Question 1

Refer to the above graph.The level of output at which this firm will shut down is:

Accepted Answer

A)   0A.
B)   0B.
C)   0C.
D)   0K.E) A) and B)
F) A) and C)

Question 2

Under which market model are the conditions of entry the most difficult?

Accepted Answer

A)   Monopolistic competition
B)   Pure competition
C)   Pure monopoly
D)   OligopolyE) C) and D)
F) None of the above

Question 3

When a firm produces less output,it can reduce:

Accepted Answer

A)   its fixed costs but not its variable costs.
B)   its variable costs but not its fixed costs.
C)   average fixed cost.
D)   marginal revenue.E) A) and D)
F) A) and C)

Question 4

In the short run,fixed costs are irrelevant in determining a firm's optimal level of output.

Accepted Answer

A) True 
 B)False

Question 5

There would be a unique product for which there are few close substitutes under which market model?

Accepted Answer

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

Question 6

Refer to the above table.The marginal cost of the third unit of output is:

Accepted Answer

A)   $20.
B)   $23.
C)   $24.
D)   $25.The change in cost when producing the third unit of output is $117 - $94 = $23.E) A) and C)
F) A) and B)

Question 7

Given the table below,what is the short-run profit-maximizing level of output for the firm?

Accepted Answer

A)   2 units
B)   3 units
C)   4 units
D)   5 unitsAt output level of four units,total revenue exceeds total cost by $7.This is the maximum difference between total revenue and total cost,which means profit is maximized.E) A) and B)
F) A) and C)

Question 8

Allocative efficiency occurs when the:

Accepted Answer

A)   minimum of average total cost equals average revenue.
B)   minimum of average total cost equals marginal revenue.
C)   marginal cost equals the marginal benefit to society.
D)   marginal revenue equals marginal benefit to society.E) B) and C)
F) None of the above

Question 9

The long-run supply curve would be downsloping in:

Accepted Answer

A)   an increasing-cost industry.
B)   a decreasing-cost industry.
C)   a constant-cost industry.
D)   a variable-cost industry.E) A) and C)
F) A) and D)

Question 10

The long-run supply curve would be upsloping in:

Accepted Answer

A)   an increasing-cost industry.
B)   a decreasing-cost industry.
C)   a constant-cost industry.
D)   a variable-cost industry.E) All of the above
F) C) and D)

Question 11

A purely competitive firm,as shown above,will face what kind of change in profits over the long run,assuming industry demand is constant?

Accepted Answer

A)   Profits will increase.
B)   Profits will decrease.
C)   Profits will be unchanged.
D)   Cannot be decided from the information given.E) B) and C)
F) None of the above

Question 12

Which is true under conditions of pure competition?

Accepted Answer

A)   There are differentiated products.
B)   The market demand curve is perfectly elastic.
C)   No single firm can influence the market price by changing its output.
D)   Firms that cannot make pure or economic profits go bankrupt.E) A) and B)
F) C) and D) C

Question 13

A firm should always continue to operate at a loss in the short run if:

Accepted Answer

A)   the firm will show a profit.
B)   the owner enjoys helping her customers.
C)   it can cover its variable costs and some of its fixed costs.
D)   the firm cannot produce any other products more profitably.E) All of the above
F) B) and D)

Question 14

In long-run equilibrium under conditions of pure competition and productive efficiency,all firms produce at minimum:

Accepted Answer

A)   average total cost.
B)   marginal cost.
C)   total cost.
D)   average variable cost.E) A) and D)
F) A) and C) A

Question 15

Which is a reason why there is no advertising by individual firms under pure competition?

Accepted Answer

A)   Firms produce a homogeneous product.
B)   The quantity of the product demanded is very large.
C)   The market demand curve cannot be increased.
D)   Firms do not make long-run profits.E) A) and D)
F) A) and C)

Question 16

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

Accepted Answer

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

Question 17

Refer to the above table.When the firm produces three units of output,it makes an economic:

Accepted Answer

A)   profit of $3.
B)   loss of $3.
C)   profit of $9.
D)   loss of $9.At three units of output,total revenue is $120,whereas total cost is $117.This leaves a $3 profit.E) None of the above
F) A) and B)

Question 18

The difference between the actual price that a producer receives and the minimum acceptable price a producer is willing to accept is:

Accepted Answer

A)   consumer surplus.
B)   producer surplus.
C)   allocative efficiency.
D)   productive efficiency.E) B) and C)
F) B) and D) B

Question 19

The purely competitive firm's supply curve:

Accepted Answer

A)   is perfectly inelastic in the short run.
B)   is horizontal in the long run.
C)   is upward sloping when some inputs are fixed.
D)   becomes less elastic in the long run.E) C) and D)
F) A) and B)

Question 20

When firms in a purely competitive industry are earning profits that are greater than normal,the supply of the product will tend to decrease in the long run.

Accepted Answer

A) True 
 B)False

Exam 7: Pure Competition

Refer to the above graph.The level of output at which this firm will shut down is:

Correct AnswerverifiedShow Answer

Under which market model are the conditions of entry the most difficult?

Correct AnswerverifiedShow Answer

When a firm produces less output,it can reduce:

Correct AnswerverifiedShow Answer

In the short run,fixed costs are irrelevant in determining a firm's optimal level of output.

Correct AnswerverifiedShow Answer

There would be a unique product for which there are few close substitutes under which market model?

Correct AnswerverifiedShow Answer

Refer to the above table.The marginal cost of the third unit of output is:

Correct AnswerverifiedShow Answer

Given the table below,what is the short-run profit-maximizing level of output for the firm?

Correct AnswerverifiedShow Answer

Allocative efficiency occurs when the:

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The long-run supply curve would be downsloping in:

Correct AnswerverifiedShow Answer

The long-run supply curve would be upsloping in:

Correct AnswerverifiedShow Answer

A purely competitive firm,as shown above,will face what kind of change in profits over the long run,assuming industry demand is constant?

Correct AnswerverifiedShow Answer

Which is true under conditions of pure competition?

Correct AnswerverifiedC

A firm should always continue to operate at a loss in the short run if:

Correct AnswerverifiedShow Answer

In long-run equilibrium under conditions of pure competition and productive efficiency,all firms produce at minimum:

Correct AnswerverifiedA

Which is a reason why there is no advertising by individual firms under pure competition?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the above table.When the firm produces three units of output,it makes an economic:

Correct AnswerverifiedShow Answer

The difference between the actual price that a producer receives and the minimum acceptable price a producer is willing to accept is:

Correct AnswerverifiedB

The purely competitive firm's supply curve:

Correct AnswerverifiedShow Answer

When firms in a purely competitive industry are earning profits that are greater than normal,the supply of the product will tend to decrease in the long run.

Correct AnswerverifiedShow Answer

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C

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A

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B

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