. A firm characterized as a price-taker:

A. takes the price that is determined from the lowest price consumers are willing to pay for the item.

B. is not a characteristic of a perfectly competitive market.

C. sets the price for the market.

D.  has control over the price it pays, or receives, in the market.

E.  has NO control over the price it pays, or receives, in the market.

2.

Which is an example of an almost perfectly competitive market?

A. farmer's market

B. MLB

C. airlines

D. restaurants

E. cruise lines

3. Marginal revenue is the change in total:

A, cost when the firm produces additional units.

B. revenue when the firm produces additional units.

C. revenue when the firm spends more money.

D. cost divided by the change in total revenue.

E. revenue divided by the change in total cost.

4. Profit maximization occurs when:

A. a firm expands output until marginal revenue is exceeded by marginal cost.

B. the price in the market is equal to the firm’s marginal revenue.

C. a firm expands output until marginal revenue is equal to marginal cost.

D. a firm sets the price at a point above average total cost.

E. Total costs equal total rev

5. Which of the following conditions will result in a firm making an economic profit?

A. P = AVC

B. ATC >P>AVC

C. P<ATC

D. P>ATC

E. P=ATC

6.

Chuck Diesel Burger is a food truck in Houston, Texas. Imagine that Chuck Diesel Burger’s minimum average total cost (ATC) is $3.75 and that its minimum average variable cost (AVC) is $2.50. Assume there are no barriers to entry or exit from the food-truck market. Chuck Diesel Burger will make a positive economic profit if the price is equal to

a. 3.75

B. 4.00

C. 2.00

D. 2.50

E. 3.00

7. huck Diesel Burger is a food truck in Houston, Texas. Imagine that Chuck Diesel Burger’s minimum average total cost (ATC) is $3.75 and that its minimum average variable cost (AVC) is $2.50. Assume there are no barriers to entry or exit from the food-truck market. Chuck Diesel Burger will always shut down if the price is equal to:

a. 3.75

B. 4.00

C. 2.00

D. 2.50

E. 3.00

9. In the short run, a competitive firm may choose to operate at a loss:

A.  only if those losses are economic losses.

B. to ensure that other firms make a loss too

C. recover a portion of fixed costs

D. gain market power in future

e. only if losses are accounted for

9. At current production levels, the marginal revenue of a competitive firm is $15 and the marginal cost of the firm is $15. The firm should:

A. produce more

B. raise price

C. cut back production

D. stop production

E. continue producing at current levels

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1.(e) Firm characterised as a price taker has no control over the price it pays or recieves in the market.

2.(a) Farmer's market

3.b) Marginal revenue is change in revenue when firms produce additional units

4.c) Till marginal revenue is equal to marginal cost

5.d) Price greater than ATC will result in economic profit.

6.b) Price = 4 > ATC will result in economic profit

7. (c) It will shut down if the price= $2 as any price less than average variable cost will give negative profits forcing it to shut down.

8.(a) Only if those losses are economic losses

9.(e) continue production at current levels