Question 1

Purely competitive firms are assumed to:

Accepted Answer

A)   advertise.
B)   be price takers.
C)   sell where marginal cost is minimized.
D)   confront demand curves that are perfectly inelastic.E) B) and C)
F) A) and D)

Question 2

Resources are efficiently allocated when production occurs at that output level where price:

Accepted Answer

A)   equals marginal cost.
B)   equals marginal revenue.
C)   is greater than marginal revenue.
D)   is equal to average variable cost.E) B) and C)
F) A) and B)

Question 3

In pure competition,the average revenue of a firm always equals:

Accepted Answer

A)   marginal cost.
B)   average total cost.
C)   marginal revenue.
D)   total revenue.E) B) and D)
F) A) and B)

Question 4

There is no control over price by firms in:

Accepted Answer

A)   oligopoly.
B)   pure monopoly.
C)   pure competition.
D)   monopolistic competition.E) C) and D)
F) B) and D)

Question 5

Refer to the above graph.At output level H,the area of economic profit is:

Accepted Answer

A)   BAEF.
B)   ACG.
C)   0AEH.
D)   BCGF.E) A) and C)
F) All of the above

Question 6

In long-run equilibrium,a competitive firm produces where P = MR = MC = minimum ATC and earns normal economic profits.

Accepted Answer

A) True 
 B)False

Question 7

The long-run supply curve in a constant-cost industry would be:

Accepted Answer

A)   vertical.
B)   horizontal.
C)   upsloping.
D)   downsloping.E) A) and D)
F) B) and C)

Question 8

The table below shows cost data for a firm that is selling in a purely competitive market.  Refer to the above cost chart.Which output level will the firm never produce?

Accepted Answer

A)   10
B)   12
C)   16
D)   20E) None of the above
F) B) and D)

Question 9

The MR = MC profit maximization 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 D)
F) B) and C)

Question 10

A purely competitive firm's output is currently such that its marginal cost is $4 and marginal revenue is $5.Assuming profit maximization,the firm should:

Accepted Answer

A)   cut its price and raise its output.
B)   raise its price and cut output.
C)   leave price unchanged and raise output.
D)   leave price unchanged and cut output.E) C) and D)
F) B) and D)

Question 11

A profit-maximizing firm in the short run will expand output:

Accepted Answer

A)   until marginal cost begins to rise.
B)   until total revenue equals total cost.
C)   until marginal cost equals average variable cost.
D)   as long as marginal revenue is greater than marginal cost.E) A) and D)
F) B) and C)

Question 12

Refer to the above table.The marginal revenue from the third unit of output is:

Accepted Answer

A)   $40.
B)   $50.
C)   $120.
D)   $160.The change in total revenue is $40,which,when divided by a one-unit increase in output,gives marginal revenue of $40.E) C) and D)
F) B) and D)

Question 13

Economic profit is the difference between total revenue and marginal revenue.

Accepted Answer

A) True 
 B)False

Question 14

In pure competition,resources are optimally allocated when production occurs at the output level where P = MC.

Accepted Answer

A) True 
 B)False

Question 15

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

Question 16

Assume a purely competitive increasing-cost industry is initially in long-run equilibrium but then there is a decrease in consumer demand.After all economic adjustments to this new situation have taken place,product price will be:

Accepted Answer

A)   higher,but total output will be lower.
B)   lower,and total output will be lower.
C)   higher,and total output will be higher.
D)   lower,but total output will be higher.E) None of the above
F) C) and D)

Question 17

Refer to the above graph.At what level of output will the firm shut down?

Accepted Answer

A)   0A
B)   0B
C)   0C
D)   0KE) A) and B)
F) A) and C)

Question 18

In pure competition,the industry demand curve is infinitely price elastic.

Accepted Answer

A) True 
 B)False

Question 19

Total revenue for producing eight units of output is $48.Total revenue for producing nine units of output is $63.Given this information,the:

Accepted Answer

A)   average revenue for producing nine units is $1.
B)   average revenue for producing nine units is $15.
C)   marginal revenue for producing the ninth unit is $1.
D)   marginal revenue for producing the ninth unit is $15.E) A) and D)
F) B) and C)

Question 20

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

Accepted Answer

A)   Monopolistic competition
B)   Pure competition
C)   Pure monopoly
D)   OligopolyE) C) and D)
F) A) and B)

Exam 7: Pure Competition

Purely competitive firms are assumed to:

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The table below shows cost data for a firm that is selling in a purely competitive market. Refer to the above cost chart.Which output level will the firm never produce?

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In pure competition,the average revenue of a firm always equals:

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There is no control over price by firms in:

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Refer to the above table.The marginal revenue from the third unit of output is:

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Refer to the above graph.At output level H,the area of economic profit is:

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

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In pure competition,the industry demand curve is infinitely price elastic.

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Assume a purely competitive increasing-cost industry is initially in long-run equilibrium but then there is a decrease in consumer demand.After all economic adjustments to this new situation have taken place,product price will be:

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In long-run equilibrium,a competitive firm produces where P = MR = MC = minimum ATC and earns normal economic profits.

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The long-run supply curve in a constant-cost industry would be:

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Refer to the above graph.At what level of output will the firm shut down?

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Resources are efficiently allocated when production occurs at that output level where price:

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A profit-maximizing firm in the short run will expand output:

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A purely competitive firm's output is currently such that its marginal cost is $4 and marginal revenue is $5.Assuming profit maximization,the firm should:

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In pure competition,resources are optimally allocated when production occurs at the output level where P = MC.

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The MR = MC profit maximization rule applies:

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

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Economic profit is the difference between total revenue and marginal revenue.

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Total revenue for producing eight units of output is $48.Total revenue for producing nine units of output is $63.Given this information,the:

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