-
Thông tin
-
Hỏi đáp
Chapter 14 Firms in Competitive Markets - Kinh tế vi mô | Trường Đại học Hà Nội
1. A market is competitive if (i) firms have the flexibility to price their own product. (ii) each buyer is small compared to the market. (iii) each seller is small compared to the market. a.(i) and (ii) only b.(i) and (iii) only c. (ii) and (iii) only d.All of the above are correct. ANSWER: c. (ii) and (iii) only. Tài liệu được sưu tầm giúp bạn tham khảo, ôn tập và đạt kết quả cao trong kì thi sắp tới. Mời bạn đọc đón xem !
Kinh tế vi mô (HANU) 18 tài liệu
Đại học Hà Nội 682 tài liệu
Chapter 14 Firms in Competitive Markets - Kinh tế vi mô | Trường Đại học Hà Nội
1. A market is competitive if (i) firms have the flexibility to price their own product. (ii) each buyer is small compared to the market. (iii) each seller is small compared to the market. a.(i) and (ii) only b.(i) and (iii) only c. (ii) and (iii) only d.All of the above are correct. ANSWER: c. (ii) and (iii) only. Tài liệu được sưu tầm giúp bạn tham khảo, ôn tập và đạt kết quả cao trong kì thi sắp tới. Mời bạn đọc đón xem !
Môn: Kinh tế vi mô (HANU) 18 tài liệu
Trường: Đại học Hà Nội 682 tài liệu
Thông tin:
Tác giả:
Preview text:
lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 405 Chapter14
FirmsinCompetitiveMarkets MULTIPLECHOICE A marketiscompetitiveif 0
firmshavetheflexibilitytopricetheirownproduct.
5888eachbuyerissmalcomparedtothemarket.
(i)eachselerissmalcomparedtothemarket. a.(i)and(i)only b.(i)and(i)only 23 (i)and(i)only d.Aloftheabovearecorrect. ANSWER:c. (i)and(i)only TYPE:MDIFFICULTY:2SECTION:14.1
5888 Whenafirm haslittleabilitytoinfluencemarketpricesitissaidtobeinwhatkindofamarket? a.acompetitivemarket b.astrategicmarket c.athinmarket d.apowermarket ANSWER:a. acompetitivemarket TYPE:MDIFFICULTY:1SECTION:14.1 23
Inacompetitivemarket,theactionsofanysinglebuyerorselerwil
a.haveaneglgibleimpactonthemarketprice.
b.havelittlee ectonoveralproductionbutwilultimatelychangefinalproductprice. ff
c.causeanoticeablechangeinoveralproductionandachangeinfinalproductprice.
d.adverselya ectheprofitabilityofmorethanonefirm inthemarket. ff ANSWER:a.
haveaneglgibleimpactonthemarketprice. TYPE:MDIFFICULTY:2SECTION:14.1
Usetheinformationinthetablebelow toanswerquestions4through7. Quantity Price 5888 13 23 13 5888 13 23 13 23 13 23 13 23 13 23 13 13 23
Thepriceandquantityrelationshipinthetableismostlikelythatfacedbyafirm ina a.monopoly. b.concentratedmarket. c.competitivemarket. d.strategicmarket. ANSWER:c. competitivemarket. TYPE:MDIFFICULTY:1SECTION:14.1 23
Overwhichrangeofoutputisaveragerevenueequaltoprice? a.1to5 b.3to7 c.5to9
d.Averagerevenueisequaltopriceoverthewholerangeofoutput.
ANSWER:d. Averagerevenueisequaltopriceoverthewholerangeofoutput. TYPE:MDIFFICULTY:1SECTION:14.1 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 406 23
Overwhatrangeofoutputismarginalrevenuedeclning? a.1to6 b.3to7 c.7to9
d.None;marginalrevenueisconstantoverthewholerangeofoutput.
ANSWER:d. None;marginalrevenueisconstantoverthewholerangeofoutput. TYPE:MDIFFICULTY:2SECTION:14.1 23
Ifthefirm doublesitsoutputfrom 3to6units,otalrevenuewil
a.increasebylessthan$39. b.increasebyexactly$39. 23 increasebymorethan$39.
d.Itcannotbedeterminedfrom theinformationprovided. ANSWER:b. increasebyexactly$39. TYPE:MDIFFICULTY:1SECTION:14.1 23
Forafirm inaperfectlycompetitivemarket,thepriceofthegoodisalways a.equaltomarginalrevenue. b.equaltootalrevenue. 23 greaterthanaveragerevenue. d.Aloftheabovearecorrect. ANSWER:a. equaltomarginalrevenue. TYPE:MDIFFICULTY:1SECTION:14.1 23
Ifafirm inaperfectlycompetitivemarketriplesthenumberofunitsofoutputsold,thenotalrevenuewil a.morethantriple. b.lessthantriple. 23 exactlytriple.
d.Aloftheabovearepotentialytrue. ANSWER:c. exactlytriple. TYPE:MDIFFICULTY:1SECTION:14.1 23
Becausethegoodso eredforsaleinacompetitivemarketarelargelythesame, ff
a.therewilbefew selersinthemarket. b.therewilbefew buyersinthemarket. c.buyerswilhavemarketpower.
d.selerswilhavelittlereasontochargelessthanthegoingmarketprice.
ANSWER:d. selerswilhavelittlereasontochargelessthanthegoingmarketprice. TYPE:MDIFFICULTY:1SECTION:14.1
11. WhichofthefolowingisNOTacharacteristicofaperfectlycompetitivemarket? a.Firmsarepricetakers.
b.Firmshavedi cultyenteringthemarket. ffi
23 Therearemanyselersinthemarket.
d.Goodso eredforsalearelargelythesame. ff ANSWER:b.
Firmshavedi cultyenteringthemarket. ffi TYPE:MDIFFICULTY:1SECTION:14.1 23
Whenbuyersinacompetitivemarketaketheselingpriceasgiven,theyaresaidtobe a.marketentrants. b.monopolists. 23 freeriders. d.pricetakers. ANSWER:d. pricetakers. TYPE:MDIFFICULTY:1SECTION:14.1
13. Whenfirmsaresaidtobepricetakers,itimpliesthatifafirm raisesitsprice, a.buyerswilgoelsewhere.
b.buyerswilpaythehigherpriceintheshortrun.
