Question 1

A competitive firm faces fixed costs even if it produces zero output.If it starts producing and selling some output, which of the following would happen?

Accepted Answer

A) The firm's total costs would increase, and its losses may become larger. 
B) The firm would earn revenues and will therefore earn positive profits. 
C) The firm's total costs would decrease, allowing it to possibly earn profits. 
D) The firm would earn revenues that are greater than its costs. 
A) The firm's total costs would increase, and its losses may become larger. 
B) The firm would earn revenues and will therefore earn positive profits. 
C) The firm's total costs would decrease, allowing it to possibly earn profits. 
D) The firm would earn revenues that are greater than its costs.

Question 2

Which market model assumes the least number of firms in an industry?

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 3

(Last Word) Temporary shutdowns of firms are most widespread when

Accepted Answer

A) total fixed costs are rising across the economy. 
B) the economy experiences recession. 
C) firms have the ability to set prices for their output. 
D) wage levels are falling. 
A) total fixed costs are rising across the economy. 
B) the economy experiences recession. 
C) firms have the ability to set prices for their output. 
D) wage levels are falling.

Question 4

A firm reaches a break-even point (normal profit position) where

Accepted Answer

A) marginal revenue cuts the horizontal axis. 
B) marginal cost intersects the average variable cost curve. 
C) total revenue equals total variable cost. 
D) total revenue and total cost are equal. 
A) marginal revenue cuts the horizontal axis. 
B) marginal cost intersects the average variable cost curve. 
C) total revenue equals total variable cost. 
D) total revenue and total cost are equal.

Question 5

In pure competition, price is determined where the industry

Accepted Answer

A) demand and supply curves intersect. 
B) total cost is less than total revenue. 
C) demand intersects the individual firm's marginal cost curve. 
D) average total cost equals total variable cost. 
A) demand and supply curves intersect. 
B) total cost is less than total revenue. 
C) demand intersects the individual firm's marginal cost curve. 
D) average total cost equals total variable cost.

Question 6

If MR > MC for a competitive firm, it should reduce its level of output in order to make MR equal to MC.

Accepted Answer

A) True 
 B)False

Question 7

If there are many firms in an industry, then it must be a purely competitive market.

Accepted Answer

A) True 
 B)False

Question 8

The fast-food restaurant industry in a large city would be an example 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 9

The MR = MC rule can be restated for a purely competitive seller as P = MC because

Accepted Answer

A) each additional unit of output adds exactly its price to total revenue. 
B) the firm's average revenue curve is downsloping. 
C) the market demand curve is downsloping. 
D) the firm's marginal revenue and total revenue curves will coincide. 
A) each additional unit of output adds exactly its price to total revenue. 
B) the firm's average revenue curve is downsloping. 
C) the market demand curve is downsloping. 
D) the firm's marginal revenue and total revenue curves will coincide.

Question 10

The marginal revenue curve of a purely competitive firm

Accepted Answer

A) lies below the firm's demand curve. 
B) is downsloping because price must be reduced to sell more output. 
C) is horizontal at the market price. 
D) has all of these characteristics. 
A) lies below the firm's demand curve. 
B) is downsloping because price must be reduced to sell more output. 
C) is horizontal at the market price. 
D) has all of these characteristics.

Question 11

If a firm is a price taker, then the demand curve for the firm's product is

Accepted Answer

A) equal to the total revenue curve. 
B) perfectly inelastic. 
C) perfectly elastic. 
D) unit elastic. 
A) equal to the total revenue curve. 
B) perfectly inelastic. 
C) perfectly elastic. 
D) unit elastic.

Question 12

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. 
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.

Question 13

Technological advance improves productivity in a purely competitive industry.This change will result in a shift

Accepted Answer

A) down of the individual firm's MC curve, causing the market supply curve to shift to the left. 
B) down of the individual firm's MC curve, causing the market supply curve to shift to the right. 
C) up of the individual firm's MC curve, causing the market supply curve to shift to the left. 
D) up of the individual firm's MC curve, causing the market supply curve to shift to the right. 
A) down of the individual firm's MC curve, causing the market supply curve to shift to the left. 
B) down of the individual firm's MC curve, causing the market supply curve to shift to the right. 
C) up of the individual firm's MC curve, causing the market supply curve to shift to the left. 
D) up of the individual firm's MC curve, causing the market supply curve to shift to the right.

Question 14

The data in the accompanying table indicates that this firm is selling its output in a(n)

Accepted Answer

A) monopolistically competitive market. 
B) monopolistic market. 
C) purely competitive market. 
D) oligopolistic market. 
A) monopolistically competitive market. 
B) monopolistic market. 
C) purely competitive market. 
D) oligopolistic market.

Question 15

A purely competitive firm does not try to sell more of its product by lowering its price below the market price because

Accepted Answer

A) its competitors would not permit it. 
B) it can sell all it wants to at the market price. 
C) this would be considered unethical price chiseling. 
D) its demand curve is inelastic, so total revenue will decline. 
A) its competitors would not permit it. 
B) it can sell all it wants to at the market price. 
C) this would be considered unethical price chiseling. 
D) its demand curve is inelastic, so total revenue will decline.

Question 16

In which of the following industry structures is the entry of new firms the most difficult?

Accepted Answer

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

Question 17

The short-run supply curve of a purely competitive producer is based primarily on its

Accepted Answer

A) AVC curve. 
B) ATC curve. 
C) AFC curve. 
D) MC curve. 
A) AVC curve. 
B) ATC curve. 
C) AFC curve. 
D) MC curve.

Question 18

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. 
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.

Question 19

Which of the following industries most closely approximates pure competition?

Accepted Answer

A) agriculture 
B) farm implements 
C) clothing 
D) steel 
A) agriculture 
B) farm implements 
C) clothing 
D) steel

Question 20

Refer to the data in the accompanying table.Assuming total fixed costs equal to zero, the firm's

Accepted Answer

A) economic profit is $12. 
B) economic profit is $16. 
C) loss is $14. 
D) economic profit is $3. 
A) economic profit is $12. 
B) economic profit is $16. 
C) loss is $14. 
D) economic profit is $3.

Exam 10: Pure Competition in the Short Run

A competitive firm faces fixed costs even if it produces zero output.If it starts producing and selling some output, which of the following would happen?

Which market model assumes the least number of firms in an industry?

(Last Word) Temporary shutdowns of firms are most widespread when

A firm reaches a break-even point (normal profit position) where

In pure competition, price is determined where the industry

If MR > MC for a competitive firm, it should reduce its level of output in order to make MR equal to MC.

If there are many firms in an industry, then it must be a purely competitive market.

The fast-food restaurant industry in a large city would be an example of which market model?

The MR = MC rule can be restated for a purely competitive seller as P = MC because

The marginal revenue curve of a purely competitive firm

If a firm is a price taker, then the demand curve for the firm's product is

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

Technological advance improves productivity in a purely competitive industry.This change will result in a shift

The data in the accompanying table indicates that this firm is selling its output in a(n)

A purely competitive firm does not try to sell more of its product by lowering its price below the market price because

In which of the following industry structures is the entry of new firms the most difficult?

The short-run supply curve of a purely competitive producer is based primarily on its

A competitive firm will maximize profits at that output at which

Which of the following industries most closely approximates pure competition?

Refer to the data in the accompanying table.Assuming total fixed costs equal to zero, the firm's

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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