Question 1

The accompanying table gives cost data for a firm that is selling in a purely competitive market. The marginal cost of the fifth unit of output is

Accepted Answer

A) $80. 
B) $90. 
C) $50. 
D) $20. 
A) $80. 
B) $90. 
C) $50. 
D) $20.

Question 2

Which point in the accompanying graph is the shutdown point for the firm?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 3

T-Shirt Enterprises is selling in a purely competitive market. It is producing 3,000 units, selling them for $2.00 each. At this level of output, the average total cost is 2.50 and the average variable cost is $2.20. Based on these data, the firm should

Accepted Answer

A) shut down in the short run. 
B) decrease output to 2,500 units. 
C) continue to produce 3,000 units. 
D) increase output to 3,500 units. 
A) shut down in the short run. 
B) decrease output to 2,500 units. 
C) continue to produce 3,000 units. 
D) increase output to 3,500 units.

Question 4

Assume for a competitive firm that MC = AVC at $12, MC = ATC at $20, and MC = MR at $16. This firm will

Accepted Answer

A) realize a profit of $4 per unit of output. 
B) maximize its profit by producing in the short run. 
C) minimize its losses by producing in the short run. 
D) shut down in the short run. 
A) realize a profit of $4 per unit of output. 
B) maximize its profit by producing in the short run. 
C) minimize its losses by producing in the short run. 
D) shut down in the short run.

Question 5

A purely competitive seller should produce (rather than shut down)in the short run

Accepted Answer

A) only if total revenue exceeds total cost. 
B) only if total cost exceeds total revenue. 
C) if total revenue exceeds total cost or if total cost exceeds total revenue by some amount less than total fixed cost. 
D) if total cost exceeds total revenue by some amount greater than total fixed cost. 
A) only if total revenue exceeds total cost. 
B) only if total cost exceeds total revenue. 
C) if total revenue exceeds total cost or if total cost exceeds total revenue by some amount less than total fixed cost. 
D) if total cost exceeds total revenue by some amount greater than total fixed cost.

Question 6

In the provided diagram, the short-run supply curve for this firm is the

Accepted Answer

A) entire MC curve. 
B) segment of the AVC curve lying to the right of the MC curve. 
C) segment of the MC curve lying to the right of output level k. 
D) segment of the MC curve lying to the right of output level h. 
A) entire MC curve. 
B) segment of the AVC curve lying to the right of the MC curve. 
C) segment of the MC curve lying to the right of output level k. 
D) segment of the MC curve lying to the right of output level h.

Question 7

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If product price is $25, the firm will

Accepted Answer

A) shut down and incur a $90 loss. 
B) shut down and incur a $50 loss. 
C) produce 3 units and incur a $65 loss. 
D) produce 4 units and realize a $10 economic profit. 
A) shut down and incur a $90 loss. 
B) shut down and incur a $50 loss. 
C) produce 3 units and incur a $65 loss. 
D) produce 4 units and realize a $10 economic profit.

Question 8

The Campus Crustacean Company receives $2 per box for its crawfish and is selling 1,600 boxes to maximize its profits. What is the profit per box of crawfish at this equilibrium level of output if the average variable cost is $1 per box and total fixed costs are $1,200?

Accepted Answer

A) $0.25 
B) $0.50 
C) $1.00 
D) $1.25 
A) $0.25 
B) $0.50 
C) $1.00 
D) $1.25

Question 9

The table shows the total costs for a purely competitive firm. If the product sells for $1,200 a unit, the firm's profit-maximizing output is

Accepted Answer

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

Question 10

The accompanying table gives cost data for a firm that is selling in a purely competitive market. We can infer that, at zero output, this firm's total fixed, total variable, and total costs are

Accepted Answer

A) zero, zero, and zero, respectively. 
B) zero, $25, and $175, respectively. 
C) $150, $25, and $175, respectively. 
D) $150, zero, and $150, respectively. 
A) zero, zero, and zero, respectively. 
B) zero, $25, and $175, respectively. 
C) $150, $25, and $175, respectively. 
D) $150, zero, and $150, respectively.

Question 11

Which of the following is characteristic of a purely competitive seller's demand curve?

Accepted Answer

A) Price and marginal revenue are equal at all levels of output. 
B) Average revenue is less than price. 
C) Its elasticity coefficient is 1 at all levels of output. 
D) It is the same as the market demand curve. 
A) Price and marginal revenue are equal at all levels of output. 
B) Average revenue is less than price. 
C) Its elasticity coefficient is 1 at all levels of output. 
D) It is the same as the market demand curve.