23 competitorswilalsoraisetheirprices.
d.firmsintheindustrywilexercisemarketpower. ANSWER:a. buyerswilgoelsewhere. TYPE:MDIFFICULTY:1SECTION:14.1 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 407 0
Whichofthefolowingstatementsbestreflectsaprice-takingfirm?
a.Ifthefirm weretochargemorethanthegoingprice,itwouldselnoneofitsgoods.
b.Thefirm hasnoincentivetochargelessthanthegoingprice.
c.Thefirm canselasmuchasitwantstoselatthegoingprice. d.Aloftheabovearecorrect. ANSWER:d. Aloftheabovearecorrect. TYPE:MDIFFICULTY:2SECTION:14.1
Inacompetitivemarket,nosingleproducercaninfluencethemarketpricebecause
a.manyotherselersareo eringaproducthatisessentialyidentical. ff
b.consumershavemoreinfluenceoverthemarketpricethanproducersdo.
0 governmentinterventionpreventsfirmsfrom
influencingprice. d.producersagreenottochangetheprice. ANSWER:a.
manyotherselersareo eringaproducthatisessentialyidentical. ff TYPE:MDIFFICULTY:2SECTION:14.1
16. A competitivefirm mightchoosetosetitspricebelow
themarketprice,because a.thiswouldresultinhigheraveragerevenue.
b.thiswouldresultinhigherprofits. 0
thiswouldresultinlowertotalcosts. d.Noneoftheabovearecorrect. ANSWER:d. Noneoftheabovearecorrect. TYPE:MDIFFICULTY:2SECTION:14.1 0
Ofthefolowingcharacteristicsofcompetitivemarkets,whicharenecessaryforfirmstobepricetakers? Therearemanyselers. 0
Firmscanfreelyenterorexitthemarket.
(i)Goodso eredforsalearelargelythesame. ff a.(i)and(i)only b.(i)and(i)only c.(i)only d.Alarenecessary. ANSWER:b. (i)and(i)only TYPE:MDIFFICULTY:2SECTION:14.1 0
Whenafirm inacompetitivemarketproduces10unitsofoutput,ithasamarginalrevenueof$8.00.Whatwouldbe
thefirm’stotalrevenuewhenitproduces6unitsofoutput? a.$4.80 b.$6.00 0 $48.00 d.$60.00 ANSWER:c. $48.00 TYPE:MDIFFICULTY:2SECTION:14.1 0
Whenafirm inacompetitivemarketreceives$500inotalrevenue,ithasamarginalrevenueof$10.Whatisthe
averagerevenue,andhow manyunitsweresold? a.$5and100 b.$10and50 c.$10and100
d.Theanswercannotbedeterminedfrom theinformationgiven. ANSWER:b. $10and50 TYPE:MDIFFICULTY:2SECTION:14.1 0
Startingfrom asituationinwhichafirm inacompetitivemarketproducesandsels500doorknobsforapriceof$10
perdoorknob,whichofthefolowingeventswoulddecreasethefirm’saveragerevenue?
a.Thefirm increasesitsoutputabove500doorknobs.
b.Thefirm decreasesitsoutputbelow 500doorknobs.
23 Themarketpriceofdoorknobsrisesabove$10.
d.Themarketpriceofdoorknobsfalsbelow $10. ANSWER:d.
Themarketpriceofdoorknobsfalsbelow $10. TYPE:MDIFFICULTY:1SECTION:14.2 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 408 23
Wheneveraperfectlycompetitivefirm
choosestochangeitslevelofoutput,holdingthepriceoftheproduct constant,itsmarginalrevenue a.increasesifMRATC. b.doesnotchange. c.increases. d.decreases. ANSWER:b. doesnotchange. TYPE:MDIFFICULTY:1SECTION:14.1 23
Ifafirm inacompetitivemarketreducesitsoutputby20percent,thenasaresultthepriceofitsoutputislikelyto a.increase. b.remainunchanged.
23 decreasebylessthan20percent. d.decreasebymorethan20percent. ANSWER:b. remainunchanged. TYPE:MDIFFICULTY:1SECTION:14.1 23
Changesintheoutputofaperfectlycompetitivefirm,wihoutanychangeinthepriceoftheproduct,wilchangethe firm’s a.otalrevenue. b.marginalrevenue. 23 averagerevenue. d.Aloftheabovearecorrect. ANSWER:a. otalrevenue. TYPE:MDIFFICULTY:2SECTION:14.1 23
Whenaprofit-maximizingfirm inacompetitivemarkethaszeroeconomicprofit,accountingprofit
a.isnegative(accountinglosses). b.ispositive. c.isalsozero.
d.couldbepositive,negativeorzero. ANSWER:b. ispositive. TYPE:MDIFFICULTY:2SECTION:14.1
25. Asageneralrule,whenaccountantscalculateprofittheyaccountforexplicitcostsbutusualyignore
a.certainoutlaysofmoneybythefirm. b.implicitcosts. 23 operatingcosts. d.fixedcosts. ANSWER:b. implicitcosts. TYPE:MDIFFICULTY:1SECTION:14.1 23
Incalculatingaccountingprofit,accountantstypicalydon’tinclude a.long-runcosts. b.sunkcosts. c.explicitcostsofproduction.
d.opportunitycoststhatdonotinvolveanoutflow ofmoney.
ANSWER:d. opportunitycoststhatdonotinvolveanoutflow
ofmoney. TYPE:MDIFFICULTY:1SECTION:14.1 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 409
Usethefolowinginformationtoanswerquestions27through29.
