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Multiple Choice Quiz
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1.
A competitive firm:
A)is a firm that becomes dominant in an industry through successful competition.
B)produces such a small share of industry output that it has insignificant influence on industry price.
C)can influence industry output in a significant way but cannot influence industry price.
D)can influence industry price in a significant way but cannot influence industry output.
2.
Competitive firms:
A)produce different products but charge similar prices.
B)produce identical products and charge identical prices.
C)produce different products and charge different prices depending on market conditions.
D)compete based on service rather than price.
3.
The fact that competitive firms are price takers means:
A)that each firm charges a different price to each customer.
B)that each firm is careful not to take price for granted and to search for the best price.
C)that a firm charges the same price to all its customers, but charges a different price than those of its rivals.
D)that no individual firm has any control over the market price.
4.
In a competitive industry:
A)the market demand curve is downward sloping but the demand curve facing the firm is horizontal.
B)marginal cost = price.
C)Both (a) and (b) are true.
D)Neither (a) nor (b) are true.
5.
A firm operating in a perfectly competitive industry:
A)expands output up to the point where P = MC.
B)expands output up to the point where MR = P.
C)Both (a) and (b) are true.
D)Neither (a) nor (b) are true.
6.
For a firm operating in a perfectly competitive industry:
A)An improvement in technology will reduce marginal cost.
B)An improvement in technology will shift the firm and industry supply curve to the right.
C)Both (a) and (b) are true.
D)Neither (a) nor (b) are true.
7.
For firms operating in perfectly competitive industries:
A)profits tend to be fleeting because they induce other firms to enter the industry.
B)profits can persist because incumbent firms are able to block entry.
C)profits are always zero due to government regulation.
D)profits can be positive in the long run but are normally zero in the short run.
8.
In long-run competitive equilibrium:
A)economic profits are zero.
B)P = MC
C)price = minimum ATC.
D)All of the above are true.
9.
If firms in a competitive industry were earning short-run economic profits:
A)one would expect the demand curve to shift to the right.
B)one would expect the supply curve to shift to the right.
C)one would expect nothing to change
D)that would represent an impossibility since competition always keeps profit at zero in a competitive industry.
10.
If firms in a competitive industry are experiencing losses, then:
A)that represents a signal that too many resources are allocated to that industry and that economic welfare would be improved if the resources were reallocated elsewhere.
B)it is a sign that the demand curve has shifted to the right.
C)it is a signal that welfare would be improved if the government were to subsidize firms in that industry to help maintain current output.
D)All of the above are true.
11.
A duopoly exists when there is/are ______ firm(s) in a particular market.
A)one
B)two
C)a few
D)many
12.
A competitive firm has ______ power over the price of the good it produces.
A)no
B)some
C)a lot of
D)total
13.
Perfect competition has a ______ number of relatively ______ firms.
A)large; large
B)small; small
C)large; small
D)small; large
14.
The demand curve facing a perfectly competitive firm is:
A)downward sloping.
B)upward sloping.
C)vertical.
D)horizontal.
15.
In perfect competition profits are maximized at the output level where P ___ MC.
A)=
B)>
C)<
D)None of the above is true.
16.
Total profit is equal to total revenue ______ total cost.
A)plus
B)minus
C)times
D)divided by
17.
Which of the following are the most important influences on marginal cost (and supply behavior)?
A)The price of factor inputs
B)Technology
C)Expectations
D)All of the above are true.
18.
If economic profits are occurring, firms will ______ the industry and the price of the good will ______.
A)enter; increase
B)enter; decrease
C)leave; increase
D)leave; decrease
19.
In long-run competitive market equilibrium, price ______ minimum average total cost.
A)is less than
B)is greater than
C)equals
D)None of the above is true.
20.
Competitive markets have ______ barriers to entry.
A)low
B)high
C)significant
D)None of the above is true.
21.
Which of the following represent the two extremes of market structure?
A)perfect competition and monopolistic competition
B)perfect competition and oligopoly
C)monopolistic competition and monopoly
D)perfect competition and monopoly
22.
Total profit can be calculated using the following formula: Price - _____ x _____.
A)AVC; Q
B)ATC; Q
C)MC; Q
D)MC; MR
23.
In a perfectly competitive firm, marginal revenue is:
A)always less than price.
B)always greater than price.
C)always equal to price.
D)never equal to price.
24.
The MC curve is a competitive firm's short-run _____ curve.
A)demand
B)supply
C)revenue
D)None of the above is true.
25.
The profit maximizing rule is to produce the output level where _____ equals _____.
A)price; marginal revenue
B)price; marginal cost
C)price; fixed cost
D)price; variable cost





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