Question 1

An industry comprising 50 firms, each with about 2 percent of the total market for a differentiated product, is an example of

Accepted Answer

A)  monopolistic competition.
B)  oligopoly.
C)  pure monopoly.
D)  pure competition.E) A) and C)
F) A) and D)

Question 2

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output is $4.00 and the market price is $4.50. What should the firm do?

Accepted Answer

A)  shut down if the minimum possible average variable cost is below $4.50
B)  decrease output if the minimum possible average variable cost is below $4.50
C)  increase output if the minimum possible average variable cost is below $4.50
D)  increase output if the minimum possible average variable cost is above $4.50E) None of the above
F) C) and D)

Question 3

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 oligopolyE) A) and B)
F) A) and C)

Question 4

The accompanying graph shows the cost curves for a competitive firm. If the market price of the product is $1.05 per unit, then the firm will produce how many units in the short run?

Accepted Answer

A)  between 0 and 15
B)  between 15 and 20
C)  between 20 and 35
D)  above 35E) A) and B)
F) None of the above

Question 5

The fact that a purely competitive firm's total revenue curve is linear and upsloping to the right implies that

Accepted Answer

A)  product price increases as output increases.
B)  product price decreases as output increases.
C)  product price is constant at all levels of output.
D)  marginal revenue declines as more output is produced.E) None of the above
F) B) and C)

Question 6

In a typical graph for a purely competitive firm, at the point where the total cost and total revenue curves intersect, the firm

Accepted Answer

A)  earns some economic profit.
B)  suffers some economic loss.
C)  earns some normal profit.
D)  suffers some accounting loss.E) A) and C)
F) C) and D)

Question 7

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

Accepted Answer

A)  the minimum point on its ATC curve.
B)  the minimum point on its AVC curve.
C)  the minimum point on its AFC curve.
D)  the minimum point on its MC curve.E) None of the above
F) A) and B)

Question 8

The firm represented in this diagram, which gives short-run data, is selling under conditions of

Accepted Answer

A)  pure monopoly.
B)  pure competition.
C)  monopolistic competition.
D)  oligopoly.E) C) and D)
F) B) and D)

Question 9

If a purely competitive firm is producing a level of output where the marginal revenue is less than the marginal cost, then its profits must be negative.

Accepted Answer

A) True 
 B)False

Question 10

At output level H in the provided graph, the area

Accepted Answer

A)  0 CGH represents the firm's total cost of production.
B)  ACGE represents the firm's economic profit.
C)  0 AEH represents the firm's economic profit.
D)  BCGF represents the firm's total fixed cost of production.E) None of the above
F) A) and B)

Question 11

The firm represented by the diagram would maximize its profit where

Accepted Answer

A)  curves (2) and (1) intersect.
B)  curve (1) touches the horizontal axis for the second time.
C)  the vertical distance between curves (3) and (4) is the greatest.
D)  curves (3) and (4) intersect.E) A) and B)
F) C) and D)

Question 12

The short-run supply curve of a purely competitive producer is based primarily on its

Accepted Answer

A)  AVC curve.
B)  ATC curve.
C)  AFC curve.
D)  MC curve.E) A) and D)
F) B) and D)

Question 13

Refer to the accompanying diagram. The firm will shut down at any price less than

Accepted Answer

A)  P₁.
B)  P₂.
C)  P₃.
D)  P₄.E) C) and D)
F) All of the above

Question 14

Which of the following is not a basic market model?

Accepted Answer

A)  pure competition
B)  free enterprise
C)  oligopoly
D)  monopolyE) A) and B)
F) A) and C)

Question 15

A competitive firm will maximize profits at that output at which

Accepted Answer

A)  total revenue exceeds total cost by the greatest amount.
B)  total revenue and total cost are equal.
C)  price exceeds average total cost by the largest amount.
D)  the difference between marginal revenue and price is at a maximum.E) C) and D)
F) B) and C)

Question 16

The accompanying table gives cost data for a firm that is selling in a purely competitive market. At 3 units of output, total variable cost is ____ and total cost is ____.

Accepted Answer

A)  $20; $70
B)  $60; $210
C)  $20; $210
D)  $60; $350E) None of the above
F) A) and D)

Question 17

Curve (2) in the diagram is a purely competitive firm's

Accepted Answer

A)  total cost curve.
B)  total revenue curve.
C)  marginal revenue curve.
D)  total economic profit curve.E) B) and D)
F) B) and C)

Question 18

At P ₃ in the accompanying diagram, this firm will

Accepted Answer

A)  produce 14 units and realize an economic profit.
B)  produce 62 units and earn only a normal profit.
C)  produce 40 units and incur a loss.
D)  shut down in the short run.E) A) and B)
F) All of the above

Question 19

In pure competition, a competitive firm's supply curve is that section of its marginal cost curve above ATC, and at any price below the average cost, the firm will produce nothing.

Accepted Answer

A) True 
 B)False

Question 20

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

Accepted Answer

A)  new firms will enter this industry.
B)  the firm should produce the MC = MR output and realize an economic profit.
C)  some firms should shut down in the short run.
D)  the firm should expand its plant.E) A) and B)
F) A) and C)

Exam 10: Pure Competition in the Short Run

A competitive firm will maximize profits at that output at which

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The firm represented in this diagram, which gives short-run data, is selling under conditions of

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In pure competition, a competitive firm's supply curve is that section of its marginal cost curve above ATC, and at any price below the average cost, the firm will produce nothing.

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At output level H in the provided graph, the area

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

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The accompanying graph shows the cost curves for a competitive firm. If the market price of the product is $1.05 per unit, then the firm will produce how many units in the short run?

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If a purely competitive firm is producing a level of output where the marginal revenue is less than the marginal cost, then its profits must be negative.

Correct AnswerverifiedShow Answer

The fact that a purely competitive firm's total revenue curve is linear and upsloping to the right implies that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the accompanying diagram. The firm will shut down at any price less than

Correct AnswerverifiedShow Answer

The short-run supply curve of a purely competitive producer is based primarily on its

Correct AnswerverifiedShow Answer

The firm represented by the diagram would maximize its profit where

Correct AnswerverifiedShow Answer

The accompanying table gives cost data for a firm that is selling in a purely competitive market. At 3 units of output, total variable cost is ____ and total cost is ____.

Correct AnswerverifiedShow Answer

At P ₃ in the accompanying diagram, this firm will

Correct AnswerverifiedShow Answer

An industry comprising 50 firms, each with about 2 percent of the total market for a differentiated product, is an example of

Correct AnswerverifiedShow Answer

In a typical graph for a purely competitive firm, at the point where the total cost and total revenue curves intersect, the firm

Correct AnswerverifiedShow Answer

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output is $4.00 and the market price is $4.50. What should the firm do?

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Which of the following is not a basic market model?

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

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Curve (2) in the diagram is a purely competitive firm's

Correct AnswerverifiedShow Answer

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The accompanying table gives cost data for a firm that is selling in a purely competitive market. At 3 units of output, total variable cost is and total cost is .

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