AspartofanestatesettlementMaryreceived$1milion.hedecidedtousethemoneytopurchaseasmalbusinessin
Anywhere,USA.IfMarywouldhaveinvestedthe$1milioninarisk-freebondfundshecouldhavemade$100,000each
year.healsoquitherjobwithLucky.Com
Inc.todevotealofhertimetohernew
business;hersalaryatLucky.Com Inc. was$75,000peryear. 23
Attheendofthefirstyearofoperatinghernew
business,Mary’saccountantreportedanaccountingprofitof $150,000.WhatwasMary’seconomicprofit? a.$25,000loss b.$50,000loss 23 $25,000profit d.$150,000profit ANSWER:a. $25,000loss TYPE:MDIFFICULTY:2SECTION:14.1
28. WhatareMary’sopportunitycostsofoperatinghernew business? 23 $25,000 b.$75,000 c.$100,000 d.$175,000 ANSWER:d. $175,000 TYPE:MDIFFICULTY:2SECTION:14.1 23
How largewouldMary’saccountingprofitsneedtobetoalow
hertoatainzeroeconomicprofit? a.$100,000 b.$125,000 23 $175,000 d.$225,000 ANSWER:c. $175,000 TYPE:MDIFFICULTY:2SECTION:14.1 23 TheWheelerWheatFarm
selswheattoagrainbrokerinSeattle,Washington.incethemarketforwheatisgeneraly
consideredtobecompetitive,theWheelerFarm doesnot a.choosethequantityofwheatoproduce.
b.choosethepriceatwhichitselsitswheat.
23 haveanyfixedcostsofproduction. d.Aloftheabovearecorrect. ANSWER:b.
choosethepriceatwhichitselsitswheat. TYPE:MDIFFICULTY:1SECTION:14.1 23 Inacompetitivemarket,
a.nosinglebuyerorselercaninfluencethepriceoftheproduct. b.thereisasmalnumberofselers. 23 thegoodso eredbythedi ff erentselersaremarkedlydi ff erent. ff d.Aloftheabovearecorrect. ANSWER:a.
nosinglebuyerorselercaninfluencethepriceoftheproduct. TYPE:MDIFFICULTY:1SECTION:14.1 32. Inacompetitivemarket,
a.eachselercanselalhewantstoselatthegoingprice.
b.buyersandselersarepricetakers. 23 thegoodso eredbythedi ff erentselersarelargelythesame. ff d.Aloftheabovearecorrect. ANSWER:d. Aloftheabovearecorrect. TYPE:MDIFFICULTY:1SECTION:14.1 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 410 23
IfABCCompanyselsitsproductinacompetitivemarket,then
a.thepriceofthatproductdependsonthequantityoftheproductthatABCCompanyproducesandsels.
b.ABCCompany’sotalrevenueisproportionaltoitsquantityofoutput.
c.ABCCompany’sotalcostisproportionaltoitsquantityofoutput.
d.ABCCompany’sotalrevenueisequaltoitsaveragerevenue. ANSWER:b.
ABCCompany’sotalrevenueisproportionaltoitsquantityofoutput. TYPE:MDIFFICULTY:2SECTION:1.41 23
Whichofthefolowingexpressionsiscorrectforacompetitivefirm?
a.Profit=Totalrevenue–Totalcost.
b.Marginalrevenue=(Changeinotalrevenue)/(Changeinquantityofoutput).
23 Averagerevenue=Totalrevenue/Quantityofoutput. d.Aloftheabovearecorrect. ANSWER:d. Aloftheabovearecorrect. TYPE:MDIFFICULTY:2SECTION:14.1 35. Foracompetitivefirm, a.Totalrevenue=Averagerevenue.
b.Totalrevenue=Marginalrevenue. 23 Totalcost=Marginalrevenue.
d.Averagerevenue=Marginalrevenue. ANSWER:d.
Averagerevenue=Marginalrevenue. TYPE:MDIFFICULTY:1SECTION:14.1 23 Foracompetitivefirm,
a.averagerevenueequalsthepriceofthegood,butmarginalrevenueisdi erent. ff
b.marginalrevenueequalsthepriceofthegood,butaveragerevenueisdi erent. ff
23 averagerevenueequalsmarginalrevenue,butthepriceofthegoodisdi erent. ff
d.averagerevenue,marginalrevenue,andthepriceofthegoodarealequaltooneanother.
ANSWER:d. averagerevenue,marginalrevenue,andthepriceofthegoodarealequaltooneanother. TYPE:MDIFFICULTY:2SECTION:14.1 23 Ifacompetitivefirm
is(i)seling1,000unitsofitsproductatapriceof$9perunitand(i)earningapositiveprofit, then a.itsotalcostislessthan$9,000.
b.itsmarginalrevenueislessthan$9.
23 itsaveragerevenueisgreaterthan$9. d.Aloftheabovearecorrect. ANSWER:a. itsotalcostislessthan$9,000. TYPE:MDIFFICULTY:2SECTION:14.1 23
Whenacompetitivefirm triplestheamountofoutputitsels,
a.itsotalrevenuetriples. b.itsaveragerevenuetriples. 23 itsmarginalrevenuetriples. d.Aloftheabovearecorrect. ANSWER:a. itsotalrevenuetriples. TYPE:MDIFFICULTY:2SECTION:14.1
39. Totalprofitforafirm iscalculatedby
a.marginalrevenueminusaveragecost.
b.averagerevenueminusaveragecost.
23 marginalrevenueminusmarginalcost. d.otalrevenueminusotalcost. ANSWER:d. otalrevenueminusotalcost. TYPE:MDIFFICULTY:1SECTION:14.2 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 411
Usetheinformationforacompetitivefirm inthetablebelow toanswerquestions40through45. Quantity TotalRevenue TotalCost 0 $0 $10 1 9 14 2 18 19 3 27 25 4 36 32 5 45 40 6 54 49 7 63 59 8 72 70 9 81 82
40. Ataproductionlevelof4unitswhichofthefolowingistrue? a.Marginalcostis$6.
b.Totalrevenueisgreaterthanvariablecost.
23 Marginalrevenueislessthanmarginalcost. d.Aloftheabovearecorrect. ANSWER:b.
Totalrevenueisgreaterthanvariablecost. TYPE:MDIFFICULTY:2SECTION:14.2 23
Atwhichquantityofoutputismarginalrevenueequaltomarginalcost? a.3 b.6 23 8 d.Aloftheabovearecorrect. ANSWER:b. 6 TYPE:MDIFFICULTY:2SECTION:14.2 23 Ifthisfirm
choosestomaximizeprofititwilchoosealevelofoutputwheremarginalcostisequalto a.6. b.7. 23 8. d.9. ANSWER:d. 9. TYPE:MDIFFICULTY:2SECTION:14.2
43. Themaximum profitavailabletothisfirm is 23 $5. b.$4. c.$3. d.$2. ANSWER:a. $5. TYPE:MDIFFICULTY:1SECTION:14.2 23
Ifthefirm findsthatitsmarginalcostis$11,itshould
a.increaseproductiontomaximizeprofit.
b.increasethepriceoftheproductomaximizeprofit.
