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Multiple Choice Pre Quiz
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1

Perfectly competitive firms are described as _______ and face _______ demand curves.
A)price-makers; horizontal
B)price-takers; horizontal
C)price-makers; vertical
D)price-takers; vertical
2

Which of the following is a key point that you should remember about perfect competition?
A)In a perfectly competitive industry, there are many small firms that each produce the same product.
B)The perfectly competitive firm faces a horizontal demand curve and is too small to affect the market price.
C)The perfectly competitive firm sells all of the units it produces at the prevailing market price.
D)All of the above.
3

The perfectly competitive firm will maximize profit at the level of output where:
A)MC=P
B)MC=MU
C)MR=MP
D)AC=P
4

The zero-profit point will occur where:
A)MC=P
B)MC=MU
C)AC=P
D)AC=MP
5

The firm will choose to shut down when:
A)revenues no longer cover variable costs.
B)losses are larger than fixed costs.
C)both a and b.
D)neither a nor b.
6

Horizontally summing all the supply curves of the individual producers will yield the:
A)average variable cost curve.
B)total product curve.
C)marginal revenue curve.
D)market supply curve.
7

The long-run supply curve is relatively _______ than the short-run supply curve.
A)more elastic
B)less elastic
C)more inelastic
D)none of the above
8

Under perfect competition, the long-run equilibrium will occur where:
A)MC=MP
B)AC=MU
C)AC=MC=P
D)none of the above
9

When the quantity supplied of an input is constant at every price, the payment for the use of that input is called _______.
A)the wage
B)rent
C)interest
D)none of the above
10

When no reorganization of production can make anyone better off without making someone else worse off, economists call that:
A)economic rent.
B)allocative efficiency.
C)competitive equilibrium.
D)none of the above.
11

You can find producer surplus on a supply and demand graph by calculating the size of the area:
A)between the supply and demand curves.
B)below the demand curve and above the prevailing market price.
C)below the prevailing market price and above the supply curve.
D)between the 45-degree line from the origin and the supply curve.
12

Which of the following will hold if the perfectly competitive allocation is efficient?
A)P = MU
B)P = MC
C)MU = MC
D)all of the above.
13

Which of the following is not an example of market failure?
A)imperfect competition
B)externalities
C)imperfect information
D)perfect competition
14

Quantity supplied of good Z increases as price increases from 0 to 10. As the price increases from 10 to infinity, the quantity supplied decreases. This situation can be graphically represented by:
A)the intersection of MC and MR.
B)the upward sloping supply curve.
C)the classic demand and supply graph.
D)a backward-bending supply curve.





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