Question 12

The accompanying table applies to a purely competitive industry composed of 100 identical firms. For each of the 100 firms in this industry, marginal revenue and total revenue will be

Accepted Answer

A) $4 and $400, respectively. 
B) $3 and $30,000, respectively. 
C) $4 and $20,000, respectively. 
D) $3 and $18,000, respectively. 
A) $4 and $400, respectively. 
B) $3 and $30,000, respectively. 
C) $4 and $20,000, respectively. 
D) $3 and $18,000, respectively.

Question 13

If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing

Accepted Answer

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

Question 14

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.   At equilibrium, each firm will realize

Accepted Answer

A) an economic profit of $155. 
B) an economic profit of $35. 
C) a loss of $45. 
D) a loss of $135. 
A) an economic profit of $155. 
B) an economic profit of $35. 
C) a loss of $45. 
D) a loss of $135.

Question 15

Farmer Jones is producing wheat and must accept the market price of $6.00 per bushel. At this time, her average total costs and her marginal costs both equal $5.00 per bushel. Her minimum average variable costs are $3.50 per bushel. In order to maximize profits or minimize losses in the short run, farmer Jones should

Accepted Answer

A) increase selling price. 
B) produce zero output and shut down. 
C) continue producing, but reduce output. 
D) increase output. 
A) increase selling price. 
B) produce zero output and shut down. 
C) continue producing, but reduce output. 
D) increase output.

Question 16

In the short run, fixed costs for a profitable competitive firm are

Accepted Answer

A) zero. 
B) negative. 
C) important determinants of the output level. 
D) irrelevant in determining the optimal level of output. 
A) zero. 
B) negative. 
C) important determinants of the output level. 
D) irrelevant in determining the optimal level of output.

Question 17

The accompanying table gives cost data for a firm that is selling in a purely competitive market. At 5 units of output, average fixed cost, average variable cost, and average total cost are

Accepted Answer

A) $10, $60, and $70, respectively. 
B) $50, $40, and $90, respectively. 
C) $10, $70, and $80, respectively. 
D) $5, $25, and $30, respectively. 
A) $10, $60, and $70, respectively. 
B) $50, $40, and $90, respectively. 
C) $10, $70, and $80, respectively. 
D) $5, $25, and $30, respectively.

Question 18

The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the

Accepted Answer

A) output-maximizing rule. 
B) profit-maximizing rule. 
C) shut-down rule. 
D) break-even rule. 
A) output-maximizing rule. 
B) profit-maximizing rule. 
C) shut-down rule. 
D) break-even rule.

Question 19

Explain the marginal revenue and marginal cost approach to profit maximization, and use it to describe profit, loss, and shut-down situations for the purely competitive firm.

Accepted Answer

The purely competitive firm operating in

Question 20

The first table shows cost data for a firm that is selling in a purely competitive market. Now assume there are 100 identical firms in this industry, each of which has the same cost data as the single firm described in the cost table. Now consider the demand curve data for this industry as shown in the second table.   The equilibrium price in the market will be

Accepted Answer

A) $140. 
B) $180. 
C) $230. 
D) $290. 
A) $140. 
B) $180. 
C) $230. 
D) $290.

Exam 10: Pure Competition in the Short Run

The accompanying table gives cost data for a firm that is selling in a purely competitive market. The marginal cost of the fifth unit of output is

Which point in the accompanying graph is the shutdown point for the firm?

T-Shirt Enterprises is selling in a purely competitive market. It is producing 3,000 units, selling them for $2.00 each. At this level of output, the average total cost is 2.50 and the average variable cost is $2.20. Based on these data, the firm should

Assume for a competitive firm that MC = AVC at $12, MC = ATC at $20, and MC = MR at $16. This firm will

A purely competitive seller should produce (rather than shut down)in the short run

In the provided diagram, the short-run supply curve for this firm is the

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If product price is $25, the firm will

The Campus Crustacean Company receives $2 per box for its crawfish and is selling 1,600 boxes to maximize its profits. What is the profit per box of crawfish at this equilibrium level of output if the average variable cost is $1 per box and total fixed costs are $1,200?

The table shows the total costs for a purely competitive firm. If the product sells for $1,200 a unit, the firm's profit-maximizing output is

The accompanying table gives cost data for a firm that is selling in a purely competitive market. We can infer that, at zero output, this firm's total fixed, total variable, and total costs are

Which of the following is characteristic of a purely competitive seller's demand curve?

The accompanying table applies to a purely competitive industry composed of 100 identical firms. For each of the 100 firms in this industry, marginal revenue and total revenue will be

If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing

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. At equilibrium, each firm will realize

In the short run, fixed costs for a profitable competitive firm are

The accompanying table gives cost data for a firm that is selling in a purely competitive market. At 5 units of output, average fixed cost, average variable cost, and average total cost are

The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the

Explain the marginal revenue and marginal cost approach to profit maximization, and use it to describe profit, loss, and shut-down situations for the purely competitive firm.

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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