23 advertisetoatractadditionalbuyerstomaximizeprofit. d.Noneoftheabovearecorrect. ANSWER:d. Noneoftheabovearecorrect. TYPE:MDIFFICULTY:2SECTION:14.2 23
Ifthefirm findsthatitsmarginalcostis$5,itshould
a.reducefixedcostsbyloweringproduction.
b.increaseproductiontomaximizeprofit.
c.decreaseproductiontomaximizeprofit.
d.maintainitscurrentlevelofproductiontomaxiizeprofit.
ANSWER:b. increaseproductiontomaximizeprofit. TYPE:MDIFFICULTY:2SECTION:14.2 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 412 23
TheWheelerWheatFarm selswheattoagrainbrokerinSeattle,Washington.incethemarketforwheatisgeneraly
consideredtobecompetitive,theWheelerWheatFarm maximizesitsprofitbychoosing
a.toproducethequantityatwhichaveragetotalcostisminimized.
b.toproducethequantityatwhichaveragefixedcostisminimized.
c.toselitswheatatapricewheremarginalcostisequaltoaveragetotalcost.
d.thequantityatwhichmarketpriceisequaltothefarm’smarginalcostofproduction.
ANSWER:d. thequantityatwhichmarketpriceisequaltothefarm’smarginalcostofproduction. TYPE:MDIFFICULTY:2SECTION:14.2 23
Comparisonofmarginalrevenuetomarginalcost
revealsthecontributionofthelastunitofproductiontootalprofit. ishelpfulinmakingprofit-
maximizingproductiondecisions. (i)telsafirm
whetheritsfixedcostsaretoohigh. a.(i)only b.(i)and(i)only c.(i)and(i)only d.Aloftheabovearecorrect. ANSWER:b. (i)and(i)only TYPE:MDIFFICULTY:2SECTION:14.2 23
Ifmarginalcostexceedsmarginalrevenue,thefirm
a.ismostlikelytobeataprofit-maximizinglevelofoutput.
b.shouldincreasethelevelofproductiontomaximizeitsprofit. 23 mustbeexperiencinglosses. d.maystilbeearningaprofit. ANSWER:d. maystilbeearningaprofit. TYPE:MDIFFICULTY:2SECTION:14.2
49. Whenmarginalrevenueequalsmarginalcost,thefirm
a.shouldincreasethelevelofproductiontomaximizeitsprofit.
b.maybeminimizingitslosses,ratherthanmaximizingitsprofit.
23 mustbegeneratingeconomicprofits.
d.mustbegeneratingeconomiclosses. ANSWER:b.
maybeminimizingitslosses,ratherthanmaximizingitsprofit. TYPE:MDIFFICULTY:2SECTION:14.2 23
Whenmanagersoffirmsthinkathemarginandmakeincrementaladjustmentstothelevelofproduction,theyare
naturalyledtoalevelofproductionwhere
a.averagevariablecostexceedsmarginalcost.
b.otalcostislessthanaveragerevenue. 23 costsareminimized. d.profitismaximized. ANSWER:d. profitismaximized. TYPE:MDIFFICULTY:2SECTION:14.2
Asageneralrule,profit-maximizingproducersinacompetitivemarketproduceoutputatapointwhere a.marginalcostisincreasing. b.marginalcostisdecreasing. c.marginalrevenueisincreasing.
d.priceislessthanmarginalrevenue. ANSWER:a. marginalcostisincreasing. TYPE:MDIFFICULTY:2SECTION:14.2 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 413
Thegraphbelow depictsthecoststructureforafirm
inacompetitivemarket.Usethegraphtoanswerquestions52 through55.
Note:Ontheabovediagram,changethevertical-axislabelsfrom MC1toP,MC12toP,etc.2
WhenpriceisequaltoP,theprofit-maximizingfirm wilproducewhatlevelofoutput? 3 a.Q1 b.Q2 Q3 d.Q4 ANSWER:c. Q3 TYPE:MDIFFICULTY:2SECTION:14.2
WhenmarketpriceisatP,afirm producingoutputlevelQ wouldexperience 21 a.profitsequalto(P –P) Q . 2 1 1 b.lossesequalto(P P) Q . 2–1 1 c.lossesbecauseP 2 1 d.zeroprofits. ANSWER:c. lossesbecauseP 2 1 TYPE:MDIFFICULTY:2SECTION:14.2
54. WhenmarketpriceisatP,aprofit-maximizingfirm wilproducewhatlevelofoutput? 4 a.Q1 b.Q2 Q3 d.Q4 ANSWER:d. Q4 TYPE:MDIFFICULTY:2SECTION:14.2
55. WhenthepriceisP2andthefirm maximizesitsprofitorminimizesitsloss,thefirm a.experiencesapositiveprofit. b.experiencesazeroprofit.
experiencesaloss,butcontinuestooperate. d.shutsdown. ANSWER:b. experiencesazeroprofit. TYPE:MDIFFICULTY:2SECTION:14.2 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 414
Whencalculatingmarginalcost,whatmusthefirm know? a.sunkcost b.variablecost c.fixedcost d.Aloftheabovearecorrect. ANSWER:b. variablecost TYPE:MDIFFICULTY:2SECTION:14.2
Theadditionalrevenueafirm inacompetitivemarketreceivesifitincreasesitsproductionbyoneunitequalsits a.marginalrevenue. b.averagerevenue. priceperunitofoutput. d.Aloftheabovearecorrect. ANSWER:d. Aloftheabovearecorrect. TYPE:MDIFFICULTY:2SECTION:14.2
Thegraphbelow depictsthecoststructureforafirm
inacompetitivemarket.Usethegraphtoanswerquestions58 through61.
