Question 1

The MR = MC rule can be restated for a purely competitive seller as P = MC because

Accepted Answer

A) each additional unit of output adds exactly its price to total revenue. 
B) the firm's average revenue curve is downsloping. 
C) the market demand curve is downsloping. 
D) the firm's marginal revenue and total revenue curves will coincide. 
A) each additional unit of output adds exactly its price to total revenue. 
B) the firm's average revenue curve is downsloping. 
C) the market demand curve is downsloping. 
D) the firm's marginal revenue and total revenue curves will coincide.

Question 2

A firm should continue to operate even at a loss in the short run if

Accepted Answer

A) its output is above the break-even point. 
B) its revenues are less than its fixed costs. 
C) it can cover its variable costs and some of its fixed costs. 
D) it has some fixed costs that cannot be brought down to zero. 
A) its output is above the break-even point. 
B) its revenues are less than its fixed costs. 
C) it can cover its variable costs and some of its fixed costs. 
D) it has some fixed costs that cannot be brought down to zero.

Question 3

A purely competitive firm is producing at the point where its marginal cost equals the price of its product. If the firm increases its output, then total revenue will

Accepted Answer

A) increase and profits will increase. 
B) decrease and profits will increase. 
C) increase and profits will decrease. 
D) decrease and profits will decrease. 
A) increase and profits will increase. 
B) decrease and profits will increase. 
C) increase and profits will decrease. 
D) decrease and profits will decrease.

Question 4

The table shows the total costs for a purely competitive firm. If the product sells for $800 a unit, the firm's short run profit-maximizing (or loss-minimizing)output is

Accepted Answer

A) 4. 
B) 1. 
C) 2. 
D) 5. 
A) 4. 
B) 1. 
C) 2. 
D) 5.

Question 5

The accompanying table applies to a purely competitive industry composed of 100 identical firms. If each of the 100 firms in the industry is maximizing its profit and earning only a normal profit, each must have a total cost of

Accepted Answer

A) $18,000. 
B) $20,000. 
C) $22,000. 
D) $14,000. 
A) $18,000. 
B) $20,000. 
C) $22,000. 
D) $14,000.

Question 6

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for the firm's product is $28, the competitive firm will

Accepted Answer

A) produce 4 units at a loss of $17.40. 
B) produce 7 units at a loss of $14.00. 
C) shut down in the short run. 
D) produce 6 units at a loss of $23.80. 
A) produce 4 units at a loss of $17.40. 
B) produce 7 units at a loss of $14.00. 
C) shut down in the short run. 
D) produce 6 units at a loss of $23.80.

Question 7

When a firm is maximizing profit, it will necessarily be

Accepted Answer

A) maximizing profit per unit of output. 
B) maximizing the difference between total revenue and total cost. 
C) minimizing total cost. 
D) maximizing total revenue. 
A) maximizing profit per unit of output. 
B) maximizing the difference between total revenue and total cost. 
C) minimizing total cost. 
D) maximizing total revenue.

Question 8

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 9

Which is necessarily true for a purely competitive firm in short-run equilibrium?

Accepted Answer

A) Marginal revenue minus marginal cost equals zero. 
B) Price minus average total cost equals zero. 
C) Total revenue minus total cost equals zero. 
D) Marginal revenue is zero. 
A) Marginal revenue minus marginal cost equals zero. 
B) Price minus average total cost equals zero. 
C) Total revenue minus total cost equals zero. 
D) Marginal revenue is zero.

Question 10

In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if price is below

Accepted Answer

A) marginal cost. 
B) average cost. 
C) average fixed cost. 
D) average variable cost. 
A) marginal cost. 
B) average cost. 
C) average fixed cost. 
D) average variable cost.

Question 11

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If there were 1,000 identical firms in this industry and total, or market, demand is as shown in the second table, equilibrium price will be

Accepted Answer

A) $32. 
B) $42. 
C) $36. 
D) $20. 
A) $32. 
B) $42. 
C) $36. 
D) $20.

Question 12

In the accompanying graph, at what level of output will the firm earn a maximum unit-profit margin (or profit per unit)?

