Question 1

Assume for a competitive firm that MC = AVC at $22, MC = ATC at $30, and MC = MR at $35. This firm will

Accepted Answer

A) realize a profit of $13 per unit of output. 
B) minimize its losses by producing in the short run. 
C) maximize its profit by producing in the short run. 
D) shut down in the short run. 
A) realize a profit of $13 per unit of output. 
B) minimize its losses by producing in the short run. 
C) maximize its profit by producing in the short run. 
D) shut down in the short run.

Question 2

If a profit-seeking competitive firm is producing its profit-maximizing output and its total fixed costs fall by 25 percent, the firm should

Accepted Answer

A) use more labor and less capital to produce a larger output. 
B) not change its output. 
C) reduce its output. 
D) increase its output. 
A) use more labor and less capital to produce a larger output. 
B) not change its output. 
C) reduce its output. 
D) increase its output.

Question 3

In the short run, a purely competitive seller will shut down if

Accepted Answer

A) it cannot produce at an economic profit. 
B) price is less than average variable cost at all outputs. 
C) price is less than average fixed cost at all outputs. 
D) there is no point at which marginal revenue and marginal cost are equal. 
A) it cannot produce at an economic profit. 
B) price is less than average variable cost at all outputs. 
C) price is less than average fixed cost at all outputs. 
D) there is no point at which marginal revenue and marginal cost are equal.

Question 4

At which of the following prices will the firm shown in the accompanying graph make an economic profit?

Accepted Answer

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

Question 5

Which of the following is not a basic characteristic of pure competition?

Accepted Answer

A) considerable nonprice competition 
B) no barriers to the entry or exit of firms 
C) a standardized or homogeneous product 
D) a large number of buyers and sellers 
A) considerable nonprice competition 
B) no barriers to the entry or exit of firms 
C) a standardized or homogeneous product 
D) a large number of buyers and sellers

Question 6

An industry comprising a very large number of sellers producing a standardized product is known as

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 7

Refer to the provided graph for a purely competitive firm in the short run. If the firm is maximizing profit, the price of the product is

Accepted Answer

A) D. 
B) E. 
C) F. 
D) G. 
A) D. 
B) E. 
C) F. 
D) G.

Question 8

Firms seek to maximize

Accepted Answer

A) per unit profit. 
B) total revenue. 
C) total profit. 
D) market share. 
A) per unit profit. 
B) total revenue. 
C) total profit. 
D) market share.

Question 9

To maximize profits, the firm whose data is shown in the graph should produce the quantity

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 10

In which market model are the conditions of entry into the market easiest?

Accepted Answer

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

Question 11

The demand curve faced by a purely competitive firm

Accepted Answer

A) has unitary elasticity. 
B) yields constant total revenues even when price changes. 
C) is identical to the market demand curve. 
D) is the same as its marginal revenue curve. 
A) has unitary elasticity. 
B) yields constant total revenues even when price changes. 
C) is identical to the market demand curve. 
D) is the same as its marginal revenue curve.

Question 12

The demand curve for a purely competitive industry is perfectly elastic, but the demand curves faced by individual firms in such an industry are downsloping.

Accepted Answer

A) True 
 B)False

Question 13

In a purely competitive industry, competition centers more on advertising and sales promotion than on price.

Accepted Answer

A) True 
 B)False

Question 14

The total revenue of a purely competitive firm from selling 200 units of output is $1,000. Based on this information, the unit price of the output must be

Accepted Answer

A) $5. 
B) $1,200. 
C) $200,000. 
D) $800. 
A) $5. 
B) $1,200. 
C) $200,000. 
D) $800.

Question 15

Refer to the provided graph for a purely competitive firm in the short run. The firm would suffer losses if it operated at which of the following ranges of output?

Accepted Answer

A) 0A 
B) AB 
C) BC 
D) any level below C 
A) 0A 
B) AB 
C) BC 
D) any level below C

Question 16

Technological advance improves productivity in a purely competitive industry. This change will result in a shift

Accepted Answer

A) down of the individual firm's MC curve, causing the market supply curve to shift to the left. 
B) down of the individual firm's MC curve, causing the market supply curve to shift to the right. 
C) up of the individual firm's MC curve, causing the market supply curve to shift to the left. 
D) up of the individual firm's MC curve, causing the market supply curve to shift to the right. 
A) down of the individual firm's MC curve, causing the market supply curve to shift to the left. 
B) down of the individual firm's MC curve, causing the market supply curve to shift to the right. 
C) up of the individual firm's MC curve, causing the market supply curve to shift to the left. 
D) up of the individual firm's MC curve, causing the market supply curve to shift to the right.

Question 17

Refer to the diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down)is

Accepted Answer

A) P₁. 
B) P₂. 
C) P₃. 
D) P₄. 
A) P₁. 
B) P₂. 
C) P₃. 
D) P₄.

Question 18

Economists would describe the U.S. automobile industry as

Accepted Answer

A) purely competitive. 
B) an oligopoly. 
C) monopolistically competitive. 
D) a pure monopoly. 
A) purely competitive. 
B) an oligopoly. 
C) monopolistically competitive. 
D) a pure monopoly.

Question 19

Using the marginal revenue and marginal cost method, determine the level of output the purely competitive firm should produce in the short run.

Accepted Answer

In this approach, the firm compares the

Question 20

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 $12, the competitive firm should produce

Accepted Answer

A) 4 units at an economic loss of $109. 
B) 4 units at an economic profit of 31.75. 
C) 8 units at an economic loss of $48.80. 
D) zero units at an economic loss of $100. 
A) 4 units at an economic loss of $109. 
B) 4 units at an economic profit of 31.75. 
C) 8 units at an economic loss of $48.80. 
D) zero units at an economic loss of $100.

Exam 10: Pure Competition in the Short Run

Assume for a competitive firm that MC = AVC at $22, MC = ATC at $30, and MC = MR at $35. This firm will

If a profit-seeking competitive firm is producing its profit-maximizing output and its total fixed costs fall by 25 percent, the firm should

In the short run, a purely competitive seller will shut down if

At which of the following prices will the firm shown in the accompanying graph make an economic profit?

Which of the following is not a basic characteristic of pure competition?

An industry comprising a very large number of sellers producing a standardized product is known as

Refer to the provided graph for a purely competitive firm in the short run. If the firm is maximizing profit, the price of the product is

Firms seek to maximize

To maximize profits, the firm whose data is shown in the graph should produce the quantity

In which market model are the conditions of entry into the market easiest?

The demand curve faced by a purely competitive firm

The demand curve for a purely competitive industry is perfectly elastic, but the demand curves faced by individual firms in such an industry are downsloping.

In a purely competitive industry, competition centers more on advertising and sales promotion than on price.

The total revenue of a purely competitive firm from selling 200 units of output is $1,000. Based on this information, the unit price of the output must be

Refer to the provided graph for a purely competitive firm in the short run. The firm would suffer losses if it operated at which of the following ranges of output?

Technological advance improves productivity in a purely competitive industry. This change will result in a shift

Refer to the diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down)is

Economists would describe the U.S. automobile industry as

Using the marginal revenue and marginal cost method, determine the level of output the purely competitive firm should produce in the short run.

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 $12, the competitive firm should produce

Limits, Alternatives, and Choices

The Market System and the Circular Flow

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Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

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Pure Competition in the Long Run

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The Demand for Resources

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