Whenpricerisesfrom P toP,thefirm findsthat 2 3
a.marginalcostexceedsmarginalrevenueataproductionlevelofQ . 2
b.ifitproducesatoutputlevelQ3itwilearnapositiveprofit.
c.expandingoutputtoQ4wouldleavethefirm withlosses. d.Aloftheabovearecorrect. ANSWER:c.
expandingoutputtoQ4wouldleavethefirm withlosses. TYPE:MDIFFICULTY:2SECTION:14.2
Whenpricefalsfrom P toP,thefirm findsthat 3 1
a.fixedcostishigherataproductionlevelofQ thanitisatQ . 1 3
b.itshouldproduceQ1unitsofoutput.
c.itshouldproduceQ3unitsofoutput.
d.itisunwilingtoproduceanyoutput. ANSWER:d.
itisunwilingtoproduceanyoutput. TYPE:MDIFFICULTY:2SECTION:14.2 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 415
Whenpricerisesfrom P toP,thefirm findsthat 3 4
a.fixedcostsarelowerataproductionlevelofQ4.
b.itcanearnapositiveprofitbyincreasingproductiontoQ . 4
c.profitismaximizedataproductionlevelofQ3.
d.averagerevenueexceedsmarginalrevenueataproductionlevelofQ . 4
ANSWER:b. itcanearnapositiveprofitbyincreasingproductiontoQ . 4 TYPE:MDIFFICULTY:2SECTION:14.2
Whichofthefolowingstatementsbestreflectsthesituationfacedbythefirm whenpricefalsfrom P toP? 4 2
a.Averagetotalcostislowerthanatthepreviouslevelofoutputsoitincreasesproduction.
b.Thefirm wilearnprofitequalto(P4–P)2 Q2.
Marginalrevenueislowerthanmarginalcostatthepreviouslevelofoutput,soitdecreasesproduction.
d.Marginalrevenueishigherthanmarginalcostatthepreviouslevelofoutput,soitincreasesproduction.
ANSWER:c. Marginalrevenueislowerthanmarginalcostatthepreviouslevelofoutput,soitdecreasesproduction. TYPE:MDIFFICULTY:2SECTION:14.2 A profit-maximizingfirm
inacompetitivemarketwilalwaysmakemarginaladjustmentstoproductionaslongas
a.averagerevenueisgreaterthanaverageotalcost. b.averagerevenueisequaltomarginalcost.
c.marginalcostisgreaterthanaverageotalcost.
d.priceisaboveorbelow marginalcost. ANSWER:d.
priceisaboveorbelow marginalcost. TYPE:MDIFFICULTY:2SECTION:14.2
Whenpriceisgreaterthanmarginalcostforafirm
inacompetitivemarket, a.marginalcostmustbefaling.
b.thefirm mustbeminimizingitslosses.
c.thereareopportunitiestoincreaseprofitbyincreasingproduction.
d.thefirm shoulddecreaseoutputtomaximizeprofit. ANSWER:c.
thereareopportunitiestoincreaseprofitbyincreasingproduction. TYPE:MDIFFICULTY:2SECTION:14.2
Theshort-runsupplycurveforafirm
inaperfectlycompetitivemarketis a.likelytobehorizontal. b.likelytoslopedownward.
determinedbyforcesexternaltothefirm.
d.itsmarginalcostcurve(aboveaveragevariablecost). ANSWER:d.
itsmarginalcostcurve(aboveaveragevariablecost). TYPE:MDIFFICULTY:2SECTION:14.2
Whenaperfectlycompetitivefirm makesadecisiontoshutdown,itismostlikelythat
a.marginalcostisaboveaveragevariablecost.
b.marginalcostisaboveaveragetotalcost.
priceisbelow theminimum ofaveragevariablecost.
d.fixedcostsexceedvariablecosts. ANSWER:c.
priceisbelow theminimum ofaveragevariablecost. TYPE:MDIFFICULTY:2SECTION:14.2
66. Whenafirm makesashort-rundecisionnottoproduceanythingduringaspecifiedperiodoftimebecauseof
currentmarketconditions,thefirm issaidto a.shutdown. b.exit. withdraw. d.leavetheindustry. ANSWER:a. shutdown. TYPE:MDIFFICULTY:1SECTION:14.2 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 416
Firmsthatshutdownintheshortrunstilhavetopaytheir a.variablecosts. b.fixedcosts. c.otalcost. d.Aloftheabovearecorrect. ANSWER:b. fixedcosts. TYPE:MDIFFICULTY:1SECTION:14.2
Whenotalrevenueislessthanvariablecosts,afirm inacompetitivemarketwil
a.continuetooperateaslongasaveragerevenueexceedsmarginalcost.
b.continuetooperateaslongasaveragerevenueexceedsaveragefixedcost. shutdown. d.alwaysexitheindustry. ANSWER:c. shutdown. TYPE:MDIFFICULTY:2SECTION:14.2
69. Whenpriceisbelow averagevariablecost,afirm inacompetitivemarketwil a.shutdownandincurfixedcosts.
b.shutdownandincurbothvariableandfixedcosts.
continuetooperateaslongasaveragerevenueexceedsmarginalcost.
d.continuetooperateaslongasaveragerevenueexceedsaveragefixedcost. ANSWER:a. shutdownandincurfixedcosts. TYPE:MDIFFICULTY:2SECTION:14.2
In1999,sheepherdersinthewesternUnitedStatesslaughtered10,000sheepandburiedthem inlargeopenpits
ratherthantruckthem tothemarkettobesold.Thisbehaviorismostlikelyexplainedby
a.sheepherdersmakingashut-downdecisiontosavethevariablecostoftransportingsheeptoaslaughterhouse.
b.sheepherdersmakinganexitdecisiontorecoverthefixedcostofraisingthesheep.
therisingmarginalcostofproducingsheep.
d.irrationalbehaviorofsheepherders. ANSWER:a. sheepherdersmakingashut-
downdecisiontosavethevariablecostoftransportingsheeptoaslaughter house. TYPE:MDIFFICULTY:2SECTION:14.2 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 417
Thefigurebelow depictsthecoststructureofaprofit-maximizingfirm
inacompetitivemarket.Usethefiguretoanswer questions71and72.
