Question 1

A purely competitive firm's short-run supply curve is

Accepted Answer

A)   perfectly elastic at the minimum average total cost.
B)   upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve.
C)   upsloping and equal to the portion of the marginal cost curve that lies above the average total cost curve.
D)   upsloping only when the industry has constant costs.E) A) and D)
F) A) and C)

Question 2

Xavier produces and sells tomatoes in a purely competitive market. This implies that Xavier's marginal revenue from an extra unit of tomatoes is always equal to the

Accepted Answer

A)   unit price.
B)   average cost.
C)   variable cost.
D)   unit profit.E) A) and B)
F) A) and C)

Question 3

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.E) None of the above
F) B) and C)

Question 4

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 D)
F) C) and D)

Question 5

Which of the following is a reason why individual firms under pure competition would not find it gainful to advertise their product?

Accepted Answer

A)   Firms produce a homogeneous product.
B)   The quantity of the product demanded is very large.
C)   The market demand curve cannot be increased.
D)   Firms do not make long-run profits.E) All of the above
F) A) and C)

Question 6

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 7

DASH Airlines is considering the addition of a flight from Red Cloud to David City. The total cost of the flight would be $1,100, of which $800 are fixed costs already incurred. Expected revenues from the flight are $600. DASH should

Accepted Answer

A)   not add this flight, because only flights that cover their full costs are profitable.
B)   not add this flight, because it is not profitable at the margin.
C)   add this flight, because marginal revenue exceeds marginal costs and total revenue exceeds total variable cost.
D)   not add this flight, because total costs exceed total revenue.E) None of the above
F) A) and B)

Question 8

The market for agricultural products such as wheat or corn would best be described by which market model?

Accepted Answer

A)   monopolistic competition
B)   pure competition
C)   pure monopoly
D)   oligopolyE) All of the above
F) A) and C)

Question 9

(Last Word)  Oil wells and seasonal resorts will often shut down temporarily because

Accepted Answer

A)   prices for their output temporarily fall below their average variable costs of production.
B)   fixed costs temporarily rise, making production unprofitable.
C)   variable costs for pumping oil and operating resorts fluctuate significantly.
D)   government regulations require seasonal shutdowns for maintenance purposes.E) A) and B)
F) All of the above

Question 10

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) C) and D)
F) B) and D)

Question 11

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) A) and B)
F) A) and C)

Question 12

A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its

Accepted Answer

A)   total variable costs.
B)   total costs.
C)   total fixed costs.
D)   marginal costs.E) A) and B)
F) A) and C)

Question 13

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) C) and D)
F) B) and D)

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) All of the above
F) B) and D)

Question 15

Marginal revenue is the addition to total revenue resulting from the sale of one more unit of output.

Accepted Answer

A) True 
 B)False

Question 16

If a firm has at least some control over the price of its product, then the firm cannot be in which market model?

Accepted Answer

A)   oligopoly
B)   pure monopoly
C)   pure competition
D)   monopolistic competitionE) A) and D)
F) All of the above

Question 17

For an individual firm in pure competition, the firm's average revenue and marginal revenue at any output level are both equal to the product's price.

Accepted Answer

A) True 
 B)False

Question 18

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

Question 19

A purely competitive seller should produce (rather than shut down)  in the short run

Accepted Answer

A)   only if total revenue exceeds total cost.
B)   only if total cost exceeds total revenue.
C)   if total revenue exceeds total cost or if total cost exceeds total revenue by some amount less than total fixed cost.
D)   if total cost exceeds total revenue by some amount greater than total fixed cost.E) None of the above
F) All of the above

Question 20

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

Exam 10: Pure Competition in the Short Run

The market for agricultural products such as wheat or corn would best be described by which market model?

Correct AnswerverifiedShow Answer

For an individual firm in pure competition, the firm's average revenue and marginal revenue at any output level are both equal to the product's price.

Correct AnswerverifiedShow Answer

(Last Word) Oil wells and seasonal resorts will often shut down temporarily because

Correct AnswerverifiedShow Answer

A competitive firm will maximize profits at that output at which

Correct AnswerverifiedShow Answer

A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its

Correct AnswerverifiedShow Answer

If a firm has at least some control over the price of its product, then the firm cannot be in which market model?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

A purely competitive firm's short-run supply curve is

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

DASH Airlines is considering the addition of a flight from Red Cloud to David City. The total cost of the flight would be $1,100, of which $800 are fixed costs already incurred. Expected revenues from the flight are $600. DASH should

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

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

The MR = MC rule applies

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Which of the following statements is correct?

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A purely competitive seller should produce (rather than shut down) in the short run

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Economists use the term imperfect competition to describe

Correct AnswerverifiedShow Answer

Which of the following is a reason why individual firms under pure competition would not find it gainful to advertise their product?

Correct AnswerverifiedShow Answer

Xavier produces and sells tomatoes in a purely competitive market. This implies that Xavier's marginal revenue from an extra unit of tomatoes is always equal to the

Correct AnswerverifiedShow Answer

Marginal revenue is the addition to total revenue resulting from the sale of one more unit of output.

Correct AnswerverifiedShow Answer

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