Question 1

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

Accepted Answer

A)  marginal cost.
B)  average cost.
C)  average fixed cost.
D)  average variable cost.E) B) and C)
F) None of the above

Question 2

A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900.This firm should

Accepted Answer

A)  shut down in the short run.
B)  produce because the resulting loss is less than its TFC.
C)  produce because it will realize an economic profit.
D)  liquidate its assets and go out of business.E) B) and C)
F) A) and B)

Question 3

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

Question 4

In a graph for a firm in pure competition with the quantity of output measured on the horizontal axis, the total revenue curve is

Accepted Answer

A)  downward-sloping.
B)  horizontal.
C)  vertical.
D)  upward-sloping.E) A) and D)
F) None of the above

Question 5

Which of the following is characteristic of a purely competitive seller's demand curve?

Accepted Answer

A)  Price and marginal revenue are equal at all levels of output.
B)  Average revenue is less than price.
C)  Its elasticity coefficient is 1 at all levels of output.
D)  It is the same as the market demand curve.E) C) and D)
F) A) and C)

Question 6

The soft drink and automobile industries would be examples of which market model?

Accepted Answer

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

Question 7

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 8

A purely competitive firm is producing at the point where its marginal cost equals the price of its product.If the firm increases its output, then total revenue will

Accepted Answer

A)  increase and profits will increase.
B)  decrease and profits will increase.
C)  increase and profits will decrease.
D)  decrease and profits will decrease.E) B) and C)
F) A) and D)

Question 9

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

Question 10

Total Revenue $3,000 Per Week Total Variable Cost $2,000 Per Week Total Fixed Cost $2,000 Per Week Let us suppose Harry's, a local supplier of chili and pizza, has the revenue and cost structure shown here.

Accepted Answer

A)  Harry's should stay open in the long run.
B)  Harry's should shut down in the short run.
C)  Harry's should stay open in the short run.
D)  Harry's should shut down in the short run but reopen in the long run.E) All of the above
F) C) and D)

Question 11

In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.For a purely competitive firm,

Accepted Answer

A)  marginal revenue will graph as an upsloping line.
B)  the demand curve will lie above the marginal revenue curve.
C)  the marginal revenue curve will lie above the demand curve.
D)  the demand and marginal revenue curves will coincide.E) B) and C)
F) C) and D)

Question 12

In the short run, the individual competitive firm's supply curve is that segment of the

Accepted Answer

A)  average variable cost curve lying below the marginal cost curve.
B)  marginal cost curve lying above the average variable cost curve.
C)  marginal revenue curve lying below the demand curve.
D)  marginal cost curve lying between the average total cost and average variable cost curves.E) C) and D)
F) B) and D)

Question 13

(Consider This)  An unprofitable motel will stay open in the short run if

Accepted Answer

A)  price (average nightly room rate)  exceeds average variable cost.
B)  marginal revenue exceeds marginal cost.
C)  price (average nightly room rate)  exceeds average fixed cost.
D)  marginal revenue exceeds price.E) A) and B)
F) B) and C)

Question 14

In a purely competitive industry, competition centers more on advertising and sales promotion than on price.

Accepted Answer

A) True 
 B)False

Question 15

Farmer Jones is producing wheat and must accept the market price of $6.00 per bushel.At this time, her average total costs and her marginal costs both equal $8.00 per bushel.Her average variable costs are $5 per bushel.In order to maximize profits or minimize losses in the short run, farmer Jones should

Accepted Answer

A)  increase output.
B)  increase selling price.
C)  produce zero output and close down.
D)  continue producing, but reduce output.E) A) and C)
F) C) and D)

Question 16

The demand curve for a purely competitive industry is perfectly elastic, but the demand curves faced by individual firms in such an industry are downsloping.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is true under conditions of pure competition?

