Question 1

Agricultural and fishing industries provide approximations of perfect competition.

Accepted Answer

A) True 
 B)False

Question 2

Figure 5.1 Cost and Demand Conditions of a Perfectly Competitive Firm
 
-Refer to Figure 5.1. The firm will maximize total economic profits by producing

Accepted Answer

A)  40 units 
B)  50 units 
C)  60 units 
D)  75 units

Question 3

If losses are being realized in a perfectly competitive industry, some firms will exit. This will shift the industry

Accepted Answer

A)  demand curve rightward and result in a higher price 
B)  demand curve rightward and result in a lower price 
C)  supply curve rightward and result in a lower price 
D)  supply curve leftward and result in a higher price

Question 4

If total revenue exceeds total variable cost, a firm should continue to produce in the short run because all of its variable costs and some or all of its fixed costs can be paid out of revenue.

Accepted Answer

A) True 
 B)False

Question 5

Figure 5.1 Cost and Demand Conditions of a Perfectly Competitive Firm
 
-Refer to Figure 5.1. If the firm's price falls to $35, it will

Accepted Answer

A)  produce 50 units and realize a profit 
B)  produce 50 units and break even 
C)  produce 45 units and realize a loss 
D)  shut down

Question 6

Cable companies and satellite broadcasters have both been able to attract many new customers by offering video, telephone, and high-speed Internet access.

Accepted Answer

A) True 
 B)False

Question 7

Barriers to entry include patents, copyrights, control over essential inputs, and economies of scale.

Accepted Answer

A) True 
 B)False

Question 8

As a price taker, a perfectly competitive firm

Accepted Answer

A)  can realize only economic profits but not economic losses 
B)  must increase its price if it desires to sell additional units of output 
C)  must decrease its price if it desires to sell additional units of output 
D)  must accept the price that is set by the market

Question 9

A monopolist's demand curve is

Accepted Answer

A)  the industry's demand curve 
B)  horizontal because the firm is a price taker 
C)  horizontal because the firm is a price maker 
D)  vertical because the firm is a price maker

Question 10

Proponents of vouchers say that a widespread system of vouchers will

Accepted Answer

A)  reduce the need for computers in public schools 
B)  add to the cost of private education 
C)  improve job security for teachers 
D)  improve the quality of education for children

Question 11

For a perfectly competitive firm, price is always identical to

Accepted Answer

A)  marginal cost 
B)  marginal revenue 
C)  total revenue 
D)  average total cost

Question 12

If economic profits are being earned in a perfectly competitive market, new firms will enter the market in the long run. Therefore, the market supply curve will shift leftward and the market price will increase.

Accepted Answer

A) True 
 B)False

Question 13

A perfectly competitive firm has a demand curve that is

Accepted Answer

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

Question 14

A perfectly competitive firm will maximize profits at that output level where marginal revenue equals

Accepted Answer

A)  marginal cost and price exceeds minimum average variable cost 
B)  marginal cost and minimum average variable cost exceeds price 
C)  average total cost and price exceeds minimum average variable cost 
D)  average variable cost and price exceeds minimum average fixed cost

Question 15

Marginal revenue represents the increase in total revenue resulting from the sale of another unit of output.

Accepted Answer

A) True 
 B)False

Question 16

Opponents of vouchers say that a widespread system of vouchers will

Accepted Answer

A)  threaten the pay and job security of teachers 
B)  reduce the overall quality of education for children 
C)  drive numerous private schools out of business 
D)  favor the education of special-needs children

Question 17

A monopoly will always charge the highest price that consumers will bear and thus realize an economic profit.

Accepted Answer

A) True 
 B)False

Question 18

Figure 5.1 Cost and Demand Conditions of a Perfectly Competitive Firm
 
-Refer to Figure 5.1. The firm will realize economic profits by producing and selling any output

Accepted Answer

A)  less than 15 units 
B)  greater than 85 units 
C)  between 15 units and 85 units 
D)  between 30 units and 75 units

Question 19

Figure 5.1 Cost and Demand Conditions of a Perfectly Competitive Firm
 
-Refer to Figure 5.1. If the firm's price falls to $20, it will

Accepted Answer

A)  shut down 
B)  produce 20 units and realize a loss 
C)  produce 50 units and break even 
D)  produce 60 units and realize a profit

Question 20

Figure 5.1 Cost and Demand Conditions of a Perfectly Competitive Firm
 
-Refer to Figure 5.1. At the profit-maximizing output, the firm's total revenue equals

Accepted Answer

A)  $2,400 
B)  $3,000 
C)  $3,600 
D)  $4,200

Exam 5: Competition and Monopoly: Virtues and Vices

Agricultural and fishing industries provide approximations of perfect competition.

Figure 5.1 Cost and Demand Conditions of a Perfectly Competitive Firm -Refer to Figure 5.1. The firm will maximize total economic profits by producing

If losses are being realized in a perfectly competitive industry, some firms will exit. This will shift the industry

If total revenue exceeds total variable cost, a firm should continue to produce in the short run because all of its variable costs and some or all of its fixed costs can be paid out of revenue.

Figure 5.1 Cost and Demand Conditions of a Perfectly Competitive Firm -Refer to Figure 5.1. If the firm's price falls to $35, it will

Cable companies and satellite broadcasters have both been able to attract many new customers by offering video, telephone, and high-speed Internet access.

Barriers to entry include patents, copyrights, control over essential inputs, and economies of scale.

As a price taker, a perfectly competitive firm

A monopolist's demand curve is

Proponents of vouchers say that a widespread system of vouchers will

For a perfectly competitive firm, price is always identical to

If economic profits are being earned in a perfectly competitive market, new firms will enter the market in the long run. Therefore, the market supply curve will shift leftward and the market price will increase.

A perfectly competitive firm has a demand curve that is

A perfectly competitive firm will maximize profits at that output level where marginal revenue equals

Marginal revenue represents the increase in total revenue resulting from the sale of another unit of output.

Opponents of vouchers say that a widespread system of vouchers will

A monopoly will always charge the highest price that consumers will bear and thus realize an economic profit.

Figure 5.1 Cost and Demand Conditions of a Perfectly Competitive Firm -Refer to Figure 5.1. The firm will realize economic profits by producing and selling any output

Figure 5.1 Cost and Demand Conditions of a Perfectly Competitive Firm -Refer to Figure 5.1. If the firm's price falls to $20, it will

Figure 5.1 Cost and Demand Conditions of a Perfectly Competitive Firm -Refer to Figure 5.1. At the profit-maximizing output, the firm's total revenue equals