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27) When economists say that a firm is a price taker they mean that A) the firm initially takes price as given and tries to influence it through advertising. B) the firm can alter its rate of production and sales without affecting the market price of the product. C) at the price prevailing in the market, the firm will be willing to sell an infinite quantity. D) the demand curve that the firm faces is perfectly inelastic. E) the firm can alter the market price as it changes its rate of production.

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Deanna Hettinger
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17 Dec 2017
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Related questions

6. Power Printers Total Costs (per hour)

q TC

0 65

1 80

2 95

3 120

4 150

5 200

If the price of a printer is $50 in this perfectly competitive industry, what is the profit-maximizing rate of output?

7. Which of the following is NOT true in a perfectly competitive market?

a. There is free entry and exit into the industry.

b. Each firm produces a differentiated product.

c. Each firm faces a perfectly elastic demand curve.

d. Price is equal to marginal revenue at every output level for the firm.

8. A perfectly competitive firm should always continue to operate in the short run as long as:

a. P < ATC at the rate of output where MR = MC.

b. P < AVC at the rate of output where MR = MC.

c. MR > AVC at the rate of output where MR = MC.

d. MR > AFC at the rate of output where MR = MC.

9. A firm that makes zero economic profits:

a. Must eventually go bankrupt.

b. Should shut down.

c. Incurs a loss, but should not shut down.

d. Covers all its costs, including a provision for normal profit.

10. A monopoly firm is different from a competitive firm in that:

A. There are many substitutes for the monopolist’s product whereas the competitive firm’s demand curve is perfectly elastic.

B. The monopolist’s demand curve is perfectly inelastic, whereas the competitive firm’s demand curve is perfectly elastic.

C. The monopolist can influence the price in the market, whereas the competitive firm is a price taker.

D. All of the above

Explain, in 100-250 words, why a perfectly competitive firm does not expand its sales without limit if its horizontal demand curve indicates that it can sell as much as it desires at the current market price.

1. A perfectly competitive firm will continue producing in the short run as long as it can cover its:

A.total cost.
B.average total cost.
C.average variable cost.
D.average fixed cost.

2. A perfectly competitive firm will earn a profit and will continue producing the profit-maximizing quantity of output in the short run if price is:
A.greater than marginal cost.
B.less than marginal cost.
C.less than average variable cost.
D.greater than average total cost.
3. Monopolistic competition is an industry characterized by:
A.a product with many close substitutes.
B.a horizontal demand curve.
C.a small number of firms.
D.barriers to entry and exit.
4. If a perfectly competitive firm increases production from 10 units to 11 units, and the market price is $20 per unit, total revenue for 10 units is:
A.$10.
B.$20
C.$200.
D.$210.
5. The demand curve facing a monopolist is:
A.horizontal, the same as that facing a perfectly competitive firm.
B.downward sloping, the same as that facing a perfectly competitive firm.
C.upward sloping, the same as that facing a perfectly competitive firm.
D.downward sloping, unlike the horizontal demand curve facing a perfectly competitive firm.
6. Suppose that a monopolist increases production from 10 units to 11 units. If the market price declines from $30 per unit to $29 per unit, marginal revenue for the eleventh unit is:
A.$1.
B.$9.
C.$19.
D.$29.
7. Most electric, gas, and water companies are examples of:
A.unregulated monopolies.
B.natural monopolies.
C.restricted-input monopolies.
D.sunk-cost monopolies.
8.If a perfectly competitive firm is producing a quantity that generates P > MC, then profit:
A.is maximized.
B.can be increased by increasing the price.
C.can be increased by decreasing the price.
D.can be increased by increasing production.

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