Question 1

The data in the accompanying table indicates that 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.E) A) and D)
F) None of the above

Question 2

A purely competitive firm does not try to sell more of its product by lowering its price below the market price because

Accepted Answer

A)  its competitors would not permit it.
B)  it can sell all it wants to at the market price.
C)  this would be considered unethical price chiseling.
D)  its demand curve is inelastic, so total revenue will decline.E) B) and C)
F) A) and D)

Question 3

Refer to the data in the accompanying table.Assuming total fixed costs equal to zero, the firm's

Accepted Answer

A)  economic profit is $12.
B)  economic profit is $16.
C)  loss is $14.
D)  economic profit is $3.E) B) and D)
F) A) and D)

Question 4

The MR = MC rule can be restated for a purely competitive seller as P = MC because

Accepted Answer

A)  each additional unit of output adds exactly its price to total revenue.
B)  the firm's average revenue curve is downsloping.
C)  the market demand curve is downsloping.
D)  the firm's marginal revenue and total revenue curves will coincide.E) A) and D)
F) A) and C)

Question 5

Technological advance improves productivity in a purely competitive industry.This change will result in a shift

Accepted Answer

A)  down of the individual firm's MC curve, causing the market supply curve to shift to the left.
B)  down of the individual firm's MC curve, causing the market supply curve to shift to the right.
C)  up of the individual firm's MC curve, causing the market supply curve to shift to the left.
D)  up of the individual firm's MC curve, causing the market supply curve to shift to the right.E) All of the above
F) None of the above

Question 6

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.E) A) and D)
F) A) and C)

Question 7

The fast-food restaurant industry in a large city would be an example of which market model?

Accepted Answer

A)  monopolistic competition
B)  pure competition
C)  pure monopoly
D)  oligopolyE) B) and D)
F) A) and B)

Question 8

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 competitionE) A) and C)
F) B) and D)

Question 9

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.E) A) and D)
F) B) and C)

Question 10

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 11

(Last Word)  Temporary shutdowns of firms are most widespread when

Accepted Answer

A)  total fixed costs are rising across the economy.
B)  the economy experiences recession.
C)  firms have the ability to set prices for their output.
D)  wage levels are falling.E) A) and D)
F) All of the above

Question 12

In pure competition, price is determined where the industry

Accepted Answer

A)  demand and supply curves intersect.
B)  total cost is less than total revenue.
C)  demand intersects the individual firm's marginal cost curve.
D)  average total cost equals total variable cost.E) A) and D)
F) All of the above

Question 13

In pure competition, the demand for the product of a single firm is perfectly

Accepted Answer

A)  elastic because the firm produces a unique product.
B)  inelastic because the firm produces a unique product.
C)  elastic because many other firms produce the same product.
D)  inelastic because many other firms produce the same product.E) B) and D)
F) None of the above

Question 14

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.E) A) and B)
F) All of the above

Question 15

A competitive firm faces fixed costs even if it produces zero output.If it starts producing and selling some output, which of the following would happen?

Accepted Answer

A)  The firm's total costs would increase, and its losses may become larger.
B)  The firm would earn revenues and will therefore earn positive profits.
C)  The firm's total costs would decrease, allowing it to possibly earn profits.
D)  The firm would earn revenues that are greater than its costs.E) B) and C)
F) None of the above

Question 16

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.E) B) and D)
F) B) and C)

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A)  monopolistic competition
B)  pure competition
C)  pure monopoly
D)  oligopolyE) None of the above
F) B) and C)

Question 19

The marginal revenue curve of a purely competitive firm

Accepted Answer

A)  lies below the firm's demand curve.
B)  is downsloping because price must be reduced to sell more output.
C)  is horizontal at the market price.
D)  has all of these characteristics.E) All of the above
F) A) and C)

Question 20

Which of the following industries most closely approximates pure competition?

Accepted Answer

A)  agriculture
B)  farm implements
C)  clothing
D)  steelE) B) and C)
F) C) and D)

Exam 10: Pure Competition in the Short Run

The marginal revenue curve of a purely competitive firm

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Which of the following industries most closely approximates pure competition?

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

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

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

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

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Technological advance improves productivity in a purely competitive industry.This change will result in a shift

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The data in the accompanying table indicates that this firm is selling its output in a(n)

Correct AnswerverifiedShow Answer

A competitive firm faces fixed costs even if it produces zero output.If it starts producing and selling some output, which of the following would happen?

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In pure competition, price is determined where the industry

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

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

Correct AnswerverifiedShow Answer

(Last Word) Temporary shutdowns of firms are most widespread when

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The fast-food restaurant industry in a large city would be an example of which market model?

Correct AnswerverifiedShow Answer

Refer to the data in the accompanying table.Assuming total fixed costs equal to zero, the firm's

Correct AnswerverifiedShow Answer

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

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The MR = MC rule can be restated for a purely competitive seller as P = MC because

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A purely competitive firm does not try to sell more of its product by lowering its price below the market price because

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A competitive firm will maximize profits at that output at which

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In pure competition, the demand for the product of a single firm is perfectly

Correct AnswerverifiedShow Answer

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