Question 1

The accompanying table applies to a purely competitive industry composed of 100 identical firms. The equilibrium price in this purely competitive market is

Accepted Answer

A) $5. 
B) $4. 
C) $3. 
D) $2. 
A) $5. 
B) $4. 
C) $3. 
D) $2.

Question 2

Assume the price of a product sold by a purely competitive firm is $5. Given the data in the accompanying table, at what output level is total profit highest in the short run?

Accepted Answer

A) 40. 
B) 20. 
C) 30. 
D) 50. 
A) 40. 
B) 20. 
C) 30. 
D) 50.

Question 3

For a purely competitive seller, price equals

Accepted Answer

A) average revenue. 
B) marginal revenue. 
C) total revenue divided by output. 
D) all of these. 
A) average revenue. 
B) marginal revenue. 
C) total revenue divided by output. 
D) all of these.

Question 4

Under what circumstances should a company stop saving into a sinking fund?

Accepted Answer

A) When the firm foresees closure and has no reason to replace depreciating equipment. 
B) When prices of new equipment are rising dramatically. 
C) Firms should never stop saving into a sinking fund. 
D) When technological innovation in the industry is stagnant. 
A) When the firm foresees closure and has no reason to replace depreciating equipment. 
B) When prices of new equipment are rising dramatically. 
C) Firms should never stop saving into a sinking fund. 
D) When technological innovation in the industry is stagnant.

Question 5

Increasing the share of your income that you save is good for you. Therefore, it would be good for the whole economy if everyone saved more. This exemplifies the

Accepted Answer

A) post hoc fallacy. 
B) fallacy of composition. 
C) use of loaded terminology. 
D) confusion between correlation and causation. 
A) post hoc fallacy. 
B) fallacy of composition. 
C) use of loaded terminology. 
D) confusion between correlation and causation.

Question 6

If MR > MC for a competitive firm, it should reduce its level of output in order to make MR equal to MC.

Accepted Answer

A) True 
 B)False

Question 7

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 800 units is $3.50. The minimum possible average variable cost is $2.00. The market price of the product is $4.00. To maximize profits or minimize losses, the firm should

Accepted Answer

A) continue producing 800 units. 
B) continue production, but reduce output. 
C) increase production. 
D) shut down. 
A) continue producing 800 units. 
B) continue production, but reduce output. 
C) increase production. 
D) shut down.

Question 8

A purely competitive firm will be willing to produce even at a loss in the short run, as long as

Accepted Answer

A) the loss is smaller than its total variable costs. 
B) the loss is smaller than its marginal costs. 
C) the loss is smaller than its total fixed costs. 
D) price exceeds marginal costs. 
A) the loss is smaller than its total variable costs. 
B) the loss is smaller than its marginal costs. 
C) the loss is smaller than its total fixed costs. 
D) price exceeds marginal costs.

Question 9

If a purely competitive firm is producing at the P = MC output and realizing an economic profit, at that output

Accepted Answer

A) marginal revenue is less than price. 
B) marginal revenue exceeds ATC. 
C) ATC is being minimized. 
D) total revenue equals total cost. 
A) marginal revenue is less than price. 
B) marginal revenue exceeds ATC. 
C) ATC is being minimized. 
D) total revenue equals total cost.

Question 10

The short-run supply curve for a purely competitive industry can be found by

Accepted Answer

A) multiplying the AVC curve of the representative firm by the number of firms in the industry. 
B) adding horizontally the AVC curves of all firms. 
C) summing horizontally the segments of the MC curves lying above the AVC curve for all firms. 
D) adding horizontally the immediate market period supply curves of each firm. 
A) multiplying the AVC curve of the representative firm by the number of firms in the industry. 
B) adding horizontally the AVC curves of all firms. 
C) summing horizontally the segments of the MC curves lying above the AVC curve for all firms. 
D) adding horizontally the immediate market period supply curves of each firm.

Question 11

The table shows the total costs for a purely competitive firm. If the firm shuts down in the short run, the total cost will be

Accepted Answer

A) $ 0. 
B) $2,500. 
C) $2,700. 
D) $3,100. 
A) $ 0. 
B) $2,500. 
C) $2,700. 
D) $3,100.

Question 12

Which of the following is true under conditions of pure competition?

