Question 1

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 2

The short-run supply curve of a purely competitive producer is based primarily on its

Accepted Answer

A)  AVC curve. 
B)  ATC curve. 
C)  AFC curve. 
D)  MC curve. 
A)  AVC curve. 
B)  ATC curve. 
C)  AFC curve. 
D)  MC curve.

Question 3

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 4

A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating

Accepted Answer

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

Question 5

A firm should continue to operate even at a loss in the short run if

Accepted Answer

A)  its output is above the break-even point. 
B)  its revenues are less than its fixed costs. 
C)  it can cover its variable costs and some of its fixed costs. 
D)  it has some fixed costs that cannot be brought down to zero. 
A)  its output is above the break-even point. 
B)  its revenues are less than its fixed costs. 
C)  it can cover its variable costs and some of its fixed costs. 
D)  it has some fixed costs that cannot be brought down to zero.

Question 6

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

Accepted Answer

A) True 
 B)False

Question 7

In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if

Accepted Answer

A)  marginal cost is greater than average revenue. 
B)  average cost is greater than average revenue. 
C)  average fixed cost is greater than average revenue. 
D)  total revenue is less than total variable cost. 
A)  marginal cost is greater than average revenue. 
B)  average cost is greater than average revenue. 
C)  average fixed cost is greater than average revenue. 
D)  total revenue is less than total variable cost.

Question 8

A firm reaches a break-even point (normal profit position) where

Accepted Answer

A)  marginal revenue cuts the horizontal axis. 
B)  marginal cost intersects the average variable cost curve. 
C)  total revenue equals total variable cost. 
D)  total revenue and total cost are equal. 
A)  marginal revenue cuts the horizontal axis. 
B)  marginal cost intersects the average variable cost curve. 
C)  total revenue equals total variable cost. 
D)  total revenue and total cost are equal.

Question 9

If there are many firms in an industry, then it must be a purely competitive market.

Accepted Answer

A) True 
 B)False

Question 10

In which of the following industry structures is the entry of new firms the most difficult?

Accepted Answer

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

Question 11

Given the accompanying table, what is the short-run profit-maximizing level of output for the firm? $\begin{array} { | c | c | c| } 
\hline \text { Output } & \text { Total Reverue } & \text { Total Cost } \
\hline 1 & \$ 4 & 2 \
\hline 2 & 8 & 3 \
\hline 3 & 12 & 6 \
\hline 4 & 16 & 9 \
\hline 5 & 20 & 14 \
\hline
\end{array}$

Accepted Answer

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

Question 12

Which idea is inconsistent with pure competition?

Accepted Answer

A)  price-taking behavior 
B)  product differentiation 
C)  freedom of entry or exit for firms 
D)  a large number of buyers and sellers 
A)  price-taking behavior 
B)  product differentiation 
C)  freedom of entry or exit for firms 
D)  a large number of buyers and sellers

Question 13

The fact that a purely competitive firm's total revenue curve is linear and upsloping to the right implies that

Accepted Answer

A)  product price increases as output increases. 
B)  product price decreases as output increases. 
C)  product price is constant at all levels of output. 
D)  marginal revenue declines as more output is produced. 
A)  product price increases as output increases. 
B)  product price decreases as output increases. 
C)  product price is constant at all levels of output. 
D)  marginal revenue declines as more output is produced.

Question 14

The prices of raw materials increase in a purely competitive industry. This change will result in a(n)

Accepted Answer

A)  decrease (downward shift) in the average total cost curve for firms in the industry. 
B)  decrease (downward shift) in the marginal revenue curve for firms in the industry. 
C)  increase (upward shift) in the marginal cost curve for firms in the industry. 
D)  increase (rightward shift) in the short-run supply curve for firms in the industry. 
A)  decrease (downward shift) in the average total cost curve for firms in the industry. 
B)  decrease (downward shift) in the marginal revenue curve for firms in the industry. 
C)  increase (upward shift) in the marginal cost curve for firms in the industry. 
D)  increase (rightward shift) in the short-run supply curve for firms in the industry.

Question 15

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 16

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 17

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 18

Which of the following is not a valid generalization concerning the relationship between price and costs for a purely competitive seller in the short run?

Accepted Answer

A)  Price must be at least equal to average total cost. 
B)  Price times quantity produced must be equal to or greater than total variable cost for some level of output or the firm will close down in the short run. 
C)  Price may be equal to, greater than, or less than average total cost. 
D)  Price must be equal to or greater than minimum average variable cost for the firm to continue producing. 
A)  Price must be at least equal to average total cost. 
B)  Price times quantity produced must be equal to or greater than total variable cost for some level of output or the firm will close down in the short run. 
C)  Price may be equal to, greater than, or less than average total cost. 
D)  Price must be equal to or greater than minimum average variable cost for the firm to continue producing.

Question 19

Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound of pork would be

Accepted Answer

A)  $36. 
B)  $3. 
C)  12 lb. 
D)  1 lb. 
A)  $36. 
B)  $3. 
C)  12 lb. 
D)  1 lb.

Question 20

If a purely competitive firm is producing a level of output where the marginal revenue is less than the marginal cost, then its profits must be negative.

Accepted Answer

A) True 
 B)False

Exam 10: Pure Competition in the Short Run

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

The short-run supply curve of a purely competitive producer is based primarily on its

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

A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating

A firm should continue to operate even at a loss in the short run if

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

In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if

A firm reaches a break-even point (normal profit position) where

If there are many firms in an industry, then it must be a purely competitive market.

In which of the following industry structures is the entry of new firms the most difficult?

Given the accompanying table, what is the short-run profit-maximizing level of output for the firm? Output Total Reverue Total Cost 1 \ 4 2 2 8 3 3 12 6 4 16 9 5 20 14

Which idea is inconsistent with pure competition?

The fact that a purely competitive firm's total revenue curve is linear and upsloping to the right implies that

The prices of raw materials increase in a purely competitive industry. This change will result in a(n)

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

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

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?

Which of the following is not a valid generalization concerning the relationship between price and costs for a purely competitive seller in the short run?

Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound of pork would be

If a purely competitive firm is producing a level of output where the marginal revenue is less than the marginal cost, then its profits must be negative.

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role 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

Filters