Whichlinesegmentbestreflectstheshort-
runsupplycurveforthisfirm? a.BCD b.CD DE d.Noneoftheabovearecorrect. ANSWER:d. Noneoftheabovearecorrect. TYPE:MDIFFICULTY:2SECTION:14.2 Ifthefirm isinashort- runpositionwherePb.CD DE d.Noneoftheabovearecorrect. ANSWER:d. Noneoftheabovearecorrect. TYPE:MDIFFICULTY:2SECTION:14.2 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 418
Thefigurebelow depictsthecoststructureofaprofit-maximizingfirm
inacompetitivemarket.Usethefiguretoanswer questions73and74.
Whichlinesegmentbestreflectsthelong-
runsupplycurveforthisfirm? a.AB b.BC c.CD d.Noneoftheabove,thelong-
runsupplycurverequiresknowledgeoftheaveragevariablecoststructure. ANSWER:c. CD TYPE:MDIFFICULTY:2SECTION:14.2
Thisfirm wilexithemarketforanypriceonthelinesegment a.AB. b.BC. CD. d.Noneoftheabovearecorrect. ANSWER:a. AB. TYPE:MDIFFICULTY:2SECTION:14.2
Wheneconomistsrefertoaproductioncosthathasalreadybeencommittedandcannotberecovered,theyusethe term a.implicitcost. b.explicitcost. variablecost. d.sunkcost. ANSWER:d. sunkcost. TYPE:MDIFFICULTY:1SECTION:14.2
A profit-maximizingfirm inacompetitivemarketproducessmalrubberbals.Whenthemarketpriceforsmal
rubberbalsfalsbelow theminimum ofitsaverageotalcost,butstilliesabovetheminimum ofaveragevariable cost,thefirm
a.wilexperiencelossesbutitwilcontinuetoproducerubberbals. b.wilshutdown.
wilbeearningbotheconomicandaccountingprofits.
d.shouldraisethepriceofitsproduct. ANSWER:a.
wilexperiencelossesbutitwilcontinuetoproducerubberbals. TYPE:MDIFFICULTY:2SECTION:14.2 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 419
Whichofthefolowingstatementsbestreflectstheproductiondecisionofaprofit-maximizingfirm
inacompetitive marketwhenpricefalsbelow theminimum ofaveragevariablecost?
a.Thefirm wilcontinuetoproducetoattempttopayfixedcosts.
b.Thefirm wilimmediatelystopproductiontominimizeitslosses.
c.Thefirm wilstopproductionassoonasitisabletopayitssunkcosts.
d.Thefirm wilcontinuetoproduceintheshortrunbutwillikelyexitthemarketinthelongrun. ANSWER:b.
Thefirm wilimmediatelystopproductiontominimizeitslosses. TYPE:MDIFFICULTY:2SECTION:14.2
Whenfixedcostsareignoredbecausetheyareirrelevanttoabusiness’sproductiondecision,theyarecaled a.explicitcosts. b.implicitcosts. sunkcosts. d.opportunitycosts. ANSWER:c. sunkcosts. TYPE:MDIFFICULTY:1SECTION:14.2
TheWheelerWheatFarm hasalong-term leaseon5,000acresoflandinSouthDakota.Theannualleasepaymentis
$250,000.Priortoplantinginthespringof2001,theWheelerFarm economistpredictedthatheFarm wouldhave
$135,000dolarsleftafterpayingalofitscostsexcepttheannualleasepayment.Inthiscase,theWheelerWheat Farm should
a.continuetooperatebecauseotalrevenueexceedsotalcost.
b.continuetooperateeventhoughitpredictsanaccountinglossof$115,000.
shutdownandexperienceanaccountinglossof$135,000.
d.exitthemarketandexperienceanaccountinglossof$250,000. ANSWER:b.
continuetooperateeventhoughitpredictsanaccountinglossof$115,000. TYPE:MDIFFICULTY:2SECTION:14.2
ShrimpGalore,ashrimpharvestingbusinessinthePacificNorthwest,hasa30-yearloanonitsshrimpharvesting
boat.Theannualoanpaymentis$25,000andtheboathasamarket(salvage)valuethatexceedsitsoutstandingloan
balance.Priortothe2001shrimpharvestingseason,hrimpGalore’saccountantpredictedthatatexpectedmarket
pricesforshrimp,hrimpGalorewouldhaveanetlossof$75,000dolarsafterpayingal2001expenses(including
theannualoanpayment).Inthiscase,hrimpGaloreshould a.producenothingandexperiencealossof$25,000.
b.producenothingandexperiencealossof$75,000.
continuetooperatebecauseexpectedprofitswilriseinthefuture.
d.continuetooperateeventhoughitpredictsalossof$75,000. ANSWER:a.
producenothingandexperiencealossof$25,000. TYPE:MDIFFICULTY:2SECTION:14.2
A profit-maximizingfirm wilshutdownintheshortrunwhen
a.priceaveragerevenue>marginalcost.
d.averagerevenue>averagefixedcost. ANSWER:a.
priceTYPE:MDIFFICULTY:2SECTION:14.2
82. Whenaprofit-maximizingfirm inacompetitivemarketisunabletogenerateenoughrevenuetopayalofitsfixed costsitshould,intheshortrun,
a.shutdownandincuralossequaltoitsfixedcosts.
b.shutdownuntilitisabletoproducewhereaveragerevenueexceedsaveragefixedcost.
continuetoproduceaslongasmarginalcostislessthanaveragerevenue.
d.continuetoproduceaslongastotalrevenueissu cienttopayvariablecosts. ffi ANSWER:d.
continuetoproduceaslongastotalrevenueissu cienttopayvariablecosts. ffi TYPE:MDIFFICULTY:2SECTION:14.2 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 420
Inthelongrunalofafirm’scostsarevariable.Inthiscasetheexitcriterionforaprofit-
maximizingfirm is a.priceb.price>averageotalcost.
c.averagerevenue>averagefixedcost.
d.averagerevenue>marginalcost. ANSWER:a.
priceTYPE:MDIFFICULTY:2SECTION:14.2
Whenprofit-maximizingfirmsincompetitivemarketsareearningprofits,
a.marketdemandmustexceedmarketsupplyatthemarketequilibrium price.
b.marketsupplymustexceedmarketdemandatthemarketequilibrium price. new firmswilenterthemarket.
d.themostine cientfirmswilbeencouragedtoleavethemarket. ffi ANSWER:c. new firmswilenterthemarket. TYPE:MDIFFICULTY:2SECTION:14.2
85. Profit-maximizingfirmsenteracompetitivemarketwhen,forexistingfirmsinthatmarket,
a.otalrevenueexceedsfixedcosts.
b.otalrevenueexceedsotalvariablecosts.
averageotalcostexceedsaveragerevenue.
d.priceexceedsaveragetotalcost. ANSWER:d. priceexceedsaveragetotalcost. TYPE:MDIFFICULTY:2SECTION:14.2
Thefigurebelow depictsthecoststructureofafirm
inacompetitivemarket.Usethefiguretoanswerquestions86through 88.
