Question 1

In the standard model of pure competition in the short run, a profit-maximizing firm will produce the output quantity where the gap between

Accepted Answer

A) marginal revenue and marginal cost is the largest, with revenue higher than cost. 
B) average revenue and average cost is the largest, with revenue higher than cost. 
C) total revenue and total cost is the largest, with revenue higher than cost. 
D) average revenue and average variable cost is the largest. 
A) marginal revenue and marginal cost is the largest, with revenue higher than cost. 
B) average revenue and average cost is the largest, with revenue higher than cost. 
C) total revenue and total cost is the largest, with revenue higher than cost. 
D) average revenue and average variable cost is the largest.

Question 2

The accompanying table gives cost data for a firm that is selling in a purely competitive market. The data are for

Accepted Answer

A) the long run. 
B) the short run. 
C) both the short run and the long run. 
D) the intermediate market period only. 
A) the long run. 
B) the short run. 
C) both the short run and the long run. 
D) the intermediate market period only.

Question 3

A purely competitive seller is

Accepted Answer

A) both a "price maker" and a "price taker." 
B) neither a "price maker" nor a "price taker." 
C) a "price taker." 
D) a "price maker." 
A) both a "price maker" and a "price taker." 
B) neither a "price maker" nor a "price taker." 
C) a "price taker." 
D) a "price maker."

Question 4

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If product price is $45, the firm will

Accepted Answer

A) shut down. 
B) produce 4 units and realize a $120 economic profit. 
C) produce 5 units and realize a $15 economic profit. 
D) produce 6 units and realize a $100 economic profit. 
A) shut down. 
B) produce 4 units and realize a $120 economic profit. 
C) produce 5 units and realize a $15 economic profit. 
D) produce 6 units and realize a $100 economic profit.

Question 5

In the provided diagram, at the profit-maximizing output, total profit is

Accepted Answer

A) efbc. 
B) fgab. 
C) egac. 
D) 0 fbn. 
A) efbc. 
B) fgab. 
C) egac. 
D) 0 fbn.

Question 6

Price is taken to be a "given" by an individual firm selling in a purely competitive market because

Accepted Answer

A) the firm's demand curve is downward-sloping. 
B) there are no good substitutes for the firm's product. 
C) each seller supplies a negligible fraction of the total market. 
D) product differentiation is reinforced by extensive advertising. 
A) the firm's demand curve is downward-sloping. 
B) there are no good substitutes for the firm's product. 
C) each seller supplies a negligible fraction of the total market. 
D) product differentiation is reinforced by extensive advertising.

Question 7

What type of market best describes the exchange rate for currencies? Why?

Accepted Answer

Pure competition best describes currency

Question 8

Given the provided graph, the competitive firm's supply curve is the

Accepted Answer

A) MC curve above F. 
B) MC curve above G. 
C) MC curve above H. 
D) MC curve above J. 
A) MC curve above F. 
B) MC curve above G. 
C) MC curve above H. 
D) MC curve above J.

Question 9

Refer to the diagram for a purely competitive producer. The firm will produce at a loss at all prices

Accepted Answer

A) below P₂. 
B) below P₁. 
C) below P₃. 
D) between P₂ and P₃. 
A) below P₂. 
B) below P₁. 
C) below P₃. 
D) between P₂ and P₃.

Question 10

Curve (1)in the diagram is a purely competitive firm's

Accepted Answer

A) total cost curve. 
B) total revenue curve. 
C) marginal revenue curve. 
D) total economic profit curve. 
A) total cost curve. 
B) total revenue curve. 
C) marginal revenue curve. 
D) total economic profit curve.

Question 11

In maximizing profit, a firm will always produce that output where total revenues are at a maximum.

Accepted Answer

A) True 
 B)False

Question 12

Xavier produces and sells tomatoes in a purely competitive market. This implies that Xavier's marginal revenue from an extra unit of tomatoes is always equal to the

Accepted Answer

A) unit price. 
B) average cost. 
C) variable cost. 
D) unit profit. 
A) unit price. 
B) average cost. 
C) variable cost. 
D) unit profit.

