Q: If the price of a good is $$150$$ and a firm sells $$200$$ units, what is the total revenue ($$TR$$)?

$$TR = 150 \times 200 = 30,000$$

Question 1

In a perfectly competitive market, what is the relationship between price ($$P) $$and marginal revenue ($$MR) $$for an individual firm?

Accepted Answer

$$P = MR$$

Question 2

Suppose a firm is producing at a level where marginal revenue ($$MR) $$equals marginal cost ($$MC$$), but price ($$P) is $$less than average variable cost ($$AVC). $$What should the firm do in the short run?

Accepted Answer

Shut down and suffer a loss equal to your fixed costs.

Question 3

If the price of a good is $$150$$ and a firm sells $$200$$ units, what is the total revenue ($$TR$$)?

Accepted Answer

$$TR = 150 	imes 200 = 30,000$$

Question 4

Refer to Figure 1. At a price of $$75$$, what is the profit-maximizing level of output?

Accepted Answer

0

Question 5

The firm's short-run supply curve shows:

Accepted Answer

The relationship between the price of a good and the quantity of the good the firm is willing to offer for sale.

Question 6

In long-run equilibrium in a perfectly competitive industry, if demand for the product decreases, what can we expect?

Accepted Answer

Firms to exit the market.

Question 7

Toby sells wheat in a perfectly competitive market. This month Toby receives a lower price for a bushel of wheat than he did last month. Which of the following might best explain this?

Accepted Answer

The market demand for wheat decreased.

Question 8

A firm will not shut down in the short run as long as at the point where $$MC$$:

Accepted Answer

$$P \u003e AVC$$

Question 9

Suppose Dopey is a monopolist in the donut market, with the demand schedule shown in Table 1. When Dopey increases output from $$1000 to$$ $$1200$$ units, what happens to Dopey's revenues?

Accepted Answer

Dopey's revenues increase by $$1200.$$

Question 10

Suppose Dopey is a monopolist in the donut market, with the demand schedule shown in Table 1. Suppose also that it costs Dopey $$4 to $$produce each $$200$$ units of output. Dopey maximizes his profits by charging a price of:

Accepted Answer

$$6$$

Question 11

At a price of $$P = MR$$, the marginal revenue of a monopolist on all units after the first unit is:

Accepted Answer

$$P \u003e MR$$ because the monopolist must decrease price on all units in order to sell another unit.

Question 12

At a price of $$10$$, the marginal revenue of a monopolist is $$6. If $$the marginal cost of production is $$8$$, what should the monopolist do in order to maximize profits?

Accepted Answer

Not enough information to solve.

Question 13

A dominant strategy is one that:

Accepted Answer

Is the best choice under all conditions.

Question 14

In Figure 3, where firms in a duopoly choose respective profits, Firm 1's equilibrium strategy is ______ and Firm 2's equilibrium strategy is ______.

Accepted Answer

Low; low

Question 15

The incentive to charge a low price even though it leads to lower profits in Figure 3 is an example of:

Accepted Answer

The duopolists' dilemma.

Question 16

Consider Figure 3. If Firm 1 and Firm 2 could coordinate their decisions, then:

Accepted Answer

They would both choose to charge a high price and earn profits of $$900$$ each.

Question 17

One method firms can use to solve the duopolists' dilemma is to engage in:

Accepted Answer

Guaranteed price matching

Question 18

Consider the entry game shown in Figure 4. Firm 1's equilibrium strategy is ______ and Firm 2's equilibrium strategy is ______.

Accepted Answer

Small quantity; enter.

Question 19

Table 13.1 contains price, demand, and cost data for the Capri Theater, the only first run movie theater in a small town. What is its total profit under the single price policy?

Accepted Answer

$$360$$

Question 20

Table 13.1 contains price, demand, and cost data for the Capri Theater, the only first run movie theater in a small town. What is its total profit under the student discount policy (price discrimination)?

Accepted Answer

$$650$$

EXAM 3 STUDY

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