Question 1

The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the:

Accepted Answer

A)   output-maximizing rule.
B)   profit-maximizing rule.
C)   shut-down rule.
D)   break-even rule.E) None of the above
F) B) and C)

Question 2

Price is constant to the individual firm selling in a purely competitive market because:

Accepted Answer

A)   the firm's demand curve is downsloping.
B)   of product differentiation reinforced by extensive advertising.
C)   each seller supplies a negligible fraction of total supply.
D)   there are no good substitutes for its product.E) B) and D)
F) B) and C)

Question 3

Which of the following is not a basic characteristic of pure competition?

Accepted Answer

A)   Considerable nonprice competition.
B)   No barriers to the entry or exit of firms.
C)   A standardized or homogeneous product.
D)   A large number of buyers and sellers.E) B) and D)
F) None of the above

Question 4

Which of the following is not a characteristic of pure competition?

Accepted Answer

A)   Price strategies by firms.
B)   A standardized product.
C)   No barriers to entry.
D)   A larger number of sellers.E) A) and B)
F) A) and C)

Question 5

The demand curve for a purely competitive industry is perfectly elastic,but the demand curves faced by individual firms in such an industry are downsloping.

Accepted Answer

A) True 
 B)False

Question 6

If a purely competitive firm is producing at some level less than the profit-maximizing output,then:

Accepted Answer

A)   price is necessarily greater than average total cost.
B)   fixed costs are large relative to variable costs.
C)   price exceeds marginal revenue.
D)   marginal revenue exceeds marginal cost.E) A) and C)
F) All of the above

Question 7

In contrast to American firms,Japanese firms frequently make lifetime employment commitments to their workers and agree not to lay them off when product demand is weak.Other things being equal,we would expect Japanese firms to:

Accepted Answer

A)   face more elastic product demand curves than American firms.
B)   have relatively greater variable costs than American firms.
C)   discontinue production at higher product prices than would American firms.
D)   continue to produce in the short run at lower prices than would American firms.E) None of the above
F) B) and C)

Question 8

The demand curve in a purely competitive industry is ______,while the demand curve to a single firm in that industry is ______.

Accepted Answer

A)   perfectly inelastic;perfectly elastic
B)   downsloping;perfectly elastic
C)   downsloping;perfectly inelastic
D)   perfectly elastic;downslopingE) B) and D)
F) A) and D)

Question 9

An industry comprised of a very large number of sellers producing a standardized product is known as:

Accepted Answer

A)   monopolistic competition.
B)   oligopoly.
C)   pure monopoly.
D)   pure competition.E) C) and D)
F) All of the above

Question 10

(Last Word) Fixed costs for a firm are analogous to:

Accepted Answer

A)   the dirt that fills up the financial hole.
B)   digging a deeper financial hole by producing when prices are too low.
C)   the cost of the shovel needed to fill the financial hole.
D)   starting out in a hole that represents economic losses if the firm produces nothing.E) A) and C)
F) B) and D)

Question 11

In the short run,the individual competitive firm's supply curve is that segment of the:

Accepted Answer

A)   average variable cost curve lying below the marginal cost curve.
B)   marginal cost curve lying above the average variable cost curve.
C)   marginal revenue curve lying below the demand curve.
D)   marginal cost curve lying between the average total cost and average variable cost curves.E) B) and C)
F) A) and B)

Question 12

(Last Word) Temporary shutdowns of firms are most widespread when:

Accepted Answer

A)   total fixed costs are rising across the economy.
B)   the economy experiences recession.
C)   firms have the ability to set prices for their output.
D)   wage levels are falling.E) A) and B)
F) A) and C)

Question 13

If a purely competitive firm is maximizing economic profit:

Accepted Answer

A)   it is necessarily maximizing per-unit profit.
B)   it may or may not be maximizing per-unit profit.
C)   then per-unit profit will be minimized.
D)   it is necessarily overallocating resources to its product.E) A) and D)
F) None of the above

Question 14

Which of the following statements applies to a purely competitive producer?

Accepted Answer

A)   It will not advertise its product.
B)   In long-run equilibrium it will earn an economic profit.
C)   Its product will have a brand name.
D)   Its product is slightly different from those of its competitors.E) B) and C)
F) A) and D)

Question 15

A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating:

Accepted Answer

A)   price and average total cost.
B)   price and average fixed cost.
C)   marginal revenue and marginal cost.
D)   price and marginal revenue.E) All of the above
F) A) and B)

Question 16

(Consider This) An unprofitable motel will stay open in the short run if:

Accepted Answer

A)   price (average nightly room rate) exceeds average variable cost.
B)   marginal revenue exceeds marginal cost.
C)   price (average nightly room rate) exceeds average fixed cost.
D)   marginal revenue exceeds price.E) None of the above
F) A) and C)

Question 17

In the short run,a purely competitive seller will shut down if product price:

Accepted Answer

A)   equals average revenue.
B)   is greater than MC.
C)   is less than AVC.
D)   is less than ATC.E) B) and C)
F) All of the above

