Question

1)

If a market has a large number of small firms, no barriers to entry, and each seller’s product is identical, then sellers in the market are

Group of answer choices

a likely to cooperate with each other and set prices and output together

b price-takers

c able to earn supernormal profit in the long-run

d likely to compete through advertising

2)

Given the following total variable cost information for a price-taking firm, what is the maximum amount of profit the firm can earn given a market price of $100?

Quantity	0	1	2	3	4	5	6	7	8
TVC	0	200	350	450	560	700	900	1140	1400

     

Group of answer choices

a Less than -TFC

b Equal to -TFC

c Greater than -TFC

d Not enough information

Answer 1

Ans 1. b) price takers

Since an individual seller is very small as compared to the entire market and has no control over the price in the amrket.

Ans 2. a) Less than -TFC

The firm is not able to even cover the total variable cost with the market price of $100 and hence they will earn a profit of less than -TFC.