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| 1 | |
In a purely competitive industry, |
| | A) | each existing firm will engage in various forms of non-price competition |
| | B) | new firms are free to enter and existing firms are able to leave the industry very easily |
| | C) | individual firms can increase the price of their product by limiting supply |
| | D) | each firm produces a differentiated (non-standardized) product |
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| 2 | |
The demand schedule or curve confronted by the individual purely competitive firm is |
| | A) | perfectly inelastic |
| | B) | inelastic but not perfectly inelastic |
| | C) | perfectly elastic |
| | D) | elastic but not perfectly elastic |
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| 3 | |
The demand curve for this firm is equal to
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| | A) | average variable cost (ATC) |
| | B) | marginal cost (MC) |
| | C) | average total cost (ATC) |
| | D) | marginal revenue (MR) |
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| 4 | |
At which point does a producer maximize profit in the short run? |
| | A) | MC = MR |
| | B) | Price = MR |
| | C) | MC = ATC |
| | D) | MC = AVC |
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| 5 | |
In pure competition, product price is always |
| | A) | greater than marginal revenue |
| | B) | equal to marginal revenue |
| | C) | equal to total revenue |
| | D) | greater than total revenue |
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| 6 | |
The individual purely competitive firm's short-run supply curve is that part of its marginal-cost curve lying above its |
| | A) | average total-cost curve (ATC) |
| | B) | average variable-cost curve (AVC) |
| | C) | average fixed-cost curve (AFC) |
| | D) | average revenue curve (ARC) |
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| 7 | |
Assume that the market for wheat is purely competitive. Currently, firms growing wheat are experiencing economic losses. In the long run, we can expect this market's |
| | A) | supply curve to increase |
| | B) | demand curve to increase |
| | C) | supply curve to decrease |
| | D) | demand curve to decrease |
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| 8 | |
Consumer surplus is the difference between |
| | A) | quantity demanded and quantity supplied |
| | B) | quantity demanded and the equilibrium point |
| | C) | the maximum that producers are willing to supply, and equilibrium quantity |
| | D) | the maximum that consumers are willing to pay, and market price |
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| 9 | |
Total revenue for producing 10 units of output is $6. Total revenue for producing 11 units of output is $8. Given this information, the |
| | A) | average revenue for producing 11 units is $2. |
| | B) | average revenue for producing 11 units is $8. |
| | C) | marginal revenue for producing the 11th unit is $8. |
| | D) | marginal revenue for producing the 11th unit is $2. |
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| 10 | |
At the profit-maximizing output for the firm above, the total variable costs are equal to the area
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| | A) | 0fbn |
| | B) | 0ecn |
| | C) | 0gan |
| | D) | gfba |
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| 11 | |
The Zebra, Inc. is selling in a purely competitive market. Its output is 250 units, which sell for $2 each. At this level of output, marginal cost is $2 and average variable cost is $2.25. The firm should |
| | A) | produce zero units of output |
| | B) | decrease output to 200 units |
| | C) | continue to produce 250 units |
| | D) | increase output to maximize profits |
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| 12 | |
Which of the following results in the most efficient use of resources? |
| | A) | P = MC = minimum ATC |
| | B) | P = AR = MR |
| | C) | P = MR = minimum MC |
| | D) | TR = MC = MR |
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| 13 | |
When a purely competitive industry is in long-run equilibrium, which statement is true? |
| | A) | marginal cost is equal to total revenue. |
| | B) | price and long-run average total cost are not equal to each other. |
| | C) | marginal cost is at its minimum level. |
| | D) | firms in the industry are earning normal profits. |
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| 14 | |
The long-run industry supply curve under pure competition will be |
| | A) | downward sloping in an increasing-cost industry and upward sloping in a decreasing-cost industry |
| | B) | horizontal in a constant-cost industry and upward sloping in a decreasing-cost industry |
| | C) | horizontal in a constant-cost industry and upward sloping in an increasing-cost industry |
| | D) | upward sloping in an increasing-cost industry and vertical in a constant-cost industry |
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| 15 | |
Allocative efficiency means that |
| | A) | consumer surplus is maximized |
| | B) | producer surplus is maximized |
| | C) | combined consumer and producer surplus is maximized |
| | D) | the firm is breaking even |
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