Perfect Competition

Chapter 8 Sample Multiple Choice Questions 1. In a competitive market, no single producer can influence the market price because a. many other sellers are offering a product that is essentially identical. b. consumers have more influence over the market price than producers do. c. government intervention prevents firms from influencing price. d. producers agree not to change the price. Suppose a firm in a competitive market received $1,000 in total revenue and had a marginal revenue of $10 for the last unit produced and sold. What is the average revenue per unit, and how many units were sold? a. $5 and 50 b. $5 and 100 c. $10 and 50 d. $10 and 100 When a profit-maximizing firm in a competitive market has zero economic profit, accounting profit a. is negative (accounting losses). b. is positive. c. is also zero. d. could be positive, negative or zero. When a competitive firm triples the amount of output it sells, a. its total revenue triples. b. its average revenue triples. c. its marginal revenue triples. d. its profit must increase. Which of the following statements regarding a competitive firm is true? a. Since demand is downward sloping, if a firm increases its level of output, the firm will have to charge a lower price to sell the additional output. b. If a firm raises its price, the firm may be able to increase its total revenue even though it will sell fewer units. c. By lowering its price below the market price, the firm will benefit from being able to sell more units at the lower price than it could have sold by charging the market price. d. For all firms, average revenue equals the price of the good. The Wheeler Wheat Farm sells wheat to a grain broker in Seattle, Washington. Since the market for wheat is generally considered to be competitive, the Wheeler Wheat Farm maximizes its profit by choosing a. to produce the quantity at which average variable cost is minimized. b. to produce the quantity at which average fixed cost is minimized. c. to sell its