For a Small Firm in an Extremely Competitive Industry, Marginal

question 30

Multiple Choice

For a small firm in an extremely competitive industry, marginal revenue is always equal to price because:

• A) the firm has no ability to influence the market price.
• B) each firm has large economies of scale.
• C) each firm has large fixed costs.
• D) if consumers increase their demand for the product, producer surplus falls.

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Definitions:

Medium of Exchange

A facilitating device or arrangement employed to assist in the transactions of buying, selling, or trading items between entities.

Legal Tender

Currency that must be accepted if offered in payment of a debt, by law.

Federal Deposit Insurance

A government guarantee that protects bank depositors' funds up to a certain limit in case of a bank failure.

Bank Panics

Events in which a large number of bank customers withdraw their deposits simultaneously due to fears that the bank will become insolvent.