Accepted Answer

A) 0 A 
B) 0 B 
C) 0 C 
D) 0 K 
A) 0 A 
B) 0 B 
C) 0 C 
D) 0 K

Question 13

The accompanying table gives cost data for a firm that is selling in a purely competitive market. At 6 units of output, total fixed cost is ____ and total cost is ____.

Accepted Answer

A) $25; $50 
B) $50; $300 
C) $100; $200 
D) $150; $300 
A) $25; $50 
B) $50; $300 
C) $100; $200 
D) $150; $300

Question 14

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 1,000 units is $2.5. The minimum possible average variable cost is $2. The market price of the product is $2.5. To maximize profits or minimize losses, the firm should

Accepted Answer

A) continue producing 1,000 units. 
B) continue production, but reduce output. 
C) increase production. 
D) shut down. 
A) continue producing 1,000 units. 
B) continue production, but reduce output. 
C) increase production. 
D) shut down.

Question 15

For a purely competitive firm, the demand curve facing it is the same as its marginal revenue curve.

Accepted Answer

A) True 
 B)False

Question 16

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $87, it will produce

Accepted Answer

A) 9 units at an economic profit of zero. 
B) 6 units at a loss of $90. 
C) 9 units at an economic profit of $281.97. 
D) 8 units at an economic profit of $130.72. 
A) 9 units at an economic profit of zero. 
B) 6 units at a loss of $90. 
C) 9 units at an economic profit of $281.97. 
D) 8 units at an economic profit of $130.72.

Question 17

Suppose a bridge for automobiles was constructed across a river and all the costs associated with its construction have been paid. The amount of traffic is such that there are no foreseeable problems of overcrowding in the use of the bridge. Assume, also, that the extra cost associated with traffic crossing the bridge is for all practical purposes equal to zero. What toll should be charged to achieve the most efficient use of the bridge?

Accepted Answer

No toll should be charged, in

Question 18

The table gives data for a purely competitive firm. The marginal revenue from the third unit of output is

Accepted Answer

A) 105. 
B) 24. 
C) 35. 
D) -12. 
A) 105. 
B) 24. 
C) 35. 
D) -12.

Question 19

Average revenue and marginal revenue are equal at each output level in

Accepted Answer

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

Question 20

Refer to the accompanying diagram. At the profit-maximizing output, total revenue will be

Accepted Answer

A) 0 AHE. 
B) 0 BGE. 
C) 0 CFE. 
D) ABGE. 
A) 0 AHE. 
B) 0 BGE. 
C) 0 CFE. 
D) ABGE.

Exam 10: Pure Competition in the Short Run

The MR = MC rule can be restated for a purely competitive seller as P = MC because

A firm should continue to operate even at a loss in the short run if

A purely competitive firm is producing at the point where its marginal cost equals the price of its product. If the firm increases its output, then total revenue will

The table shows the total costs for a purely competitive firm. If the product sells for $800 a unit, the firm's short run profit-maximizing (or loss-minimizing)output is

The accompanying table applies to a purely competitive industry composed of 100 identical firms. If each of the 100 firms in the industry is maximizing its profit and earning only a normal profit, each must have a total cost of

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for the firm's product is $28, the competitive firm will

When a firm is maximizing profit, it will necessarily be

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

Which is necessarily true for a purely competitive firm in short-run equilibrium?

In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if price is below

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If there were 1,000 identical firms in this industry and total, or market, demand is as shown in the second table, equilibrium price will be

In the accompanying graph, at what level of output will the firm earn a maximum unit-profit margin (or profit per unit)?

The accompanying table gives cost data for a firm that is selling in a purely competitive market. At 6 units of output, total fixed cost is ____ and total cost is ____.

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 1,000 units is $2.5. The minimum possible average variable cost is $2. The market price of the product is $2.5. To maximize profits or minimize losses, the firm should

For a purely competitive firm, the demand curve facing it is the same as its marginal revenue curve.

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $87, it will produce

The table gives data for a purely competitive firm. The marginal revenue from the third unit of output is

Average revenue and marginal revenue are equal at each output level in

Refer to the accompanying diagram. At the profit-maximizing output, total revenue will be

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

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

Filters

The accompanying table gives cost data for a firm that is selling in a purely competitive market. At 6 units of output, total fixed cost is and total cost is .