Question 1

The table gives data for a purely competitive firm. When the firm produces 3 units of output, it makes an economic

Accepted Answer

A) profit of $40. 
B) loss of $3. 
C) profit of $3. 
D) loss of $39. 
A) profit of $40. 
B) loss of $3. 
C) profit of $3. 
D) loss of $39.

Question 2

Why does price equal marginal revenue for the purely competitive firm? What is the relationship to the demand curve for the firm?

Accepted Answer

Price equals marginal revenue for the pu

Question 3

For a purely competitive firm, total revenue

Accepted Answer

A) is price times quantity sold. 
B) increases by a constant absolute amount as output expands. 
C) graphs as a straight upsloping line from the origin. 
D) has all of these characteristics. 
A) is price times quantity sold. 
B) increases by a constant absolute amount as output expands. 
C) graphs as a straight upsloping line from the origin. 
D) has all of these characteristics.

Question 4

According to the information in the provided diagram, this firm is selling its product in a(n)

Accepted Answer

A) purely competitive market. 
B) oligopoly market. 
C) monopolistically competitive market. 
D) monopolistic market. 
A) purely competitive market. 
B) oligopoly market. 
C) monopolistically competitive market. 
D) monopolistic market.

Question 5

The data in the accompanying table indicates that this firm is selling its output in a(n)

Accepted Answer

A) monopolistically competitive market. 
B) monopolistic market. 
C) purely competitive market. 
D) oligopolistic market. 
A) monopolistically competitive market. 
B) monopolistic market. 
C) purely competitive market. 
D) oligopolistic market.

Question 6

A purely competitive firm currently producing 30 units of output earns marginal revenues of $12 from each extra unit of output it sells. If it sells 30 units, then its total revenues would be

Accepted Answer

A) $360. 
B) $240. 
C) $120. 
D) indeterminate based on the information given. 
A) $360. 
B) $240. 
C) $120. 
D) indeterminate based on the information given.

Question 7

Assume that labor is a variable input. The average wage of workers increases in a purely competitive industry. This change will result in a(n)

Accepted Answer

A) increase in marginal cost for firms in the industry and an increase in the industry supply curve. 
B) decrease in marginal cost for firms in the industry and a decrease in the industry supply curve. 
C) decrease in marginal cost for firms in the industry and an increase in the industry supply curve. 
D) increase in marginal cost for firms in the industry and a decrease in the industry supply curve. 
A) increase in marginal cost for firms in the industry and an increase in the industry supply curve. 
B) decrease in marginal cost for firms in the industry and a decrease in the industry supply curve. 
C) decrease in marginal cost for firms in the industry and an increase in the industry supply curve. 
D) increase in marginal cost for firms in the industry and a decrease in the industry supply curve.

Question 8

An industry comprising 40 firms, none of which has more than 3 percent of the total market for a differentiated product, is an example of

Accepted Answer

A) monopolistic competition. 
B) oligopoly. 
C) pure monopoly. 
D) pure competition. 
A) monopolistic competition. 
B) oligopoly. 
C) pure monopoly. 
D) pure competition.

Question 9

Refer to the accompanying cost table. If a competitive firm faced with these costs finds that it can sell its product at $60 per unit, it will

Accepted Answer

A) produce 5 units and incur a loss of $50. 
B) produce 6 units and incur a loss of $30. 
C) produce 7 units and realize a profit of $32. 
D) close down in the short run. 
A) produce 5 units and incur a loss of $50. 
B) produce 6 units and incur a loss of $30. 
C) produce 7 units and realize a profit of $32. 
D) close down in the short run.

Question 10

The first table shows cost data for a single firm. Now suppose that there are 600 identical firms in this industry, each with the same cost data. Suppose, too, that the demand curve for this industry is as shown in the second table.   When the market is in equilibrium, each of the firms will be producing

Accepted Answer

A) 5 units. 
B) 6 units. 
C) 7 units. 
D) 9 units. 
A) 5 units. 
B) 6 units. 
C) 7 units. 
D) 9 units.

Question 11

Refer to the accompanying graph for a purely competitive firm operating at a loss in the short run. Which area in the graph represents the portion of total costs that the firm can recoup by continuing to produce rather than shutting down?

Accepted Answer

A) 0 beg 
B) bcde 
C) acdf 
D) abef 
A) 0 beg 
B) bcde 
C) acdf 
D) abef

Question 12

In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.For a purely competitive firm, total revenue graphs as a

Accepted Answer

A) straight, upsloping line. 
B) straight line, parallel to the vertical axis. 
C) straight line, parallel to the horizontal axis. 
D) straight, downsloping line. 
A) straight, upsloping line. 
B) straight line, parallel to the vertical axis. 
C) straight line, parallel to the horizontal axis. 
D) straight, downsloping line.

