Question 1

In which two market models would advertising be used most often?

Accepted Answer

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

Question 2

In the short run, a purely competitive firm will always make an economic profit if

Accepted Answer

A)   P = ATC.
B)   P > AVC.
C)   P = MC.
D)   P > ATC.

Question 3

Assume the price of a product sold by a purely competitive firm is $5. Given the data in the accompanying table, at what output level is total profit highest in the short run?   Output  Total Cost 20$702575308535100401254515550190\begin{array} { | c | c | } \hline 	ext { Output } & 	ext { Total Cost } \\hline 20 & \$ 70 \\hline 25 & 75 \\hline 30 & 85 \\hline 35 & 100 \\hline 40 & 125 \\hline 45 & 155 \\hline 50 & 190 \\hline\end{array} Output 20253035404550​ Total Cost $707585100125155190​​

Accepted Answer

A)   20
B)   30
C)   40
D)   50

Question 4

A purely competitive seller is

Accepted Answer

A)   both a "price maker" and a "price taker."
B)   neither a "price maker" nor a "price taker."
C)   a "price taker."
D)   a "price maker."

Question 5

Marginal revenue is the

Accepted Answer

A)   change in product price associated with the sale of one more unit of output.
B)   change in average revenue associated with the sale of one more unit of output.
C)   difference between product price and average total cost.
D)   change in total revenue associated with the sale of one more unit of output.

Question 6

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.

Question 7

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, total 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 8

Which of the following is characteristic of a purely competitive seller's demand curve?

Accepted Answer

A)   Price and marginal revenue are equal at all levels of output.
B)   Average revenue is less than price.
C)   Its elasticity coefficient is 1 at all levels of output.
D)   It is the same as the market demand curve.

Question 9

If a purely competitive firm is producing a level of output greater than its profit-maximizing output, then its profits must be negative.

Accepted Answer

A) True 
 B)False

Question 10

The total revenue of a purely competitive firm from 8 units of output is $48. Based on this information, total revenue for 9 units of output must be

Accepted Answer

A)   $52.
B)   $54.
C)   $58.
D)   $60.

Question 11

A purely competitive firm will be willing to produce even at a loss in the short run, as long as

Accepted Answer

A)   the loss is smaller than its total variable costs.
B)   the loss is smaller than its marginal costs.
C)   the loss is smaller than its total fixed costs.
D)   price exceeds marginal costs.

Question 12

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 13

In the short run, the individual competitive firm's supply curve is that segment of the

Accepted Answer

A)   average variable cost curve lying below the marginal cost curve.
B)   marginal cost curve lying above the average variable cost curve.
C)   marginal revenue curve lying below the demand curve.
D)   marginal cost curve lying between the average total cost and average variable cost curves.

Question 14

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 15

In which market model would there be a unique product for which there are no close substitutes?

Accepted Answer

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

Question 16

An industry comprising four firms, each with about 25 percent of the total market for a product, is an example of

Accepted Answer

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

Question 17

If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing

Accepted Answer

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

Question 18

If a purely competitive firm is maximizing economic profit,

Accepted Answer

A)   it is necessarily maximizing per-unit profit.
B)   it may or may not be maximizing per-unit profit.
C)   then per-unit profit will be minimized.
D)   it is necessarily overallocating resources to its product.

Question 19

In the short run, a purely competitive firm will earn a normal profit when

Accepted Answer

A)   P = AVC.
B)   P > MC.
C)   that firm's MR = market equilibrium price.
D)   P = ATC.

Question 20

In the short run, a competitive firm will not produce unless price is at least equal to average total costs.

Accepted Answer

A) True 
 B)False

Exam 10: Pure Competition in the Short Run

If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing

Correct Answer
verified

A purely competitive firm will be willing to produce even at a loss in the short run, as long as

Correct Answer
verified

If a purely competitive firm is maximizing economic profit,

Correct Answer
verified

A purely competitive seller is

Correct Answer
verified

In the short run, a purely competitive firm will earn a normal profit when

Correct Answer
verified

In the short run, the individual competitive firm's supply curve is that segment of the

Correct Answer
verified

Correct Answer
verified

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, total revenue graphs as a

Correct Answer
verified

In the short run, a purely competitive firm will always make an economic profit if

Correct Answer
verified

If a purely competitive firm is producing a level of output greater than its profit-maximizing output, then its profits must be negative.

Correct Answer
verified

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

Correct Answer
verified

In the short run, a competitive firm will not produce unless price is at least equal to average total costs.

Correct Answer
verified

In which two market models would advertising be used most often?

Correct Answer
verified

The total revenue of a purely competitive firm from 8 units of output is $48. Based on this information, total revenue for 9 units of output must be

Correct Answer
verified

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

Correct Answer
verified

Marginal revenue is the

Correct Answer
verified

In which market model would there be a unique product for which there are no close substitutes?

Correct Answer
verified

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 Answer
verified

Which of the following is characteristic of a purely competitive seller's demand curve?

Correct Answer
verified

An industry comprising four firms, each with about 25 percent of the total market for a product, is an example of

Correct Answer
verified

Exam 10: Pure Competition in the Short Run

If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing

Correct AnswerverifiedShow Answer

A purely competitive firm will be willing to produce even at a loss in the short run, as long as

Correct AnswerverifiedShow Answer

If a purely competitive firm is maximizing economic profit,

Correct AnswerverifiedShow Answer

A purely competitive seller is

Correct AnswerverifiedShow Answer

In the short run, a purely competitive firm will earn a normal profit when

Correct AnswerverifiedShow Answer

In the short run, the individual competitive firm's supply curve is that segment of the

Correct AnswerverifiedShow Answer

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, total revenue graphs as a

Correct AnswerverifiedShow Answer

In the short run, a purely competitive firm will always make an economic profit if

Correct AnswerverifiedShow Answer

If a purely competitive firm is producing a level of output greater than its profit-maximizing output, then its profits must be negative.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the short run, a competitive firm will not produce unless price is at least equal to average total costs.

Correct AnswerverifiedShow Answer

In which two market models would advertising be used most often?

Correct AnswerverifiedShow Answer

The total revenue of a purely competitive firm from 8 units of output is $48. Based on this information, total revenue for 9 units of output must be

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Marginal revenue is the

Correct AnswerverifiedShow Answer

In which market model would there be a unique product for which there are no close substitutes?

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

Which of the following is characteristic of a purely competitive seller's demand curve?

Correct AnswerverifiedShow Answer

An industry comprising four firms, each with about 25 percent of the total market for a product, is an example of

Correct AnswerverifiedShow Answer

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