Question 1

In the short run,a competitive firm will always choose to shut down if product price is less than the lowest attainable average total cost.

Accepted Answer

A) True 
 B)False

Question 2

Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market: $\begin{array}{c}
\begin{array}{c}
\
\text {Total}\
\underline{\text {Product}}\
1 \
2 \
3 \
4 \
5 \
6 \
7 \
8 \
9 \
10 \
11 \
12
\end{array}
\begin{array}{c}
\text {Average}\
\text {Fixed }\
\underline{\text {Cost }}\
\$ 100.00  \
50.00 \
33.33 \
25.00 \
20.00 \
16.67 \
14.29 \
12.50 \
11.11 \
10.00 \
9.09 \
8.33
\end{array}
\begin{array}{c}
\text {Average}\
\text {Variable}\
\underline{\text {Cost}} \
\$ 17.00 \
16.00 \
15.00 \
14.25 \
14.00 \
14.00 \
15.71 \
17.50 \
19.44 \
21.60 \
24.00 \
26.67
\end{array}
\begin{array}{c}
\text {Average}\
\text {Total}\
\underline{\text {Cost}}\
 \$ 117.00 \
66.00\
48.33\
39.25\
34.00\
30.67\
30.00\
30.00\
30.55\
31.60\
33.09\
35.00
\end{array}
\begin{array}{c}
\text {Marginal}\
\underline{\text {Cost}}\
 \$ 17 \
15\
13\
12\
13\
14\
26 \
30\
30 \
35\
41\
48 \
56
\end{array}
\end{array}$
 Refer to the data.If there were 1,000 identical firms in this industry and total or market demand is as shown below,equilibrium price will be: $$\begin{array}{l}
\begin{array} { c c }
Price& \text { Quantity Demanded }\ 
\hline \$ 50 & 3,000 \
42 & 6,000 \
36 & 9,000 \
32 & 11,000 \
20 & 14,000 \
13 & 19,500
\end{array}
\end{array}$$

Accepted Answer

A)  $32. 
B)  $42. 
C)  $36. 
D)  $20. 
A)  $32. 
B)  $42. 
C)  $36. 
D)  $20.

Question 3

Assume a purely competitive firm is selling 200 units of output at $3 each.At this output,its total fixed cost is $100 and its total variable cost is $350.This firm:

Accepted Answer

A)  is maximizing its profit. 
B)  is making a profit,but not necessarily the maximum profit. 
C)  is incurring losses. 
D)  should shut down in the short run. 
A)  is maximizing its profit. 
B)  is making a profit,but not necessarily the maximum profit. 
C)  is incurring losses. 
D)  should shut down in the short run.

Question 4

Firms seek to maximize:

Accepted Answer

A)  per unit profit. 
B)  total revenue. 
C)  total profit. 
D)  market share. 
A)  per unit profit. 
B)  total revenue. 
C)  total profit. 
D)  market share.

Question 5

Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market: $\begin{array}{c}
\begin{array}{c}
\
Total\
Product\
\hline
1 \
2 \
3 \
4 \
5 \
6 \
7 \
8 \
9 \
10 \
11 \
12
\end{array}
\begin{array}{lll}
Average\
Fixed\
Cost\
\hline
 \$ 100.00 \
 50.00 \
 33.33 \
 25.00 \
 20.00 \
16.67\
 14.29 \
 12.50 \
 11.11 \
 10.00 \
 9.09 \
 8.33 \
\end{array}
\begin{array}{lll}
Average\
Variable\
Cost\
\hline
 \$ 17.00 \
 16.00 \
 15.00 \
 14.25 \
 14.00 \
 14.00 \
15.71\
 17.50 \
19.44 \
 21.60 \
 24.00 \
 26.67 
\end{array}
\begin{array}{ccc}
\text { Average }\
\text { Total } &&\text { Marginal }\
\text { Cost }&&\text { Cost }\
\hline
 \$ 117.00 & & \$ 17 \
66.00 & & 15 \
48.33 & & 13 \
39.25 & & 12 \
34.00 & & 13 \
30.67 & & 14 \
30.00 & & 26 \
30.00 & & 30 \
30.55 & & 35 \
31.60 & & 41 \
33.09 & & 48 \
35.00 & & 56
\end{array}
\end{array}$ Refer to the data.Which of the following is the firm's short-run supply schedule?