Question 13

If a purely competitive firm is producing at some output level less than the profit-maximizing output, then

Accepted Answer

A) price is necessarily greater than average total cost. 
B) fixed costs are large relative to variable costs. 
C) price exceeds marginal revenue. 
D) marginal revenue exceeds marginal cost. 
A) price is necessarily greater than average total cost. 
B) fixed costs are large relative to variable costs. 
C) price exceeds marginal revenue. 
D) marginal revenue exceeds marginal cost.

Question 14

The table gives data for a purely competitive firm. The market price of the product in the short run is

Accepted Answer

A) $80. 
B) $120. 
C) $40. 
D) $160. 
A) $80. 
B) $120. 
C) $40. 
D) $160.

Question 15

Consider the purely competitive firm whose data are shown in the accompanying graph. At its short-run equilibrium point, the firm is earning

Accepted Answer

A) zero normal profits. 
B) zero economic profits. 
C) zero accounting profits. 
D) We can say nothing about this firm's profit or loss situation. 
A) zero normal profits. 
B) zero economic profits. 
C) zero accounting profits. 
D) We can say nothing about this firm's profit or loss situation.

Question 16

How would you describe the demand curve for the purely competitive firm? For the industry?

Accepted Answer

The demand curve for the individual firm

Question 17

Which of the following statements applies to a purely competitive producer?

Accepted Answer

A) It will not advertise its product. 
B) In long-run equilibrium, it will earn an economic profit. 
C) Its product will have a brand name that elicits customer loyalty. 
D) Its product is slightly different from those of its competitors. 
A) It will not advertise its product. 
B) In long-run equilibrium, it will earn an economic profit. 
C) Its product will have a brand name that elicits customer loyalty. 
D) Its product is slightly different from those of its competitors.

Question 18

If a firm is a price taker, then the demand curve for the firm's product is

Accepted Answer

A) equal to the total revenue curve. 
B) perfectly inelastic. 
C) perfectly elastic. 
D) unit elastic. 
A) equal to the total revenue curve. 
B) perfectly inelastic. 
C) perfectly elastic. 
D) unit elastic.

Question 19

The accompanying graph shows short-run cost curves for a competitive firm. At what minimum price would the firm be willing to produce some output in the short run?

Accepted Answer

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

Question 20

Unit price and average revenue are the same or equal in

Accepted Answer

A) pure competition only. 
B) pure monopoly only. 
C) monopolistic competition only. 
D) all market structures. 
A) pure competition only. 
B) pure monopoly only. 
C) monopolistic competition only. 
D) all market structures.

Exam 10: Pure Competition in the Short Run

In the standard model of pure competition in the short run, a profit-maximizing firm will produce the output quantity where the gap between

The accompanying table gives cost data for a firm that is selling in a purely competitive market. The data are for

A purely competitive seller is

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If product price is $45, the firm will

In the provided diagram, at the profit-maximizing output, total profit is

Price is taken to be a "given" by an individual firm selling in a purely competitive market because

What type of market best describes the exchange rate for currencies? Why?

Given the provided graph, the competitive firm's supply curve is the

Refer to the diagram for a purely competitive producer. The firm will produce at a loss at all prices

Curve (1)in the diagram is a purely competitive firm's

In maximizing profit, a firm will always produce that output where total revenues are at a maximum.

Xavier produces and sells tomatoes in a purely competitive market. This implies that Xavier's marginal revenue from an extra unit of tomatoes is always equal to the

If a purely competitive firm is producing at some output level less than the profit-maximizing output, then

The table gives data for a purely competitive firm. The market price of the product in the short run is

Consider the purely competitive firm whose data are shown in the accompanying graph. At its short-run equilibrium point, the firm is earning

How would you describe the demand curve for the purely competitive firm? For the industry?

Which of the following statements applies to a purely competitive producer?

If a firm is a price taker, then the demand curve for the firm's product is

The accompanying graph shows short-run cost curves for a competitive firm. At what minimum price would the firm be willing to produce some output in the short run?

Unit price and average revenue are the same or equal in

Limits, Alternatives, and Choices

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Pure Competition in the Long Run

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