Question 18

Answer the question on the basis of the following cost data for a purely competitive seller:   Total  Total  Fixed  Output  Cost 0$50150250350450550650 Total  Variable  Total  Cost  Cost $0$5070120120170150200220270300350390440\begin{array}{ccc}\begin{array}{c}&	ext { Total } \	ext { Total }&	ext { Fixed } \	ext { Output }&	ext { Cost }\\hline0&\$50\1 &   50 \2 &  50 \3 &  50 \4 &  50 \5 &  50 \6 &  50\end{array}\begin{array}{cc}	ext { Total } &\	ext { Variable }&	ext { Total } \	ext { Cost }&	ext { Cost }\\hline\$ 0 & \$ 50 \70 & 120 \120 & 170 \150 & 200 \220 & 270 \300 & 350 \390 & 440\end{array}\end{array} Total  Output 0123456​ Total  Fixed  Cost $50505050505050​​ Total  Variable  Cost $070120150220300390​ Total  Cost $50120170200270350440​​​  Refer to the data.If product price is $75,the firm will produce:

Accepted Answer

A)   3 units of output.
B)   4 units of output.
C)   5 units of output.
D)   6 units of output. E) All of the above
F) A) and B)

Question 19

The following table applies to a purely competitive industry composed of 100 identical firms.  QuantityQuantityDemandedPriceSupplied400,000$5800,000500,0004700,000600,0003600,000700,0002500,000800,0001400,000\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}QuantityDemanded400,000500,000600,000700,000800,000​Price$54321​QuantitySupplied800,000700,000600,000500,000400,000​​  Refer to the table.If each of the 100 firms in the industry is maximizing its profit,each must have a marginal cost of:

Accepted Answer

A)   $5.
B)   $4.
C)   $3.
D)   $2. E) A) and B)
F) B) and C)

Question 20

In which of the following industry structures is the entry of new firms the most difficult?

Accepted Answer

A)   Pure monopoly.
B)   Oligopoly.
C)   Monopolistic competition.
D)   Pure competition.E) B) and D)
F) A) and B)

Exam 10: Pure Competition in the Short Run

The demand curve for a purely competitive industry is perfectly elastic,but the demand curves faced by individual firms in such an industry are downsloping.

Correct Answer
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Correct Answer
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If a purely competitive firm is producing at some level less than the profit-maximizing output,then:

Correct Answer
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Which of the following is not a characteristic of pure competition?

Correct Answer
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Correct Answer
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If a purely competitive firm is maximizing economic profit:

Correct Answer
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In the short run,the individual competitive firm's supply curve is that segment of the:

Correct Answer
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The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the:

Correct Answer
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(Consider This) An unprofitable motel will stay open in the short run if:

Correct Answer
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(Last Word) Fixed costs for a firm are analogous to:

Correct Answer
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(Last Word) Temporary shutdowns of firms are most widespread when:

Correct Answer
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The demand curve in a purely competitive industry is ,while the demand curve to a single firm in that industry is .

Correct Answer
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Which of the following statements applies to a purely competitive producer?

Correct Answer
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A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating:

Correct Answer
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An industry comprised of a very large number of sellers producing a standardized product is known as:

Correct Answer
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In which of the following industry structures is the entry of new firms the most difficult?

Correct Answer
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Which of the following is not a basic characteristic of pure competition?

Correct Answer
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In the short run,a purely competitive seller will shut down if product price:

Correct Answer
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In contrast to American firms,Japanese firms frequently make lifetime employment commitments to their workers and agree not to lay them off when product demand is weak.Other things being equal,we would expect Japanese firms to:

Correct Answer
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Price is constant to the individual firm selling in a purely competitive market because:

Correct Answer
verified

Exam 10: Pure Competition in the Short Run

The demand curve for a purely competitive industry is perfectly elastic,but the demand curves faced by individual firms in such an industry are downsloping.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a purely competitive firm is producing at some level less than the profit-maximizing output,then:

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of pure competition?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a purely competitive firm is maximizing economic profit:

Correct AnswerverifiedShow Answer

In the short run,the individual competitive firm's supply curve is that segment of the:

Correct AnswerverifiedShow Answer

The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the:

Correct AnswerverifiedShow Answer

(Consider This) An unprofitable motel will stay open in the short run if:

Correct AnswerverifiedShow Answer

(Last Word) Fixed costs for a firm are analogous to:

Correct AnswerverifiedShow Answer

(Last Word) Temporary shutdowns of firms are most widespread when:

Correct AnswerverifiedShow Answer

The demand curve in a purely competitive industry is ______,while the demand curve to a single firm in that industry is ______.

Correct AnswerverifiedShow Answer

Which of the following statements applies to a purely competitive producer?

Correct AnswerverifiedShow Answer

A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating:

Correct AnswerverifiedShow Answer

An industry comprised of a very large number of sellers producing a standardized product is known as:

Correct AnswerverifiedShow Answer

In which of the following industry structures is the entry of new firms the most difficult?

Correct AnswerverifiedShow Answer

Which of the following is not a basic characteristic of pure competition?

Correct AnswerverifiedShow Answer

In the short run,a purely competitive seller will shut down if product price:

Correct AnswerverifiedShow Answer

In contrast to American firms,Japanese firms frequently make lifetime employment commitments to their workers and agree not to lay them off when product demand is weak.Other things being equal,we would expect Japanese firms to:

Correct AnswerverifiedShow Answer

Price is constant to the individual firm selling in a purely competitive market because:

Correct AnswerverifiedShow Answer

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The demand curve in a purely competitive industry is ,while the demand curve to a single firm in that industry is .

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