Accepted Answer

A) 
$\begin{array}{cc}
\text { Price } & Q_{s} \
\hline \$ 50 & 12 \
42 & 10 \
36 & 8 \
32 & 8 \
20 & 6 \
13 & 0
\end{array}$ 
B) 
$\begin{array}{cc}
\text { Price } & Q_{s} \
\hline \$ 50 & 12 \
42 & 11 \
36 & 9 \
32 & 8 \
20 & 6 \
13 & 5
\end{array}$ 
C) 
$\begin{array}{cc}
\text { Price } & Q_{s} \
\hline \$ 50 & 11 \
42 & 10 \
36 & 9 \
32 & 8 \
20 & 6 \
13 & 0
\end{array}$ 
D) 
$$\begin{array} { c c } 
\text { Price } & Q _ { s } \
\hline \$ 50 & 11 \
42 & 10 \
36 & 9 \
32 & 8 \
20 & 6 \
13 & 5
\end{array}$$ 
A) 
$\begin{array}{cc}
\text { Price } & Q_{s} \
\hline \$ 50 & 12 \
42 & 10 \
36 & 8 \
32 & 8 \
20 & 6 \
13 & 0
\end{array}$ 
B) 
$\begin{array}{cc}
\text { Price } & Q_{s} \
\hline \$ 50 & 12 \
42 & 11 \
36 & 9 \
32 & 8 \
20 & 6 \
13 & 5
\end{array}$ 
C) 
$\begin{array}{cc}
\text { Price } & Q_{s} \
\hline \$ 50 & 11 \
42 & 10 \
36 & 9 \
32 & 8 \
20 & 6 \
13 & 0
\end{array}$ 
D) 
$$\begin{array} { c c } 
\text { Price } & Q _ { s } \
\hline \$ 50 & 11 \
42 & 10 \
36 & 9 \
32 & 8 \
20 & 6 \
13 & 5
\end{array}$$

Question 6

Answer the question on the basis of the following cost data for a purely competitive seller: $\begin{array}{ccc}
\begin{array}{c}
&\text { Total } \
\text { Total }&\text { Fixed } \
\text { Output }&\text { Cost }\
\hline
0&\$50\
1 &   50 \
2 &  50 \
3 &  50 \
4 &  50 \
5 &  50 \
6 &  50
\end{array}
\begin{array}{cc}
\text { Total } &\
\text { Variable }&\text { Total } \
\text { Cost }&\text { Cost }\
\hline
\$ 0 & \$ 50 \
70 & 120 \
120 & 170 \
150 & 200 \
220 & 270 \
300 & 350 \
390 & 440
\end{array}
\end{array}$ Refer to the data.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 7

The following table applies to a purely competitive industry composed of 100 identical firms. $\begin{array}{lcl}
Quantity&&Quantity\
Demanded &Price &Supplied\
\hline
400,000 & \$ 5 & 800,000 \
500,000 & 4 & 700,000 \
600,000 & 3 & 600,000 \
700,000 & 2 & 500,000 \
800,000 & 1 & 400,000
\end{array}$ Refer to the table.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 8

On a per unit basis,economic profit can be determined as the difference between:

Accepted Answer

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

Question 9

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 10

Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market: $\begin{array}{c}
\begin{array}{c}
\
Total\
Product\
\hline
1 \
2 \
3 \
4 \
5 \
6 \
7 \
8 \
9 \
10 \
11 \
12
\end{array}
\begin{array}{lll}
Average\
Fixed\
Cost\
\hline
 \$ 100.00 \
 50.00 \
 33.33 \
 25.00 \
 20.00 \
16.67\
 14.29 \
 12.50 \
 11.11 \
 10.00 \
 9.09 \
 8.33 \
\end{array}
\begin{array}{lll}
Average\
Variable\
Cost\
\hline
 \$ 17.00 \
 16.00 \
 15.00 \
 14.25 \
 14.00 \
 14.00 \
15.71\
 17.50 \
19.44 \
 21.60 \
 24.00 \
 26.67 
\end{array}
\begin{array}{ccc}
\text { Average }\
\text { Total } &&\text { Marginal }\
\text { Cost }&&\text { Cost }\
\hline
 \$ 117.00 & & \$ 17 \
66.00 & & 15 \
48.33 & & 13 \
39.25 & & 12 \
34.00 & & 13 \
30.67 & & 14 \
30.00 & & 26 \
30.00 & & 30 \
30.55 & & 35 \
31.60 & & 41 \
33.09 & & 48 \
35.00 & & 56
\end{array}
\end{array}$ Refer to the data.If the market price for the firm's product is $28,the competitive firm will:

Accepted Answer

A)  produce 4 units at a loss of $17.40. 
B)  produce 7 units at a loss of $14.00. 
C)  shut down in the short run. 
D)  produce 6 units at a loss of $23.80. 
A)  produce 4 units at a loss of $17.40. 
B)  produce 7 units at a loss of $14.00. 
C)  shut down in the short run. 
D)  produce 6 units at a loss of $23.80.

