Question 1

In the short run, a purely competitive firm will earn a normal profit when

Accepted Answer

A)  P = AVC.
B)  P > MC.
C)  that firm's MR = market equilibrium price.
D)  P = ATC.E) C) and D)
F) B) and C)

Question 2

The lowest point on a purely competitive firm's short-run supply curve corresponds to

Accepted Answer

A)  the minimum point on its ATC curve.
B)  the minimum point on its AVC curve.
C)  the minimum point on its AFC curve.
D)  the minimum point on its MC curve.E) B) and D)
F) A) and B)

Question 3

For a purely competitive firm, the demand curve facing it is the same as its marginal revenue curve.

Accepted Answer

A) True 
 B)False

Question 4

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 5

A purely competitive firm can be identified by the fact that

Accepted Answer

A)  there are other firms in the industry producing similar products.
B)  it is making only normal profits in the short run.
C)  its average revenue equals its marginal revenue.
D)  it experiences diminishing marginal returns.E) A) and D)
F) A) and C)

Question 6

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

Question 7

Assume the XYZ Corporation is producing 20 units of output.It is selling this output in a purely competitive market at $10 per unit.Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output.This corporation

Accepted Answer

A)  should close down in the short run.
B)  is maximizing its profits.
C)  is realizing a loss of $60.
D)  is realizing an economic profit of $40.E) All of the above
F) None of the above

Question 8

If a purely competitive firm is maximizing economic profit,

Accepted Answer

A)  it is necessarily maximizing per-unit profit.
B)  it may or may not be maximizing per-unit profit.
C)  then per-unit profit will be minimized.
D)  it is necessarily overallocating resources to its product.E) All of the above
F) C) and D)

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) C) and D)
F) None of the above

Question 10

Which of the following changes will not affect the market supply or the market demand in a purely competitive industry?

Accepted Answer

A)  a change in fixed costs
B)  a change in the number of buyers
C)  a change in marginal costs
D)  a change in the number of firmsE) C) and D)
F) A) and B) A

Question 11

The total revenue of a purely competitive firm from 8 units of output is $48.Based on this information, total revenue for 9 units of output must be

Accepted Answer

A)  $52.
B)  $54.
C)  $58.
D)  $60.E) A) and B)
F) A) and C)

Question 12

An industry comprising a very large number of sellers producing a standardized product is known as

Accepted Answer

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

Question 13

A firm should continue to operate even at a loss in the short run if

Accepted Answer

A)  its output is above the break-even point.
B)  its revenues are less than its fixed costs.
C)  it can cover its variable costs and some of its fixed costs.
D)  it has some fixed costs that cannot be brought down to zero.E) A) and D)
F) None of the above

Question 14

A firm sells a product in a purely competitive market.The marginal cost of the product at the current output of 1,000 units is $2.50.The minimum possible average variable cost is $2.00.The market price of the product is $2.50.To maximize profits or minimize losses, the firm should

Accepted Answer

A)  continue producing 1,000 units.
B)  continue production, but produce less than 1,000 units.
C)  increase production to more than 1,000 units.
D)  shut down.E) B) and C)
F) A) and B)

Question 15

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

Question 16

Which of the following is a feature of a purely competitive market?

Accepted Answer

A)  Price differences exist between firms producing the same product.
B)  There are significant barriers to entry into the industry.
C)  The industry's demand curve is perfectly elastic.
D)  Products are standardized or homogeneous.E) A) and B)
F) B) and C) D

Question 17

When a firm is maximizing profit, it will necessarily be

Accepted Answer

A)  maximizing profit per unit of output.
B)  maximizing the difference between total revenue and total cost.
C)  minimizing total cost.
D)  maximizing total revenue.E) B) and C)
F) All of the above

Question 18

The resource cost falls in a purely competitive industry.This change will result in a(n)

Accepted Answer

A)  increase in marginal cost for firms in the industry and an increase in the industry supply curve.
B)  decrease in marginal cost for firms in the industry and a decrease in the industry supply curve.
C)  decrease in marginal cost for firms in the industry and an increase in the industry supply curve.
D)  increase in marginal cost at each output level for firms in the industry and an increase in the industry supply curve.E) B) and D)
F) All of the above

Question 19

Price is constant to the individual firm selling in a purely competitive market because

Accepted Answer

A)  the firm's demand curve is downsloping.
B)  of product differentiation reinforced by extensive advertising.
C)  each seller supplies a negligible fraction of total supply.
D)  marginal costs are constant.E) B) and C)
F) A) and B)

Question 20

Which characteristic would best be associated with pure competition?

Accepted Answer

A)  few sellers
B)  price takers
C)  nonprice competition
D)  product differentiationE) A) and D)
F) B) and C) B

Exam 10: Pure Competition in the Short Run

In the short run, a purely competitive firm will earn a normal profit when

Correct AnswerverifiedShow Answer

The lowest point on a purely competitive firm's short-run supply curve corresponds to

Correct AnswerverifiedShow Answer

For a purely competitive firm, the demand curve facing it is the same as its marginal revenue curve.

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

A purely competitive firm can be identified by the fact that

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

Assume the XYZ Corporation is producing 20 units of output.It is selling this output in a purely competitive market at $10 per unit.Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output.This corporation

Correct AnswerverifiedShow Answer

If a purely competitive firm is maximizing economic profit,

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following changes will not affect the market supply or the market demand in a purely competitive industry?

Correct AnswerverifiedA

The total revenue of a purely competitive firm from 8 units of output is $48.Based on this information, total revenue for 9 units of output must be

Correct AnswerverifiedShow Answer

An industry comprising a very large number of sellers producing a standardized product is known as

Correct AnswerverifiedShow Answer

A firm should continue to operate even at a loss in the short run if

Correct AnswerverifiedShow Answer

A firm sells a product in a purely competitive market.The marginal cost of the product at the current output of 1,000 units is $2.50.The minimum possible average variable cost is $2.00.The market price of the product is $2.50.To maximize profits or minimize losses, the firm should

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a feature of a purely competitive market?

Correct AnswerverifiedD

When a firm is maximizing profit, it will necessarily be

Correct AnswerverifiedShow Answer

The resource cost falls in a purely competitive industry.This change will result in a(n)

Correct AnswerverifiedShow Answer

Price is constant to the individual firm selling in a purely competitive market because

Correct AnswerverifiedShow Answer

Which characteristic would best be associated with pure competition?

Correct AnswerverifiedB

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A

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D

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B