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Exam 10: Pure Competition in the Short Run

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Question 21

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The MR = MC rule can be restated for a purely competitive seller as P = MC because:

A) each additional unit of output adds exactly its price to total revenue.
B) the firm's average revenue curve is downsloping.
C) the market demand curve is downsloping.
D) the firm's marginal revenue and total revenue curves will coincide.

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Question 22

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The MR = MC rule applies:

A) to firms in all types of industries.
B) only when the firm is a "price taker."
C) only to monopolies.
D) only to purely competitive firms.

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Question 23

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

A purely competitive seller should produce (rather than shut down) in the short run:

Answer the question on the basis of the following cost data for a purely competitive seller: $\begin{array}{ccc}\begin{array}{c}&\text { Total } \\\text { Total }&\text { Fixed } \\\text { Output }&\text { Cost }\\\hline0&\$50\\1 & 50 \\2 & 50 \\3 & 50 \\4 & 50 \\5 & 50 \\6 & 50\end{array}\begin{array}{cc}\text { Total } &\\\text { Variable }&\text { Total } \\\text { Cost }&\text { Cost }\\\hline\$ 0 & \$ 50 \\70 & 120 \\120 & 170 \\150 & 200 \\220 & 270 \\300 & 350 \\390 & 440\end{array}\end{array}$ Refer to the data.At 5 units of output,average fixed cost,average variable cost,and average total cost are:

(Consider This) An otherwise unprofitable motel located on a largely abandoned roadway might be able to stay open for several years by:

If at the MC = MR output,AVC exceeds price:

A firm finds that at its MR = MC output,its TC = $1,000,TVC = $800,TFC = $200,and total revenue is $900.This firm should:

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

Answer the question on the basis of the following cost data for a purely competitive seller: $\begin{array}{ccc}\begin{array}{c}&\text { Total } \\\text { Total }&\text { Fixed } \\\text { Output }&\text { Cost }\\\hline0&\$50\\1 & 50 \\2 & 50 \\3 & 50 \\4 & 50 \\5 & 50 \\6 & 50\end{array}\begin{array}{cc}\text { Total } &\\\text { Variable }&\text { Total } \\\text { Cost }&\text { Cost }\\\hline\$ 0 & \$ 50 \\70 & 120 \\120 & 170 \\150 & 200 \\220 & 270 \\300 & 350 \\390 & 440\end{array}\end{array}$ The data are for:

Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market. $\begin{array}{ccccc}& \text { Average } & \text { Average } & \text { Average } & \\\text { Total } & \text { Fixed } & \text { Variable } & \text { Total } & \text { Marginal } \\\text { Output } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost }\\\hline1 & \$ 150.00 & \$ 25.00 & \$ 175.00 & \$ 25.00 \\2 & 75.00 & 23.00 & 98.00 & 21.00 \\3 & 50.00 & 20.00 & 70.00 & 14.00 \\4 & 37.50 & 21.00 & 58.50 & 24.00 \\5 & 30.00 & 23.00 & 53.00 & 31.00 \\6 & 25.00 & 25.00 & 50.00 & 35.00 \\7 & 21.43 & 28.00 & 49.43 & 46.01 \\8 & 18.75 & 33.00 & 51.76 & 68.07 \\9 & 16.67 & 39.00 & 55.67 & 86.95 \\10 & 15.00 & 48.00 & 63.00 & 128.97\end{array}$ Refer to the data.The marginal cost column reflects:

Answer the question on the basis of the following cost data for a purely competitive seller: $\begin{array} { c c c } \text { Output } & & \text { Total Cost } \\\hline0 & & \$ 50 \\1 & & 90 \\2 & & 120 \\3 & & 140 \\4 & & 170 \\5 & & 210 \\6 & & 260 \\7 & & 330\end{array}$ Refer to the data.If product price is $45,the firm will:

Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market. $\begin{array}{ccccc}& \text { Average } & \text { Average } & \text { Average } & \\\text { Total } & \text { Fixed } & \text { Variable } & \text { Total } & \text { Marginal } \\\text { Output } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost }\\\hline1 & \$ 150.00 & \$ 25.00 & \$ 175.00 & \$ 25.00 \\2 & 75.00 & 23.00 & 98.00 & 21.00 \\3 & 50.00 & 20.00 & 70.00 & 14.00 \\4 & 37.50 & 21.00 & 58.50 & 24.00 \\5 & 30.00 & 23.00 & 53.00 & 31.00 \\6 & 25.00 & 25.00 & 50.00 & 35.00 \\7 & 21.43 & 28.00 & 49.43 & 46.01 \\8 & 18.75 & 33.00 & 51.76 & 68.07 \\9 & 16.67 & 39.00 & 55.67 & 86.95 \\10 & 15.00 & 48.00 & 63.00 & 128.97\end{array}$ Refer to the data.We can infer that,at zero output,this firm's total fixed,total variable,and total costs are:

Assume the XYZ Corporation is producing 20 units of output.It is selling this output in a purely competitive market at $10 per unit.Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output.This corporation:

(Last Word) Oil wells and seasonal resorts will often shut down temporarily because:

Although individual purely competitive firms can influence the price of their product,these firms as a group cannot influence market price.

The following table applies to a purely competitive industry composed of 100 identical firms. $\begin{array}{lcl}Quantity&&Quantity\\Demanded &Price &Supplied\\\hline400,000 & \$ 5 & 800,000 \\500,000 & 4 & 700,000 \\600,000 & 3 & 600,000 \\700,000 & 2 & 500,000 \\800,000 & 1 & 400,000\end{array}$ Refer to the table.If each of the 100 firms in the industry is maximizing its profit and earning only a normal profit,each must have a total cost of:

Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market. $\begin{array}{ccccc}& \text { Average } & \text { Average } & \text { Average } & \\\text { Total } & \text { Fixed } & \text { Variable } & \text { Total } & \text { Marginal } \\\text { Output } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost }\\\hline1 & \$ 150.00 & \$ 25.00 & \$ 175.00 & \$ 25.00 \\2 & 75.00 & 23.00 & 98.00 & 21.00 \\3 & 50.00 & 20.00 & 70.00 & 14.00 \\4 & 37.50 & 21.00 & 58.50 & 24.00 \\5 & 30.00 & 23.00 & 53.00 & 31.00 \\6 & 25.00 & 25.00 & 50.00 & 35.00 \\7 & 21.43 & 28.00 & 49.43 & 46.01 \\8 & 18.75 & 33.00 & 51.76 & 68.07 \\9 & 16.67 & 39.00 & 55.67 & 86.95 \\10 & 15.00 & 48.00 & 63.00 & 128.97\end{array}$ Refer to the data.If the market price for this firm's product is $87,it will produce:

Answer the question on the basis of the following data confronting a firm: $\begin{array}{l}\begin{array}{ccr}&&\text { Marginal }\\\text { Output } & & \text { Reven } \\\hline0&&--\\1 & & \$ 16 \\2 & & 16 \\3 & & 16 \\4 & & 16 \\5 & & 16\end{array}\begin{array}{c}Marginal\\Cost\\\hline--\\\$ 10 \\9 \\13 \\17 \\21\end{array}\end{array}$ Refer to the data.At the profit-maximizing output,the firm's total revenue is:

The lowest point on a purely competitive firm's short-run supply curve corresponds to: