Question 1

Refer to the above graph.It shows the cost curves for a competitive firm.At output level 20,the marginal cost is:

Accepted Answer

A)   $0.60.
B)   $0.90.
C)   $1.05.
D)   $1.20.E) A) and B)
F) B) and D)

Question 2

When a purely competitive firm is in long-run equilibrium,price is equal to:

Accepted Answer

A)   marginal cost,but may be greater or less than average cost.
B)   minimum average cost and also to marginal cost.
C)   minimum average cost but may be greater or less than marginal cost.
D)   marginal revenue but may be greater or less than both average and marginal cost.E) C) and D)
F) B) and C)

Question 3

An industry experiencing increasing returns to scale and fixed factor prices will have a long-run supply curve that is:

Accepted Answer

A)   vertical.
B)   horizontal.
C)   upward sloping.
D)   downward sloping.E) All of the above
F) A) and C)

Question 4

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) C) and D)
F) A) and D)

Question 5

The table below shows cost data for a firm that is selling in a purely competitive market.  Refer to the above table.If the market price for the firm's product is $180,the competitive firm will produce:

Accepted Answer

A)   6 units at an economic profit of $100.
B)   6 units at an economic profit of $120.
C)   7 units at an economic profit of $238.
D)   7 units at an economic profit of $278.The firm's profit-maximizing output is 7,where MC = MR.At that output,total revenue is $180 * 7 = $1260 and total cost is $146 * 7 = $1022,so profit is $238.E) B) and C)
F) A) and D)

Question 6

In pure competition,the marginal revenue of a firm always equals:

Accepted Answer

A)   product price.
B)   total revenue.
C)   average total cost.
D)   marginal cost.E) A) and D)
F) B) and C)

Question 7

Refer to the above graph.It shows a profit-maximizing,purely competitive firm operating in the short run.Which area in the graph represents the amount of economic loss for the firm?

Accepted Answer

A)   0beg
B)   bcde
C)   acdf
D)   abefE) C) and D)
F) A) and D)

Question 8

If firms enter a purely competitive industry,then in the long run this change will shift the industry:

Accepted Answer

A)   demand curve to the left,and the market price will decrease.
B)   demand curve to the right,and the market price will increase.
C)   supply curve to the right,and the market price will decrease.
D)   supply curve to the left,and the market price will increase.E) A) and B)
F) A) and C)

Question 9

In a purely competitive industry,an optimal allocation of scarce resources occurs when:

Accepted Answer

A)   P = AC.
B)   P = MC.
C)   MR = MC.
D)   TR = TC.E) B) and D)
F) A) and C)

Question 10

Refer to the above data.At the profit-maximizing output,the firm's total revenue is:

Accepted Answer

A)   $48.
B)   $38.
C)   $80.
D)   $64.Profit maximization occurs at MC = MR,which is three units in this case.At three units of output,total revenue is 3 * $16 = $48.E) None of the above
F) A) and D)

Question 11

When demand increases,in the short run the purely competitive firm:

Accepted Answer

A)   will spend more on advertising.
B)   will earn higher profits or experience smaller losses.
C)   will experience no change in costs as it steps up production.
D)   can alter available inputs and output as well as the size of the plant.E) A) and B)
F) A) and C)

Question 12

A purely competitive firm does not try to sell more of its product by lowering its price below the market price because:

Accepted Answer

A)   its competitors would not permit it.
B)   it can sell all it wants to at the market price.
C)   this would be considered unethical price chiseling.
D)   its demand curve is inelastic,so total revenue will decline.E) None of the above
F) C) and D)

Question 13

An economy is producing at the least-cost rate of production when:

Accepted Answer

A)   price and the minimum average cost are equal.
B)   marginal cost is greater than average total cost.
C)   marginal revenue is greater than price.
D)   price and marginal revenue are equal.E) C) and D)
F) A) and B)

Question 14

Refer to the above graphs.What will happen in the long run to industry supply and the equilibrium price of the product?

Accepted Answer

A)   S will decrease,P will decrease.
B)   S will increase,P will decrease.
C)   S will decrease,P will increase.
D)   S will increase,P will increase.E) B) and D)
F) A) and C)

Question 15

If a firm is a price taker,then the demand curve for the firm's product is:

Accepted Answer

A)   equal to the total revenue curve.
B)   perfectly inelastic.
C)   perfectly elastic.
D)   unit elastic.E) C) and D)
F) A) and B)

Question 16

The retail trade for clothing would be an example of which market model?

Accepted Answer

A)   Monopolistic competition
B)   Pure competition
C)   Pure monopoly
D)   OligopolyE) A) and B)
F) A) and C)

Question 17

Productive efficiency refers to:

Accepted Answer

A)   cost minimization,where P = minimum ATC.
B)   production,where P = MC.
C)   maximizing profits by producing where MR = MC.
D)   setting TR = TC.E) All of the above
F) A) and B)

Question 18

2,the firm will: A)  close down to avoid a loss. B)  produce Q2 units and make an economic profit. C)  produce Q5 units and break even. D)  produce Q2 units and suffer a loss." class="answers-bank-image d-inline" rel="preload" > Refer to the above diagram.All data are for the short run.If product price is P2,the firm will:

Accepted Answer

A)   close down to avoid a loss.
B)   produce Q2 units and make an economic profit.
C)   produce Q5 units and break even.
D)   produce Q2 units and suffer a loss.E) B) and C)
F) None of the above

Question 19

If firms are losing money in a purely competitive industry,then in the long run this situation will shift the industry:

Accepted Answer

A)   demand curve to the right,and the market price will increase.
B)   supply curve to the left,and the market price will increase.
C)   supply curve to the right,and the market price will decrease.
D)   demand curve to the left,and the market price will decrease.E) B) and C)
F) A) and D)

Question 20

Refer to the above table.The equilibrium price of the product is:

Accepted Answer

A)   $40.
B)   $80.
C)   $120.
D)   $160.E) A) and D)
F) B) and C)

Exam 7: Pure Competition

The retail trade for clothing would be an example of which market model?

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An industry experiencing increasing returns to scale and fixed factor prices will have a long-run supply curve that is:

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A purely competitive firm does not try to sell more of its product by lowering its price below the market price because:

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When a purely competitive firm is in long-run equilibrium,price is equal to:

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The table below shows cost data for a firm that is selling in a purely competitive market. Refer to the above table.If the market price for the firm's product is $180,the competitive firm will produce:

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If firms are losing money in a purely competitive industry,then in the long run this situation will shift the industry:

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If a firm is a price taker,then the demand curve for the firm's product is:

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In a purely competitive industry,an optimal allocation of scarce resources occurs when:

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Refer to the above graph.It shows a profit-maximizing,purely competitive firm operating in the short run.Which area in the graph represents the amount of economic loss for the firm?

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Refer to the above diagram.All data are for the short run.If product price is P2,the firm will:

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

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Refer to the above graph.It shows the cost curves for a competitive firm.At output level 20,the marginal cost is:

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If firms enter a purely competitive industry,then in the long run this change will shift the industry:

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Productive efficiency refers to:

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Refer to the above graphs.What will happen in the long run to industry supply and the equilibrium price of the product?

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Refer to the above table.The equilibrium price of the product is:

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In pure competition,the marginal revenue of a firm always equals:

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Refer to the above data.At the profit-maximizing output,the firm's total revenue is:

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When demand increases,in the short run the purely competitive firm:

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An economy is producing at the least-cost rate of production when:

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Refer to the above diagram.All data are for the short run.If product price is P₂,the firm will:

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