Question 1

The term imperfect competition refers to every market structure besides pure competition.

Accepted Answer

A) True 
 B)False

Question 2

What are four characteristics of pure competition?

Accepted Answer

Four characteristics of pure competition

Question 3

Refer to the accompanying graph for a purely competitive firm operating at a loss in the short run. Which area in the graph represents the amount of economic loss for the firm?

Accepted Answer

A) 0 beg 
B) bcde 
C) acdf 
D) abef 
A) 0 beg 
B) bcde 
C) acdf 
D) abef

Question 4

A purely competitive firm is currently in short-run equilibrium and its MC exceeds its ATC at its current output level. It can be concluded that

Accepted Answer

A) firms will leave the industry in the long run. 
B) the firm is realizing an economic profit. 
C) the firm is suffering an economic loss. 
D) the firm will shut down in the short run. 
A) firms will leave the industry in the long run. 
B) the firm is realizing an economic profit. 
C) the firm is suffering an economic loss. 
D) the firm will shut down in the short run.

Question 5

Price is constant to the individual firm selling in a purely competitive market because

Accepted Answer

A) the firm's demand curve is downsloping. 
B) of product differentiation reinforced by extensive advertising. 
C) each seller supplies a negligible fraction of total supply. 
D) marginal costs are constant. 
A) the firm's demand curve is downsloping. 
B) of product differentiation reinforced by extensive advertising. 
C) each seller supplies a negligible fraction of total supply. 
D) marginal costs are constant.

Question 6

Refer to the data in the accompanying table. If the firm's minimum average variable cost is $11, at the profit-maximizing level of output, the firm's total revenue is

Accepted Answer

A) $48. 
B) $80. 
C) $32. 
D) $64. 
A) $48. 
B) $80. 
C) $32. 
D) $64.

Question 7

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 200 units is $4.00. The average variable cost is $3.50. The market price of the product is $3.00. To maximize profits or minimize losses, the firm should

Accepted Answer

A) continue to produce 200 units. 
B) continue production, but produce less than 200 units. 
C) increase production to more than 200 units. 
D) shut down. 
A) continue to produce 200 units. 
B) continue production, but produce less than 200 units. 
C) increase production to more than 200 units. 
D) shut down.

Question 8

The MR = MC rule applies

Accepted Answer

A) to firms in all types of industries. 
B) only when the firm is a "price taker." 
C) only to monopolies. 
D) only to purely competitive firms. 
A) to firms in all types of industries. 
B) only when the firm is a "price taker." 
C) only to monopolies. 
D) only to purely competitive firms.

Question 9

Although individual purely competitive firms can influence the price of their product, these firms as a group cannot influence market price.

Accepted Answer

A) True 
 B)False

Question 10

Which market model assumes the least number of firms in an industry?

Accepted Answer

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

Question 11

If the demand curve faced by an individual firm is downward-sloping, the firm cannot be

Accepted Answer

A) a monopoly firm. 
B) a purely competitive firm. 
C) an oligopolistic firm. 
D) a monopolistically competitive firm. 
A) a monopoly firm. 
B) a purely competitive firm. 
C) an oligopolistic firm. 
D) a monopolistically competitive firm.

Question 12

The basic difference between pure competition and monopolistic competition is in the number of firms in the industry.

Accepted Answer

A) True 
 B)False

Question 13

The accompanying graph shows short-run cost curves for a competitive firm. At what price would the firm break even?

Accepted Answer

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

Question 14

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

Accepted Answer

A) equals average revenue. 
B) is greater than MC. 
C) is less than AVC. 
D) is less than ATC. 
A) equals average revenue. 
B) is greater than MC. 
C) is less than AVC. 
D) is less than ATC.

Question 15

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

Accepted Answer

A) pricing strategies by firms 
B) a standardized product 
C) no barriers to entry 
D) a larger number of sellers 
A) pricing strategies by firms 
B) a standardized product 
C) no barriers to entry 
D) a larger number of sellers

Question 16

Refer to the diagram, which pertains to a purely competitive firm. Curve C represents

Accepted Answer

A) total revenue and marginal revenue. 
B) marginal revenue only. 
C) total revenue and average revenue. 
D) average revenue and marginal revenue. 
A) total revenue and marginal revenue. 
B) marginal revenue only. 
C) total revenue and average revenue. 
D) average revenue and marginal revenue.

Question 17

At P ₁ in the accompanying diagram, this firm will produce

Accepted Answer

A) 47 units and break even. 
B) 47 units and realize an economic profit. 
C) 66 units and earn only a normal profit. 
D) 24 units and earn only a normal profit. 
A) 47 units and break even. 
B) 47 units and realize an economic profit. 
C) 66 units and earn only a normal profit. 
D) 24 units and earn only a normal profit.

Question 18

What are the differences between average, total, and marginal revenue?

Accepted Answer

Average revenue is total revenue from th

Question 19

Firms in a monopolistically competitive industry have no reason to engage in nonprice competition because their products are uniquely different from other sellers in the market.

Accepted Answer

A) True 
 B)False

Question 20

Given the accompanying table, what is the short-run profit-maximizing level of output for the firm?

Accepted Answer

A) 3. 
B) 1. 
C) 2. 
D) 4. 
A) 3. 
B) 1. 
C) 2. 
D) 4.

Exam 10: Pure Competition in the Short Run

The term imperfect competition refers to every market structure besides pure competition.

What are four characteristics of pure competition?

Refer to the accompanying graph for a purely competitive firm operating at a loss in the short run. Which area in the graph represents the amount of economic loss for the firm?

A purely competitive firm is currently in short-run equilibrium and its MC exceeds its ATC at its current output level. It can be concluded that

Price is constant to the individual firm selling in a purely competitive market because

Refer to the data in the accompanying table. If the firm's minimum average variable cost is $11, at the profit-maximizing level of output, the firm's total revenue is

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 200 units is $4.00. The average variable cost is $3.50. The market price of the product is $3.00. To maximize profits or minimize losses, the firm should

The MR = MC rule applies

Although individual purely competitive firms can influence the price of their product, these firms as a group cannot influence market price.

Which market model assumes the least number of firms in an industry?

If the demand curve faced by an individual firm is downward-sloping, the firm cannot be

The basic difference between pure competition and monopolistic competition is in the number of firms in the industry.

The accompanying graph shows short-run cost curves for a competitive firm. At what price would the firm break even?

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

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

Refer to the diagram, which pertains to a purely competitive firm. Curve C represents

At P ₁ in the accompanying diagram, this firm will produce

What are the differences between average, total, and marginal revenue?

Firms in a monopolistically competitive industry have no reason to engage in nonprice competition because their products are uniquely different from other sellers in the market.

Given the accompanying table, what is the short-run profit-maximizing level of output for the 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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