Accepted Answer

A)  There are differentiated products.
B)  The market demand curve is perfectly elastic.
C)  No single firm can influence the market price by changing its production level.
D)  Each individual firm has the ability to set its own price.E) All of the above
F) B) and C)

Question 18

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 19

In the short run, a purely competitive firm that seeks to maximize profit will produce

Accepted Answer

A)  where the demand and the ATC curves intersect.
B)  where total revenue exceeds total cost by the maximum amount.
C)  that output at which economic profits are zero.
D)  at any point where the total revenue and total cost curves intersect.E) A) and B)
F) B) and C)

Question 20

If the market demand for the product increases, in the short run a purely competitive firm

Accepted Answer

A)  will not change its output quantity because there are so many firms that the individual firm will not be affected by the change.
B)  will earn higher profits or experience smaller losses as a result of the change in the market.
C)  will experience no change in costs as it steps up production in response to the change in the market.
D)  can employ more inputs and increase the size of its plant, to respond to the change in the market.E) B) and C)
F) None of the above

Exam 10: Pure Competition in the Short Run

If the market demand for the product increases, in the short run a purely competitive firm

Correct Answer
verified

The soft drink and automobile industries would be examples of which market model?

Correct Answer
verified

A purely competitive firm is producing at the point where its marginal cost equals the price of its product.If the firm increases its output, then total revenue will

Correct Answer
verified

In a purely competitive industry, competition centers more on advertising and sales promotion than on price.

Correct Answer
verified

Which of the following is characteristic of a purely competitive seller's demand curve?

Correct Answer
verified

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

Correct Answer
verified

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.

Correct Answer
verified

Total Revenue $3,000 Per Week Total Variable Cost $2,000 Per Week Total Fixed Cost $2,000 Per Week Let us suppose Harry's, a local supplier of chili and pizza, has the revenue and cost structure shown here.

Correct Answer
verified

In the short run, the individual competitive firm's supply curve is that segment of the

Correct Answer
verified

A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900.This firm should

Correct Answer
verified

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

Correct Answer
verified

In a graph for a firm in pure competition with the quantity of output measured on the horizontal axis, the total revenue curve is

Correct Answer
verified

The demand curve for a purely competitive industry is perfectly elastic, but the demand curves faced by individual firms in such an industry are downsloping.

Correct Answer
verified

Which of the following is true under conditions of pure competition?

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

(Consider This) An unprofitable motel will stay open in the short run if

Correct Answer
verified

In the short run, a purely competitive firm that seeks to maximize profit will produce

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.For a purely competitive firm,

Correct Answer
verified

Exam 10: Pure Competition in the Short Run

If the market demand for the product increases, in the short run a purely competitive firm

Correct AnswerverifiedShow Answer

The soft drink and automobile industries would be examples of which market model?

Correct AnswerverifiedShow Answer

A purely competitive firm is producing at the point where its marginal cost equals the price of its product.If the firm increases its output, then total revenue will

Correct AnswerverifiedShow Answer

In a purely competitive industry, competition centers more on advertising and sales promotion than on price.

Correct AnswerverifiedShow Answer

Which of the following is characteristic of a purely competitive seller's demand curve?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Total Revenue $3,000 Per Week Total Variable Cost $2,000 Per Week Total Fixed Cost $2,000 Per Week Let us suppose Harry's, a local supplier of chili and pizza, has the revenue and cost structure shown here.

Correct AnswerverifiedShow Answer

In the short run, the individual competitive firm's supply curve is that segment of the

Correct AnswerverifiedShow Answer

A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900.This firm should

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In a graph for a firm in pure competition with the quantity of output measured on the horizontal axis, the total revenue curve is

Correct AnswerverifiedShow Answer

The demand curve for a purely competitive industry is perfectly elastic, but the demand curves faced by individual firms in such an industry are downsloping.

Correct AnswerverifiedShow Answer

Which of the following is true under conditions of pure competition?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

(Consider This) An unprofitable motel will stay open in the short run if

Correct AnswerverifiedShow Answer

In the short run, a purely competitive firm that seeks to maximize profit will produce

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis.For a purely competitive firm,

Correct AnswerverifiedShow Answer

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