Perfect Competition Clicker Questions

Document created by Elizabeth Uva Employee on Mar 31, 2015Last modified by Elizabeth Uva Employee on Apr 1, 2015
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Assume that Noah has a one-year lease for his factory that isn't up until next March. If Noah can sell one boat a month for $10,000, what is his most profitable option (remember that he pays $500 for materials, $1000 to run machines and $7000 for rent, and he still has the option to go work for a competitor for $5000)?

 

A. Shut down immediately and go to work for his competitor now.

B. Keep building and selling boats until March and then shut down.

C. Keep building and selling boats indefinitely since he is covering his costs.

 


Although it would be more economically profitable for Noah to close up shop, Noah really doesnít want to work for someone else (being his own boss is worth more than $3500 to him) so he keeps the business. Remember, to build each boat, Noah must use 100 planks of wood and 10 pounds of nails (which costs $500). He uses machinery that costs $1,000 each month to maintain, in a factory that he rents for $7,000/month. If Noah hires some workers, he can build one more boat each month without needing more equipment or space. If boats sell for $10,000, what should Noah do?

 

A. Keep building one boat each month by himself.

B. Build the second boat as long as he pays the workers no more than $1,500.

C. Build the second boat as long as he pays the workers no more than $9,500.

D. Build the second boat as long as he pays the workers no more than $11,000.

 


Which of the following industries is least likely to be perfectly competitive?

 

A. soybeans

B. semiconductors

C. military aircraft

D. sheet metal

 


For perfectly competitive firms, marginal revenue is equivalent to:

 

A. total revenue

B. profit per unit

C. price per unit

D. change in quantity sold

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