Question 1

If a purely competitive firm is producing at the P = MC output and realizing an economic profit, at that output

Accepted Answer

A)  marginal revenue is less than price.
B)  marginal revenue exceeds ATC.
C)  ATC is being minimized.
D)  total revenue equals total cost.

Question 2

In which market model are the conditions of entry into the market easiest?

Accepted Answer

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

Question 3

The total revenue of a purely competitive firm from selling 6 units of output is $48.Based on this information, the unit price of the output must be

Accepted Answer

A)  $8.
B)  $42.
C)  $288.
D)  $54.

Question 4

The demand curve faced by a purely competitive firm

Accepted Answer

A)  has unitary elasticity.
B)  yields constant total revenues even when price changes.
C)  is identical to the market demand curve.
D)  is the same as its marginal revenue curve.

Question 5

In contrast to American firms, Japanese firms frequently make lifetime employment commitments to their workers and agree not to lay them off when product demand is weak.Other things being equal, we would expect Japanese firms to

Accepted Answer

A)  face more elastic product demand curves than American firms.
B)  have relatively greater variable costs than American firms.
C)  discontinue production at higher product prices than would American firms.
D)  continue to produce in the short run at lower prices than would American firms.

Question 6

If a purely competitive firm is producing at some output level less than the profit-maximizing output, then

Accepted Answer

A)  price is necessarily greater than average total cost.
B)  fixed costs are large relative to variable costs.
C)  price exceeds marginal revenue.
D)  marginal revenue exceeds marginal cost.

Question 7

If a purely competitive firm shuts down in the short run,

Accepted Answer

A)  its loss will be zero.
B)  it will realize a loss equal to its total variable costs.
C)  it will realize a loss equal to its total fixed costs.
D)  it will realize a loss equal to its explicit costs.

Question 8

Economists would describe the U.S.automobile industry as

Accepted Answer

A)  purely competitive.
B)  an oligopoly.
C)  monopolistically competitive.
D)  a pure monopoly.

Question 9

Which of the following is not a basic market model?

Accepted Answer

A)  pure competition
B)  free enterprise
C)  oligopoly
D)  monopoly

Question 10

An industry comprising 40 firms, none of which has more than 3 percent of the total market for a differentiated product, is an example of

Accepted Answer

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

Question 11

Economists use the term imperfect competition to describe

Accepted Answer

A)  all industries that produce standardized products.
B)  any industry in which there is no nonprice competition.
C)  a pure monopoly only.
D)  those markets that are not purely competitive.

Question 12

Firms seek to maximize

Accepted Answer

A)  per unit profit.
B)  total revenue.
C)  total profit.
D)  market share.

Question 13

As long as an additional unit of output yields a marginal revenue larger than its marginal cost, it will be adding to total profits of the firm.

Accepted Answer

A) True 
 B)False

Question 14

The accompanying table gives cost data for a firm that is selling in a purely competitive market.If the market price for the firm's product is $12, the competitive firm should produce

Accepted Answer

A)  4 units at a loss of $109.
B)  4 units at an economic profit of $31.75.
C)  8 units at a loss of $48.80.
D)  zero units at a loss of $100.

Question 15

If the firm produces an output level below its break-even point, then the firm will earn negative economic profits.

Accepted Answer

A) True 
 B)False

Question 16

A competitive firm will produce in the short run so long as its price exceeds its average fixed cost.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is a reason why individual firms under pure competition would not find it gainful to advertise their product?

Accepted Answer

A)  Firms produce a homogeneous product.
B)  The quantity of the product demanded is very large.
C)  The market demand curve cannot be increased.
D)  Firms do not make long-run profits.

Question 18

In which market model are the conditions of entry the most difficult?

Accepted Answer

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

Question 19

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

Accepted Answer

A)  it cannot produce at an economic profit.
B)  price is less than average variable cost at all outputs.
C)  price is less than average fixed cost at all outputs.
D)  there is no point at which marginal revenue and marginal cost are equal.

Question 20

Mutual interdependence would tend to limit control over price in which market model?

Accepted Answer

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

Exam 10: Pure Competition in the Short Run

Economists use the term imperfect competition to describe

Correct AnswerverifiedShow Answer

Economists would describe the U.S.automobile industry as

Correct AnswerverifiedShow Answer

If a purely competitive firm is producing at the P = MC output and realizing an economic profit, at that output

Correct AnswerverifiedShow Answer

The total revenue of a purely competitive firm from selling 6 units of output is $48.Based on this information, the unit price of the output must be

Correct AnswerverifiedShow Answer

The accompanying table gives cost data for a firm that is selling in a purely competitive market.If the market price for the firm's product is $12, the competitive firm should produce

Correct AnswerverifiedShow Answer

The demand curve faced by a purely competitive firm

Correct AnswerverifiedShow Answer

Mutual interdependence would tend to limit control over price in which market model?

Correct AnswerverifiedShow Answer

In contrast to American firms, Japanese firms frequently make lifetime employment commitments to their workers and agree not to lay them off when product demand is weak.Other things being equal, we would expect Japanese firms to

Correct AnswerverifiedShow Answer

As long as an additional unit of output yields a marginal revenue larger than its marginal cost, it will be adding to total profits of the firm.

Correct AnswerverifiedShow Answer

Firms seek to maximize

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Which of the following is not a basic market model?

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A competitive firm will produce in the short run so long as its price exceeds its average fixed cost.

Correct AnswerverifiedShow Answer

In which market model are the conditions of entry the most difficult?

Correct AnswerverifiedShow Answer

If a purely competitive firm is producing at some output level less than the profit-maximizing output, then

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An industry comprising 40 firms, none of which has more than 3 percent of the total market for a differentiated product, is an example of

Correct AnswerverifiedShow Answer

If the firm produces an output level below its break-even point, then the firm will earn negative economic profits.

Correct AnswerverifiedShow Answer

If a purely competitive firm shuts down in the short run,

Correct AnswerverifiedShow Answer

Which of the following is a reason why individual firms under pure competition would not find it gainful to advertise their product?

Correct AnswerverifiedShow Answer

In which market model are the conditions of entry into the market easiest?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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