Accepted Answer

A) There are differentiated products. 
B) The market demand curve is perfectly elastic. 
C) No single firm can influence the market price by changing its production level. 
D) Each individual firm has the ability to set its own price. 
A) There are differentiated products. 
B) The market demand curve is perfectly elastic. 
C) No single firm can influence the market price by changing its production level. 
D) Each individual firm has the ability to set its own price.

Question 13

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.   Based on all these data, the equilibrium price of the product in the market will be

Accepted Answer

A) $60. 
B) $95. 
C) $120. 
D) $75. 
A) $60. 
B) $95. 
C) $120. 
D) $75.

Question 14

What is the relationship between marginal cost and the short-run supply curve for the purely competitive firm?

Accepted Answer

The short-run supply curve is the portio

Question 15

If the supply and demand curves in the provided graph represent the market supply and demand for a purely competitive industry, then the demand curve that an individual firm in the industry faces

Accepted Answer

A) is identical to the market demand. 
B) is equal to the marginal-revenue curve, which is a flat line at P₀ . 
C) is more elastic than the market demand but has a marginal-revenue curve lying below it. 
D) has the same slope as the market demand, but at P₀ its quantity demanded is only a fraction of Q₀ . 
A) is identical to the market demand. 
B) is equal to the marginal-revenue curve, which is a flat line at P₀ . 
C) is more elastic than the market demand but has a marginal-revenue curve lying below it. 
D) has the same slope as the market demand, but at P₀ its quantity demanded is only a fraction of Q₀ .

Question 16

The total revenue of a purely competitive firm from selling 6 units of output is $48. Based on this information, the unit price of the output must be

Accepted Answer

A) $8. 
B) $42. 
C) $288. 
D) $54. 
A) $8. 
B) $42. 
C) $288. 
D) $54.

Question 17

How does pure competition differ from other basic market models?

Accepted Answer

The other basic market models are pure m

Question 18

Marginal revenue is the

Accepted Answer

A) change in product price associated with the sale of one more unit of output. 
B) change in average revenue associated with the sale of one more unit of output. 
C) difference between product price and average total cost. 
D) change in total revenue associated with the sale of one more unit of output. 
A) change in product price associated with the sale of one more unit of output. 
B) change in average revenue associated with the sale of one more unit of output. 
C) difference between product price and average total cost. 
D) change in total revenue associated with the sale of one more unit of output.

Question 19

The accompanying table shows cost data for a firm that is selling in a purely competitive market. If the product price is $180, the per-unit economic profit at the profit-maximizing output is

Accepted Answer

A) $0 
B) $238 
C) $34 
D) $73 
A) $0 
B) $238 
C) $34 
D) $73

Question 20

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

Accepted Answer

First, find total revenue by multiplying

Exam 10: Pure Competition in the Short Run

The accompanying table applies to a purely competitive industry composed of 100 identical firms. The equilibrium price in this purely competitive market is

Assume the price of a product sold by a purely competitive firm is $5. Given the data in the accompanying table, at what output level is total profit highest in the short run?

For a purely competitive seller, price equals

Under what circumstances should a company stop saving into a sinking fund?

Increasing the share of your income that you save is good for you. Therefore, it would be good for the whole economy if everyone saved more. This exemplifies the

If MR > MC for a competitive firm, it should reduce its level of output in order to make MR equal to MC.

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 800 units is $3.50. The minimum possible average variable cost is $2.00. The market price of the product is $4.00. To maximize profits or minimize losses, the firm should

A purely competitive firm will be willing to produce even at a loss in the short run, as long as

If a purely competitive firm is producing at the P = MC output and realizing an economic profit, at that output

The short-run supply curve for a purely competitive industry can be found by

The table shows the total costs for a purely competitive firm. If the firm shuts down in the short run, the total cost will be

Which of the following is true under conditions of pure competition?

What is the relationship between marginal cost and the short-run supply curve for the purely competitive firm?

If the supply and demand curves in the provided graph represent the market supply and demand for a purely competitive industry, then the demand curve that an individual firm in the industry faces

The total revenue of a purely competitive firm from selling 6 units of output is $48. Based on this information, the unit price of the output must be

How does pure competition differ from other basic market models?

Marginal revenue is the

The accompanying table shows cost data for a firm that is selling in a purely competitive market. If the product price is $180, the per-unit economic profit at the profit-maximizing output is

Using the total revenue and total cost method, determine the level of output the purely competitive firm should produce 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

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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