Question 1

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

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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. 
A) downward-sloping. 
B) horizontal. 
C) vertical. 
D) upward-sloping.

Question 4

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

Question 5

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 6

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. 
A) equals average revenue. 
B) is greater than MC. 
C) is less than AVC. 
D) is less than ATC.

Question 7

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. 
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.

Question 8

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. 
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.

Question 9

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. 
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.

Question 10

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 11

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

Question 12

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. 
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.

Question 13

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 14

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. 
A) marginal cost. 
B) average cost. 
C) average fixed cost. 
D) average variable cost.

Question 15

(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. 
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.

Question 16

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. 
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.

Question 17

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. 
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.

Question 18

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. 
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.

Question 19

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. 
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.

Question 20

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. 
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.

Exam 10: Pure Competition in the Short Run

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

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

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

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

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

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

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

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.

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.

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

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

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.

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

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

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,

Which of the following statements is correct?

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

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

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

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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