Question 1

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.

Question 2

The accompanying graph shows short-run cost curves for a competitive firm. At what price would the firm face the same profit or loss whether it chooses to produce or not?

Accepted Answer

A)  P₁
B)  P₂
C)  P₃
D)  P₄

Question 3

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 4

On a per-unit basis, economic profit can be determined as the difference between

Accepted Answer

A)  marginal revenue and product price.
B)  product price and average total cost.
C)  marginal revenue and marginal cost.
D)  average fixed cost and product price.

Question 5

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 $32, the competitive firm should produce

Accepted Answer

A)  10 units at an economic profit of $4.
B)  8 units at an economic profit of $2.
C)  8 units at an economic profit of $16.
D)  10 units at an economic profit of $20.

Question 6

The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.

Accepted Answer

A)  perfectly inelastic; perfectly elastic
B)  downsloping; perfectly elastic
C)  downsloping; perfectly inelastic
D)  perfectly elastic; downsloping

Question 7

What is the shape of the total and marginal revenue curves for the individual competitive firm?

Accepted Answer

Total revenue (TR)is a straight line tha...

Question 8

An industry comprising a small number of firms, each of which considers the potential reactions of its rivals in making price-output decisions, is called

Accepted Answer

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

Question 9

In the provided diagram, the profit-maximizing output

Accepted Answer

A)  is n.
B)  is k.
C)  is h.
D)  cannot be determined from the information given.

Question 10

Refer to the accompanying cost table. If price of the product were $30 per unit, the firm would

Accepted Answer

A)  produce 5 units and realize a loss of $50.
B)  produce 6 units and realize a loss of $30.
C)  produce 7 units and realize a loss of $32.
D)  shut down in the short run.

Question 11

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.

Question 12

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 13

Competitive firms are price takers largely because of intensive advertising by their competitors.

Accepted Answer

A) True 
 B)False

Question 14

Refer to the accompanying diagram. The firm's supply curve is the segment of the

Accepted Answer

A)  MC curve above its intersection with the AVC curve.
B)  MC curve above its intersection with the ATC curve.
C)  AVC curve above its intersection with the MC curve.
D)  ATC curve above its intersection with the MC curve.

Question 15

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

Question 16

Refer to the accompanying diagram. The firm will realize an economic profit if price is

Accepted Answer

A)  P₁.
B)  P₂.
C)  P₃.
D)  P₄.

Question 17

The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $35, it will produce

Accepted Answer

A)  6 units at a loss of $150.
B)  6 units at a loss of $90.
C)  9 units at an economic profit of $281.97.
D)  8 units at an economic profit of $130.72.

Question 18

In pure competition, the industry demand curve is infinitely price elastic.

Accepted Answer

A) True 
 B)False

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.

Question 20

Which of the following is true for a purely competitive firm in short-run equilibrium?

Accepted Answer

A)  The firm is making only normal profits.
B)  The firm's marginal cost is greater than its marginal revenue.
C)  The firm's marginal revenue is equal to its marginal cost.
D)  A decrease in output would lead to a rise in profits.

Exam 10: Pure Competition in the Short Run

On a per-unit basis, economic profit can be determined as the difference between

Correct AnswerverifiedShow Answer

The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In pure competition, the industry demand curve is infinitely price elastic.

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 this firm's product is $35, it will produce

Correct AnswerverifiedShow Answer

Competitive firms are price takers largely because of intensive advertising by their competitors.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is true for a purely competitive firm in short-run equilibrium?

Correct AnswerverifiedShow Answer

In pure competition, price is determined where the industry

Correct AnswerverifiedShow Answer

An industry comprising a small number of firms, each of which considers the potential reactions of its rivals in making price-output decisions, is called

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Refer to the accompanying diagram. The firm's supply curve is the segment of the

Correct AnswerverifiedShow Answer

Refer to the accompanying cost table. If price of the product were $30 per unit, the firm would

Correct AnswerverifiedShow Answer

Refer to the accompanying diagram. The firm will realize an economic profit if price is

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 $32, the competitive firm should produce

Correct AnswerverifiedShow Answer

In the provided diagram, the profit-maximizing output

Correct AnswerverifiedShow Answer

What is the shape of the total and marginal revenue curves for the individual competitive firm?

Correct AnswerverifiedTotal revenue (TR)is a straight line tha...View AnswerShow Answer

The accompanying graph shows short-run cost curves for a competitive firm. At what price would the firm face the same profit or loss whether it chooses to produce or not?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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The demand curve in a purely competitive industry is , while the demand curve to a single firm in that industry is .

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Total revenue (TR)is a straight line tha...
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