Question 11

Which of the following statements is correct?

Accepted Answer

A)  The demand curve for a purely competitive firm is perfectly elastic,but the demand curve for a purely competitive industry is downsloping. 
B)  The demand curve for a purely competitive firm is downsloping,but the demand curve for a purely competitive industry is perfectly elastic. 
C)  The demand curves are downsloping for both a purely competitive firm and a purely competitive industry. 
D)  The demand curves are perfectly elastic for both a purely competitive firm and a purely competitive industry. 
A)  The demand curve for a purely competitive firm is perfectly elastic,but the demand curve for a purely competitive industry is downsloping. 
B)  The demand curve for a purely competitive firm is downsloping,but the demand curve for a purely competitive industry is perfectly elastic. 
C)  The demand curves are downsloping for both a purely competitive firm and a purely competitive industry. 
D)  The demand curves are perfectly elastic for both a purely competitive firm and a purely competitive industry.

Question 12

If a firm in a purely competitive industry is confronted with an equilibrium price of $5,its marginal revenue:

Accepted Answer

A)  may be either greater or less than $5. 
B)  will also be $5. 
C)  will be less than $5. 
D)  will be greater than $5. 
A)  may be either greater or less than $5. 
B)  will also be $5. 
C)  will be less than $5. 
D)  will be greater than $5.

Question 13

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 14

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

Accepted Answer

A)  it cannot produce at an economic profit. 
B)  price is less than average variable cost at all outputs. 
C)  price is less than average fixed cost at all outputs. 
D)  there is no point at which marginal revenue and marginal cost are equal. 
A)  it cannot produce at an economic profit. 
B)  price is less than average variable cost at all outputs. 
C)  price is less than average fixed cost at all outputs. 
D)  there is no point at which marginal revenue and marginal cost are equal.

Question 15

Economists use the term imperfect competition to describe:

Accepted Answer

A)  all industries that produce standardized products. 
B)  any industry in which there is no nonprice competition. 
C)  a pure monopoly only. 
D)  those markets that are not purely competitive. 
A)  all industries that produce standardized products. 
B)  any industry in which there is no nonprice competition. 
C)  a pure monopoly only. 
D)  those markets that are not purely competitive.

Question 16

Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market. $\begin{array}{ccccc}
& \text { Average } & \text { Average } & \text { Average } & \
\text { Total } & \text { Fixed } & \text { Variable } & \text { Total } & \text { Marginal } \
\text { Output } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost }\
\hline
1 & \$ 150.00 & \$ 25.00 & \$ 175.00 & \$ 25.00 \
2 & 75.00 & 23.00 & 98.00 & 21.00 \
3 & 50.00 & 20.00 & 70.00 & 14.00 \
4 & 37.50 & 21.00 & 58.50 & 24.00 \
5 & 30.00 & 23.00 & 53.00 & 31.00 \
6 & 25.00 & 25.00 & 50.00 & 35.00 \
7 & 21.43 & 28.00 & 49.43 & 46.01 \
8 & 18.75 & 33.00 & 51.76 & 68.07 \
9 & 16.67 & 39.00 & 55.67 & 86.95 \
10 & 15.00 & 48.00 & 63.00 & 128.97
\end{array}$ Refer to the data.If the market price for this firm's product is $35,it will produce:

Accepted Answer

A)  6 units at a loss of $150. 
B)  6 units at a loss of $90. 
C)  9 units at an economic profit of $281.97. 
D)  8 units at an economic profit of $130.72. 
A)  6 units at a loss of $150. 
B)  6 units at a loss of $90. 
C)  9 units at an economic profit of $281.97. 
D)  8 units at an economic profit of $130.72.

Question 17

A competitive firm will maximize profits at that output at which:

Accepted Answer

A)  total revenue exceeds total cost by the greatest amount. 
B)  total revenue and total cost are equal. 
C)  price exceeds average total cost by the largest amount. 
D)  the difference between marginal revenue and price is at a maximum. 
A)  total revenue exceeds total cost by the greatest amount. 
B)  total revenue and total cost are equal. 
C)  price exceeds average total cost by the largest amount. 
D)  the difference between marginal revenue and price is at a maximum.