WhenmarketpriceisP,aprofit-maximizingfirm’sprofitscanberepresentedbythearea 5 a.P5 Q3. b.(P5–P)3 Q2. c.(P5–P)4 Q3.
d.WhenmarketpriceisP5therearenoprofits. ANSWER:c. (P5–P)4 Q3. TYPE:MDIFFICULTY:2SECTION:14.2
Firmswouldbeencouragedtoenterthismarketforalpricesthatexceed a.P. 1 b.P. 2 P. 3 d.Noneoftheabovearecorrect. ANSWER:c. P.3 TYPE:MDIFFICULTY:2SECTION:14.2 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 421
WhenmarketpriceisP,aprofit-maximizingfirm’slossescanberepresentedbythearea 2 a.(P3–P)2 Q2. b.(P2–P)1 Q2.
AtamarketpriceofP,thefirm doesnothavelosses. 2
d.AtamarketpriceofP2thefirm haslosses,butthereferencepointsinthefiguredon’tidentifythelosses.
ANSWER:d. AtamarketpriceofP2thefirm haslosses,butthereferencepointsinthefiguredon’tidentifythelosses. TYPE:MDIFFICULTY:2SECTION:14.2
Thefigurebelow depictsthecoststructureofafirm
inacompetitivemarket.Usethefiguretoanswerquestions89through 91.
WhenmarketpriceisP,aprofit-maximizingfirm’sotalrevenuecanberepresentedbythearea 1 a.P1 Q2. b.P2 Q2. c.P3 Q2. d.P1 Q3. ANSWER:a. P1 Q2. TYPE:MDIFFICULTY:2SECTION:14.2
WhenmarketpriceisP,aprofit-maximizingfirm’sotalcostcanberepresentedbythearea 4 a.P4 Q1 b.P4 Q4 c.P2 Q4
d.Totalcostscannotbedeterminedfrom theinformationinthefigure. ANSWER:c. P2 Q4 TYPE:MDIFFICULTY:2SECTION:14.2
WhenmarketpriceisP,aprofit-maximizingfirm’sotalprofitorlosscanberepresentedbywhicharea? 1 a.P1 Q3;profit b.(P –P) Q ;loss 3 1 2 c.(_P2–P)1 Q1;loss
d.Wecan’telbecausewedon’tknow fixedcosts. ANSWER:b. (P3–P)1 Q2;loss TYPE:MDIFFICULTY:2SECTION:14.2 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 422 Whenaprofit-maximizingfirm
isearningprofits,thoseprofitscanbeidentifiedby a.P Q. b.(MC–AVC) Q. c. (P–ATC) Q. d.(P–AVC) Q. ANSWER:c. (P–ATC) Q. TYPE:MDIFFICULTY:2SECTION:14.2
Whenaprofit-maximizingfirm findsitselfminimizinglossesbecauseitisunabletoearnapositiveprofit,thistaskis
accomplishedbyproducingthequantityatwhichpriceisequalto a.sunkcost. b.averagefixedcost. averagevariablecost. d.marginalcost. ANSWER:d. marginalcost. TYPE:MDIFFICULTY:2SECTION:14.2 Whenaprofit-
maximizingfirm’sfixedcostsareconsideredsunkintheshortrun,thenthefirm
a.cansetpriceabovemarginalcost. b.mustsetpricebelow averageotalcost. c.wilnevershow losses.
d.cansafelyignorefixedcostswhendecdinghow muchoutputtoproduce.
ANSWER:d. cansafelyignorefixedcostswhendecdinghow
muchoutputtoproduce. TYPE:MDIFFICULTY:2SECTION:14.2
A firm’sshort-runsupplycurveispartofwhichofthefolowingcurves? a.marginalrevenue b.averagevariablecost averageotalcost d.marginalcost ANSWER:d. marginalcost TYPE:MDIFFICULTY:2SECTION:14.2
Theirrelevanceofsunkcostsisbestdescribedbywhichofthefolowingbusinessdecisions? a.New
airlinesenterthemarketandearnprofits.
b.Airlinescontinuetoselticketseventhoughtheyarereportinglargelosses.
Airlinesexitthemarketwhentheyreportlosses. d.Aloftheabovearecorrect. ANSWER:b.
Airlinescontinuetoselticketseventhoughtheyarereportinglargelosses. TYPE:MDIFFICULTY:2SECTION:14.2
Ifaprofit-maximizingfirm inacompetitivemarketdiscoversthatatitscurrentlevelofproductionpriceisgreater thanmarginalcostitshould a.shutdown.
b.reduceitsoutput,butcontinueoperating. keepoutputthesame. d.increaseitsoutput. ANSWER:d. increaseitsoutput. TYPE:MDIFFICULTY:2SECTION:14.2
Foranygivenprice,afirm inacompetitivemarketwilmaximizeprofitbyselectingthelevelofoutputatwhich priceintersectsthe a.averageotalcostcurve. b.averagevariablecostcurve. c.marginalcostcurve. d.marginalrevenuecurve. ANSWER:c. marginalcostcurve. TYPE:MDIFFICULTY:2SECTION:14.2 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 423
Bycomparingmarginalrevenueandmarginalcost,afirm inacompetitivemarketisabletoadjustproductiontothe
levelthatachievesitsobjective,whichweassumetobe a.maximizationoftotalrevenue. b.maximizationofprofit. c.minimizationofvariablecost.
d.minimizationofaveragetotalcost. ANSWER:b. maximizationofprofit. TYPE:MDIFFICULTY:2SECTION:14.2
Assumethatarahplacesa$70valueonseeinghercolegefootbalteam playintheRoseBowl.hepurchasesa
ticketothegamefor$50butwhenshearrivesatthegameshediscoversthatherticketismissing.A
ticketscalper outsidethestadium isselingticketsfor$65dolars.Ifarahpurchasesaticketfrom
oneofthescalpersfor$65,she isbestdemonstratingtheprinciplethat
a.sunkcostsareirrelevanttomanypersonaldecisions.
b.thepriceofticketscannotbeexplainedbyeconomicprinciples.
c.theassumptionofrationalbehaviordoesnoteasilyapplytothepurchaseofcolegefootbalgametickets.
d.rationalconsumersdonotalwaysrespondtoincentives.
