21) Refer to Table 11-1. What portion of the marginal revenue of the 4th unit is due to the output effect and what portion is due to the price effect?
A) output effect = $24.00; price effect = $19.50
B) output effect = $6.50; price effect = $2.00
C) output effect = -$0.50; price effect = $5.00
D) output effect = $6.00; price effect = -$1.50
22) Refer to Table 11-1. What portion of the marginal revenue of the 5th unit is due to the output effect and what portion is due to the price effect?
A) output effect = $3.00; price effect = $0.50
B) output effect = $1.50; price effect = $2.00
C) output effect = $5.50; price effect = -$2.00
D) output effect = $4.00; price effect = -$0.50
Figure 11-1
23) Refer to Figure 11-1. The marginal revenue from the increase in price from P0 to P1 equals
A) the area A.
B) the area (B + D – A).
C) the area (A – D).
D) the area (C – B).
Figure 11-2
24) Refer to Figure 11-2. The marginal revenue from selling the additional unit Qb instead of Qa equals
A) the area (G + H).
B) the area (H – E).
C) the area (E + F) – (G + H).
D) the area G.
25) Which of the following statements is true about marginal revenue?
A) If marginal revenue is zero, it means that quantity demanded falls to zero when a firm changes its price.
B) If marginal revenue is negative, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price.
C) If marginal revenue is positive, the additional revenue received from selling 1 more unit of the good is smaller than the revenue lost from receiving a lower price on all the units that could have been sold at the original price.
D) Marginal revenue increases as price falls and quantity sold increases.
26) In monopolistic competition, if a firm produces a highly desirable product relative to its competitors, the firm will be able to raise its price without losing any customers.
27) When a monopolistically competitive firm cuts its price to increase its sales, it experiences a loss in revenue due to the income effect and a gain in revenue due to the substitution effect.
28) If marginal revenue is negative then the revenue lost from receiving a lower price on all the units that could have been sold at the original price is smaller than the additional revenue from selling one more unit of the good.
29) What are the most important differences between perfectly competitive markets and monopolistically competitive markets?
30) Explain the differences between total revenue, average revenue, and marginal revenue.
31) Complete the following table.
Energy Drinks Consumed per Week
Price (P)
Total Revenue (TR)
Average Revenue (AR)
Marginal Revenue (MR)
0
$6.00
1
5.50
2
5.00
3
4.50
4
4.00
5
3.50
6
3.00
7
2.50
8
2.00
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