Question 13

A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing)output by equating

Accepted Answer

A) price and average total cost. 
B) price and average fixed cost. 
C) marginal revenue and marginal cost. 
D) price and marginal revenue. 
A) price and average total cost. 
B) price and average fixed cost. 
C) marginal revenue and marginal cost. 
D) price and marginal revenue.

Question 14

Refer to the provided graph for a purely competitive firm in the short run. If the firm increases its output level from B to C, then its total profits will be

Accepted Answer

A) negative and decreasing. 
B) negative and increasing. 
C) positive and increasing. 
D) positive and decreasing. 
A) negative and decreasing. 
B) negative and increasing. 
C) positive and increasing. 
D) positive and decreasing.

Question 15

The short-run supply curve slopes upward because producers must be compensated for rising marginal costs.

Accepted Answer

A) True 
 B)False

Question 16

The accompanying table shows cost data for a firm that is selling in a purely competitive market. If the market price for the firm's product is $60, the firm will

Accepted Answer

A) shut down. 
B) produce 3 units. 
C) produce 2 units. 
D) produce 5 units. 
A) shut down. 
B) produce 3 units. 
C) produce 2 units. 
D) produce 5 units.

Question 17

This purely competitive firm shown in the accompanying graph will not produce unless price is at least

Accepted Answer

A) $2. 
B) $5. 
C) $7. 
D) $10. 
A) $2. 
B) $5. 
C) $7. 
D) $10.

Question 18

Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound of pork would be

Accepted Answer

A) $3. 
B) $36. 
C) 12 lbs. 
D) $12. 
A) $3. 
B) $36. 
C) 12 lbs. 
D) $12.

Question 19

If the market demand for the product increases, in the short run a purely competitive firm

Accepted Answer

A) will not change its output quantity because there are so many firms that the individual firm will not be affected by the change. 
B) will earn higher profits or experience smaller losses as a result of the change in the market. 
C) will experience no change in costs as it steps up production in response to the change in the market. 
D) can employ more inputs and increase the size of its plant, to respond to the change in the market. 
A) will not change its output quantity because there are so many firms that the individual firm will not be affected by the change. 
B) will earn higher profits or experience smaller losses as a result of the change in the market. 
C) will experience no change in costs as it steps up production in response to the change in the market. 
D) can employ more inputs and increase the size of its plant, to respond to the change in the market.

Question 20

The accompanying graph shows the cost curves for a competitive firm. What is the lowest price at which the firm will start producing output in the short run?

Accepted Answer

A) $1.25 
B) $1.05 
C) $0.90 
D) $0.60 
A) $1.25 
B) $1.05 
C) $0.90 
D) $0.60

Exam 10: Pure Competition in the Short Run

The table gives data for a purely competitive firm. When the firm produces 3 units of output, it makes an economic

Why does price equal marginal revenue for the purely competitive firm? What is the relationship to the demand curve for the firm?

For a purely competitive firm, total revenue

According to the information in the provided diagram, this firm is selling its product in a(n)

The data in the accompanying table indicates that this firm is selling its output in a(n)

A purely competitive firm currently producing 30 units of output earns marginal revenues of $12 from each extra unit of output it sells. If it sells 30 units, then its total revenues would be

Assume that labor is a variable input. The average wage of workers increases in a purely competitive industry. This change will result in a(n)

An industry comprising 40 firms, none of which has more than 3 percent of the total market for a differentiated product, is an example of

Refer to the accompanying cost table. If a competitive firm faced with these costs finds that it can sell its product at $60 per unit, it will

Refer to the accompanying graph for a purely competitive firm operating at a loss in the short run. Which area in the graph represents the portion of total costs that the firm can recoup by continuing to produce rather than shutting down?

In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.For a purely competitive firm, total revenue graphs as a

A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing)output by equating

Refer to the provided graph for a purely competitive firm in the short run. If the firm increases its output level from B to C, then its total profits will be

The short-run supply curve slopes upward because producers must be compensated for rising marginal costs.

The accompanying table shows cost data for a firm that is selling in a purely competitive market. If the market price for the firm's product is $60, the firm will

This purely competitive firm shown in the accompanying graph will not produce unless price is at least

Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound of pork would be

If the market demand for the product increases, in the short run a purely competitive firm

The accompanying graph shows the cost curves for a competitive firm. What is the lowest price at which the firm will start producing output in the short run?

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, RD, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

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The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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