ANSWER:a. sunkcostsareirrelevanttomanypersonaldecisions. TYPE:MDIFFICULTY:2SECTION:14.2
101. Whenarestaurantstaysopenforlunchserviceeventhoughfew customerspatronizetherestaurantforlunch,which
ofthefolowingprinciplesis(are)bestdemonstrated?
(i) Fixedcostsaresunkintheshortrun.
Intheshortrun,onlyfixedcostsareimportanttothedecisiontostayopenforlunch.
(i)Ifrevenueexceedsvariablecost,therestaurantownerismakingaprofitablestrategicdecisiontoremainopen forlunch. a. (i)and(i)only b. (i)and(i)only c. (i)and(i)only d.Alaredemonstrated. ANSWER:c. (i)and(i)only TYPE:MDIFFICULTY:2SECTION:14.2
Inthelongrun,aprofit-maximizingfirm
wilchoosetoexitamarketwhen a.averagefixedcostisfaling.
b.variablecostsexceedsunkcosts.
c.marginalcostexceedsmarginalrevenueathecurrentlevelofproduction.
d.otalrevenueislessthanotalcost. ANSWER:d. otalrevenueislessthanotalcost. TYPE:MDIFFICULTY:2SECTION:14.2
Oneofthemostimportantdeterminantsofthesuccessoffree-marketcapitalism is
a.enlightenedgovernmentsselectingfirmsthatshouldnotbealowedtoexitamarket. b.freeentryandexitinmarkets.
c.governmentregulationofmarketparticipants.
d.havingafew largefirmsratherthanthousandsofsmalones. ANSWER:b. freeentryandexitinmarkets. TYPE:MDIFFICULTY:2SECTION:14.2
A profit-maximizingfirm inacompetitivemarketiscurrentlyproducing100unitsofoutput.Ithasaveragerevenue
of$10,anditsaverageotalcostis$8.Itfolowsthatthefirm’s
a.averageotalcostcurveintersectsthemarginalcostcurveatanoutputleveloflessthan100units.
b.averagevariablecostcurveintersectsthemarginalcostcurveatanoutputleveloflessthan100units. c.profitis$200. d.Aloftheabovearecorrect. ANSWER:d. Aloftheabovearecorrect. TYPE:MDIFFICULTY:3SECTION:14.2 lOMoARcPSD|46342985
Chapter 14/Firms in Competitive Markets 424 A profit-maximizingfirm
inacompetitivemarketisabletoselitsproductfor$9.Atitscurrentlevelofoutputthe
firm’saveragetotalcostis$11.Itsmarginalcostcurvecrossesthemarginalrevenuecurveatanoutputlevelof10 units.Thenthefirm experiencesa a.profitofmorethan$20. b.profitofexactly$20. lossofmorethan$20. d.lossofexactly$20. ANSWER:d. lossofexactly$20. TYPE:MDIFFICULTY:2SECTION:14.2
106. Ifacompetitivefirm iscurrentlyproducingalevelofoutputatwhichmarginalrevenueexceedsmarginalcost,then
a.aone-unitincreaseinoutputwilincreasethefirm’sprofit. b.aone-
unitdecreaseinoutputwilincreasethefirm’sprofit. otalrevenueexceedsotalcost. d.otalcostexceedsotalrevenue. ANSWER:a.
aone-unitincreaseinoutputwilincreasethefirm’sprofit. TYPE:MDIFFICULTY:2SECTION:14.2
Ifacompetitivefirm iscurrentlyproducingalevelofoutputatwhichmarginalcostexceedsmarginalrevenue,then
a.averagerevenueexceedsmarginalcost.
b.thefirm isearningapositiveprofit.
aone-unitdecreaseinoutputwouldincreasethefirm’sprofit. d.Aloftheabovearecorrect. ANSWER:c.
aone-unitdecreaseinoutputwouldincreasethefirm’sprofit. TYPE:MDIFFICULTY:3SECTION:14.2 Ifacompetitivefirm
iscurrentlyproducingalevelofoutputatwhichprofitisnotmaximized,thenitmustbetrue that
a.marginalrevenueexceedsmarginalcost.
b.marginalcostexceedsmarginalrevenue. otalcostexceedsotalrevenue. d.Noneoftheabovearecorrect. ANSWER:d. Noneoftheabovearecorrect. TYPE:MDIFFICULTY:2SECTION:14.2
Attheprofit-maximizinglevelofoutput,
a.marginalrevenue=averagetotalcost.
b.marginalrevenue=averagevariablecost. marginalrevenue=marginalcost.
d.averagerevenue=averagetotalcost. ANSWER:c. marginalrevenue=marginalcost. TYPE:MDIFFICULTY:2SECTION:14.2
110. Theintersectionofafirm’smarginalrevenueandmarginalcostcurvesdeterminesthelevelofoutputatwhich
a.otalrevenueisequaltovariablecost.
b.otalrevenueisequaltofixedcost. otalrevenueisequaltootalcost. d.profitismaximized. ANSWER:d. profitismaximized. TYPE:MDIFFICULTY:2SECTION:14.2
Foracertainfirm,the100thunitofoutputthatthefirm
produceshasamarginalrevenueof$10andamarginalcost of$7.Itfolowsthat
a.theproductionofthe100thunitofoutputincreasesthefirm’sprofitby$3.
b.theproductionofthe100thunitofoutputincreasesthefirm’saveragetotalcostby$7.
thefirm’sprofit-maximizinglevelofoutputislessthan100units. d.Aloftheabovearecorrect. ANSWER:a.
theproductionofthe100thunitofoutputincreasesthefirm’sprofitby$3. TYPE:MDIFFICULTY:2SECTION:14.2