Question 18

Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market: $\begin{array}{c}
\begin{array}{c}
\
Total\
Product\
\hline
1 \
2 \
3 \
4 \
5 \
6 \
7 \
8 \
9 \
10 \
11 \
12
\end{array}
\begin{array}{lll}
Average\
Fixed\
Cost\
\hline
 \$ 100.00 \
 50.00 \
 33.33 \
 25.00 \
 20.00 \
16.67\
 14.29 \
 12.50 \
 11.11 \
 10.00 \
 9.09 \
 8.33 \
\end{array}
\begin{array}{lll}
Average\
Variable\
Cost\
\hline
 \$ 17.00 \
 16.00 \
 15.00 \
 14.25 \
 14.00 \
 14.00 \
15.71\
 17.50 \
19.44 \
 21.60 \
 24.00 \
 26.67 
\end{array}
\begin{array}{ccc}
\text { Average }\
\text { Total } &&\text { Marginal }\
\text { Cost }&&\text { Cost }\
\hline
 \$ 117.00 & & \$ 17 \
66.00 & & 15 \
48.33 & & 13 \
39.25 & & 12 \
34.00 & & 13 \
30.67 & & 14 \
30.00 & & 26 \
30.00 & & 30 \
30.55 & & 35 \
31.60 & & 41 \
33.09 & & 48 \
35.00 & & 56
\end{array}
\end{array}$ Refer to the data.If the market price for the firm's product is $32,the competitive firm will produce:

Accepted Answer

A)  8 units at an economic profit of $16. 
B)  6 units at an economic profit of $7.98. 
C)  10 units at an economic profit of $4. 
D)  7 units at an economic profit of $41.50. 
A)  8 units at an economic profit of $16. 
B)  6 units at an economic profit of $7.98. 
C)  10 units at an economic profit of $4. 
D)  7 units at an economic profit of $41.50.

Question 19

In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies?

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 20

Answer the question on the basis of the following data confronting a firm: $\begin{array}{l}
\begin{array}{ccr}
&&\text { Marginal }\
\text { Output } & & \text { Reven } \
\hline
0&&--\
1 & & \$ 16 \
2 & & 16 \
3 & & 16 \
4 & & 16 \
5 & & 16
\end{array}
\begin{array}{c}
Marginal\
Cost\
\hline
--\
\$ 10 \
9 \
13 \
17 \
21
\end{array}
\end{array}$ Refer to the data.This firm is selling its output in a(n):

Accepted Answer

A)  monopolistically competitive market. 
B)  monopolistic market. 
C)  purely competitive market. 
D)  oligopolistic market. 
A)  monopolistically competitive market. 
B)  monopolistic market. 
C)  purely competitive market. 
D)  oligopolistic market.

In the short run,a competitive firm will always choose to shut down if product price is less than the lowest attainable average total cost.

Assume a purely competitive firm is selling 200 units of output at $3 each.At this output,its total fixed cost is $100 and its total variable cost is $350.This firm:

Firms seek to maximize:

On a per unit basis,economic profit can be determined as the difference between:

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.

Which of the following statements is correct?

If a firm in a purely competitive industry is confronted with an equilibrium price of $5,its marginal revenue:

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

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

Economists use the term imperfect competition to describe:

A competitive firm will maximize profits at that output at which:

In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies?

Answer the question on the basis of the following data confronting a firm: Marginal Output Reven 0 -- 1 \ 16 2 16 3 16 4 16 5 16 Marginal Cost -- \ 10 9 13 17 21 Refer to the data.This firm is selling its output in a(n):

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 Cost of Production

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

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

Filters

Exam 10: Pure Competition in the Short Run

In the short run,a competitive firm will always choose to shut down if product price is less than the lowest attainable average total cost.

Assume a purely competitive firm is selling 200 units of output at $3 each.At this output,its total fixed cost is $100 and its total variable cost is $350.This firm:

Firms seek to maximize:

On a per unit basis,economic profit can be determined as the difference between:

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.

Which of the following statements is correct?

If a firm in a purely competitive industry is confronted with an equilibrium price of $5,its marginal revenue:

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

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

Economists use the term imperfect competition to describe:

A competitive firm will maximize profits at that output at which:

In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies?

Answer the question on the basis of the following data confronting a firm: Marginal Output Reven 0 -- 1 \ 16 2 16 3 16 4 16 5 16 Marginal Cost -- \ 10 9 13 17 21 Refer to the data.This firm is selling its output in a(n):

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 Cost of Production

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition and Oligopoly

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

Filters