Question 1

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. 
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. D

Question 2

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 firms 
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 firms A

Question 3

Which characteristic would best be associated with pure competition?

Accepted Answer

A) few sellers 
B) price takers 
C) nonprice competition 
D) product differentiation 
A) few sellers 
B) price takers 
C) nonprice competition 
D) product differentiation B

Question 4

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. 
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.

Question 5

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 6

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. 
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.

Question 7

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

Question 8

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 9

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. 
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.

Question 10

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. 
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.

Question 11

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) oligopoly 
A) monopolistic competition 
B) pure competition 
C) pure monopoly 
D) oligopoly

Question 12

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. 
A) $52. 
B) $54. 
C) $58. 
D) $60.

Question 13

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. 
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.

Question 14

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. 
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.

Question 15

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. 
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.

Question 16

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. 
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.

Question 17

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. 
A) total variable costs. 
B) total costs. 
C) total fixed costs. 
D) marginal costs.

Question 18

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. 
A) monopolistic competition. 
B) oligopoly. 
C) pure monopoly. 
D) pure competition.

Question 19

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. 
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.

Question 20

(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. 
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.

Exam 10: Pure Competition in the Short Run

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

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

Which characteristic would best be associated with pure competition?

When a firm is maximizing profit, it will necessarily be

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

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

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

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.

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

A purely competitive firm can be identified by the fact that

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

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

If a purely competitive firm is maximizing economic profit,

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

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

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

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

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

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

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

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Long Run

Pure Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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