Output (Q)Total Fixed CostTotal Variable Cost020012052207320104201552021
Table 6.1 shows the cost structure of a firm in a perfectly competitive market. If the market price is $3:
A. the firm suffers a loss and is better off shutting down.
B. the firm suffers a loss but is better off producing the output level where MR = MC.
C. the market price is greater than the minimum average variable cost.
D. None of these
Answer: A
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Contestable markets improve the performance of imperfect markets with
A. government regulations. B. the threat of entry. C. advertising. D. tacit collusion.
For perfectly competitive firms, marginal revenue ________ price; for monopolists marginal revenue ________ price.
A. equals; is greater than B. equals; is less than C. is less than; equals D. equals; equals
Any change in price along a perfectly inelastic demand curve produces:
A. greater change in the quantity demanded. B. less change in the quantity demanded. C. no change in the quantity demanded. D. infinite change in the quantity demanded.
Which of the following offers the best example of derived demand?
A. An increase in the demand for movie tickets causes an increase in the demand for popcorn. B. An increase in demand for movie tickets causes an increase in the demand for movie theatre workers. C. A decline in the demand for cars causes an increase in the demand for bus rides. D. An increase in the demand for cars causes an increase in the demand for gasoline.