Question 1

Refer to the short-run data in the accompanying graph. Which of the following is correct?

Accepted Answer

A)  This firm will maximize its profit at 440 units of output.
B)  Any level of output between 100 and 440 units will yield an economic profit.
C)  This firm's marginal revenue rises with output.
D)  Any level of output less than 100 units or greater than 440 units is profitable.

Question 2

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

Question 3

Which idea is inconsistent with pure competition?

Accepted Answer

A)  price-taking behavior
B)  product differentiation
C)  freedom of entry or exit for firms
D)  a large number of buyers and sellers

Question 4

In a purely competitive industry, each firm

Accepted Answer

A)  determines its own price.
B)  produces a differentiated product.
C)  can easily enter or exit the industry.
D)  engages in various forms of nonprice competition.

Question 5

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.

Question 6

The accompanying graph shows the cost curves for a competitive firm. If the market price falls to $0.55, the optimal output is

Accepted Answer

A)  0.
B)  15.
C)  20.
D)  more than 20, but less than 35.

Question 7

Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound of pork would be

Accepted Answer

A)  $3.
B)  $36.
C)  12 lbs.
D)  $12.

Question 8

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.

Question 9

According to the accompanying diagram, at the profit-maximizing output, total fixed cost is equal to

Accepted Answer

A)  0 AHE.
B)  0 BGE.
C)  0 CFE.
D)  BCFG.

Question 10

Refer to the provided graph for a purely competitive firm in the short run. Profits would be maximized if the firm produces which level of output?

Accepted Answer

A)  A
B)  B
C)  C
D)  greater than C

Question 11

The demand schedule or curve confronted by the individual, purely competitive firm is

Accepted Answer

A)  relatively elastic, that is, the elasticity coefficient is greater than unity.
B)  perfectly elastic.
C)  relatively inelastic, that is, the elasticity coefficient is less than unity.
D)  perfectly inelastic.

Question 12

Given the accompanying table, what is the short-run profit-maximizing level of output for the firm?

Accepted Answer

A)  4.
B)  5.
C)  3.
D)  2.

Question 13

In the graph, the amount of profit is measured by the gap between

Accepted Answer

A)  e and the vertical axis.
B)  e and the horizontal axis.
C)  d and e.
D)  e and f.

Question 14

Refer to the diagram, which pertains to a purely competitive firm. Curve A represents

Accepted Answer

A)  total revenue and marginal revenue.
B)  marginal revenue only.
C)  total revenue and average revenue.
D)  total revenue only.

Question 15

In the short run, fixed costs are important in determining a competitive firm's optimal level of output.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not a necessary characteristic of a purely competitive industry?

Accepted Answer

A)  The industry or market demand is highly elastic.
B)  Firms can easily enter or leave the industry.
C)  There are so many small firms that no one firm can influence the market price.
D)  Consumers see no difference between the product of one firm and that of another.

Question 17

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, marginal revenue graphs as a

Accepted Answer

A)  straight, upsloping line.
B)  straight line, parallel to the vertical axis.
C)  straight line, parallel to the horizontal axis.
D)  straight, downsloping line.

Question 18

Refer to the diagram. Other things equal, an increase of product price would be shown as

Accepted Answer

A)  an increase in the steepness of curve (3) , an upward shift in curve (2) , and an upward shift in curve (1) .
B)  a decrease in the steepness of curve (3) , a downward shift in curve (2) , and an upward shift in curve (1) .
C)  a downward shift in curve (4) and an upward shift in curve (1) , with no changes in curves (2) and (3) .
D)  an upward shift in curve (2) only.

Question 19

Suppose that at 500 units of output, marginal revenue is equal to marginal cost. The firm is selling its output at $5 per unit, and average total cost at 500 units of output is $6. On the basis of this information, we

Accepted Answer

A)  can say that the firm should close down in the short run.
B)  can say that the firm can produce and realize an economic profit in the short run.
C)  cannot determine whether the firm should produce or shut down in the short run.
D)  can assume the firm is not using the most efficient technology.

Question 20

The accompanying table shows cost data for a firm that is selling in a purely competitive market. If the price of the product is $3, what output level will the firm produce?

Accepted Answer

A)  12
B)  14
C)  0
D)  16

Exam 10: Pure Competition in the Short Run

Which of the following is not a necessary characteristic of a purely competitive industry?

Correct AnswerverifiedShow Answer

Refer to the diagram, which pertains to a purely competitive firm. Curve A represents

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Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound of pork would be

Correct AnswerverifiedShow Answer

Which idea is inconsistent with pure competition?

Correct AnswerverifiedShow Answer

According to the accompanying diagram, at the profit-maximizing output, total fixed cost is equal to

Correct AnswerverifiedShow Answer

In the graph, the amount of profit is measured by the gap between

Correct AnswerverifiedShow Answer

Refer to the provided graph for a purely competitive firm in the short run. Profits would be maximized if the firm produces which level of output?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In a purely competitive industry, each firm

Correct AnswerverifiedShow Answer

Given the accompanying table, what is the short-run profit-maximizing level of output for the firm?

Correct AnswerverifiedShow Answer

The accompanying table shows cost data for a firm that is selling in a purely competitive market. If the price of the product is $3, what output level will the firm produce?

Correct AnswerverifiedShow Answer

Suppose that at 500 units of output, marginal revenue is equal to marginal cost. The firm is selling its output at $5 per unit, and average total cost at 500 units of output is $6. On the basis of this information, we

Correct AnswerverifiedShow Answer

The demand schedule or curve confronted by the individual, purely competitive firm is

Correct AnswerverifiedShow Answer

Refer to the diagram. Other things equal, an increase of product price would be shown as

Correct AnswerverifiedShow Answer

Refer to the short-run data in the accompanying graph. Which of the following is correct?

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The accompanying graph shows the cost curves for a competitive firm. If the market price falls to $0.55, the optimal output is

Correct AnswerverifiedShow Answer

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, marginal revenue graphs as a

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

In the short run, fixed costs are important in determining a competitive firm's optimal level of output.

Correct AnswerverifiedShow Answer

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