Question 1

There would be some control over price within rather narrow limits in which market model?

Accepted Answer

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

Question 2

When a competitive firm is in long-run equilibrium,its accounting profits are greater than zero.

Accepted Answer

A) True 
 B)False

Question 3

Assume the market for ball bearings is purely competitive.Currently,each of the firms in this market is making a positive level of economic profits.In the long run,we can expect the market:

Accepted Answer

A)   supply to increase.
B)   demand to increase.
C)   supply to decrease.
D)   demand to decrease.E) A) and D)
F) All of the above

Question 4

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 $3.00.
B)   Decrease output if the minimum possible average variable cost is $3.00.
C)   Increase output if the minimum possible average variable cost is $3.75.
D)   Decrease output if the minimum possible average variable cost is $3.75.E) None of the above
F) A) and B)

Question 5

Refer to the above data.If the firm's minimum average variable cost is $10,the firm's profit-maximizing level of output would be:

Accepted Answer

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

Question 6

Which would indicate that a firm is operating under conditions of pure competition and is being productively efficient?

Accepted Answer

A)   It is making economic profits in the long run.
B)   Marginal cost equals average variable cost.
C)   It produces at the minimum average total cost.
D)   Its marginal revenue is less than average revenue.E) All of the above
F) None of the above

Question 7

Productive efficiency refers to long-run market conditions where marginal cost is equal to marginal revenue.

Accepted Answer

A) True 
 B)False

Question 8

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

Accepted Answer

A)   0A.
B)   0B.
C)   0C.
D)   0K.E) A) and B)
F) None of the above

Question 9

Refer to the above graph.The level of output at which this firm is maximizing an economic profit is:

Accepted Answer

A)   0A.
B)   0B.
C)   0C.
D)   0K.E) A) and D)
F) All of the above

Question 10

If there is allocative efficiency in a purely competitive market for a product,the maximum price consumers are willing to pay is:

Accepted Answer

A)   less than marginal benefit.
B)   greater than marginal cost.
C)   equal to the amount of efficiency or deadweight losses.
D)   equal to the minimum price producers are willing to accept.E) C) and D)
F) All of the above

Question 11

If MR > MC for a competitive firm,it should raise its price and increase its level of output.

Accepted Answer

A) True 
 B)False

Question 12

A firm sells a product in a purely competitive market.The marginal cost of the product at the current output of 500 units is $1.50.The minimum possible average variable cost is $1.00.The market price of the product is $1.25.To maximize profit or minimize losses,the firm should:

Accepted Answer

A)   continue producing 500 units.
B)   produce less than 500 units.
C)   produce more than 500 units.
D)   shut down.E) B) and D)
F) A) and C)

Question 13

The Campus Crustacean Company receives $2 per box for its crawfish and is selling 1600 boxes to maximize its profits.What is the per-unit profit on a box of crawfish at the profit-maximizing level of output if the variable cost is $1 per box and fixed costs are $1200?

Accepted Answer

A)   $0.25
B)   $0.50
C)   $1.00
D)   $1.25Total revenue is 1600 * $2 = $3200.Total costs are $1200 + (1600 * $1) = $2800,so profit is $400.Profit per unit is $400/1600 = $0.25.E) C) and D)
F) A) and D)

Question 14

Mutual interdependence would tend to limit control over price in which market model?

Accepted Answer

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

Question 15

Refer to the above graph.It shows the cost curves for a competitive firm.If the market price falls to $0.55,the optimal output rate is:

Accepted Answer

A)   0.
B)   15.
C)   20.
D)   more than 20,but less than 35.E) All of the above
F) A) and B)

Question 16

One explanation for the existence of an increasing-cost industry is:

Accepted Answer

A)   increasing marginal returns to labor occur.
B)   firms produce beyond the point of minimum long-run average total costs.
C)   perfectly elastic long-run supply schedules are observed in the industry.
D)   as the industry expands,input prices are bid up for some factor of production.E) C) and D)
F) B) and C)

Question 17

A firm sells a product in a purely competitive market.The marginal cost of the product at the current output of 800 units is $3.50.The minimum possible average variable cost is $3.00.The market price of the product is $4.00.To maximize profit or minimize losses,the firm should:

Accepted Answer

A)   continue producing 800 units.
B)   produce less than 800 units.
C)   produce more than 800 units.
D)   shut down.E) B) and C)
F) B) and D)

Question 18

Refer to the above graph.At output level H,the area:

Accepted Answer

A)   0CGH represents the firm's variable cost of production.
B)   ACGE represents the firm's economic profit.
C)   0AEH represents the firm's economic profit.
D)   0CGH represents the firm's fixed costs of production.E) All of the above
F) A) and B)

Question 19

In long-run equilibrium a purely competitive firm will operate where price is:

Accepted Answer

A)   greater than MR but equal to MC and minimum ATC.
B)   greater than MR and MC but equal to minimum ATC.
C)   greater than MC and minimum ATC but equal to MR.
D)   equal to MR,MC,and minimum ATC.E) A) and B)
F) All of the above

Question 20

If a purely competitive firm is in short-run equilibrium and its marginal cost exceeds its average total cost,we can conclude that:

Accepted Answer

A)   this is a decreasing-cost industry.
B)   this is an increasing-cost industry.
C)   firms will exit the industry in the long run.
D)   firms will enter the industry in the long run.E) B) and D)
F) All of the above

Exam 7: Pure Competition

Refer to the above graph.The level of output at which this firm is maximizing an economic profit is:

Correct AnswerverifiedShow Answer

There would be some control over price within rather narrow limits in which market model?

Correct AnswerverifiedShow Answer

When a competitive firm is in long-run equilibrium,its accounting profits are greater than zero.

Correct AnswerverifiedShow Answer

If there is allocative efficiency in a purely competitive market for a product,the maximum price consumers are willing to pay is:

Correct AnswerverifiedShow Answer

Refer to the above data.If the firm's minimum average variable cost is $10,the firm's profit-maximizing level of output would be:

Correct AnswerverifiedShow Answer

Assume the market for ball bearings is purely competitive.Currently,each of the firms in this market is making a positive level of economic profits.In the long run,we can expect the market:

Correct AnswerverifiedShow Answer

A firm sells a product in a purely competitive market.The marginal cost of the product at the current output of 800 units is $3.50.The minimum possible average variable cost is $3.00.The market price of the product is $4.00.To maximize profit or minimize losses,the firm should:

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Refer to the above graph.It shows the cost curves for a competitive firm.If the market price falls to $0.55,the optimal output rate is:

Correct AnswerverifiedShow Answer

Refer to the above graph.At output level H,the area:

Correct AnswerverifiedShow Answer

Productive efficiency refers to long-run market conditions where marginal cost is equal to marginal revenue.

Correct AnswerverifiedShow Answer

Mutual interdependence would tend to limit control over price in which market model?

Correct AnswerverifiedShow Answer

In long-run equilibrium a purely competitive firm will operate where price is:

Correct AnswerverifiedShow Answer

One explanation for the existence of an increasing-cost industry is:

Correct AnswerverifiedShow Answer

Which would indicate that a firm is operating under conditions of pure competition and is being productively efficient?

Correct AnswerverifiedShow Answer

If a purely competitive firm is in short-run equilibrium and its marginal cost exceeds its average total cost,we can conclude that:

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?

Correct AnswerverifiedShow Answer

A firm sells a product in a purely competitive market.The marginal cost of the product at the current output of 500 units is $1.50.The minimum possible average variable cost is $1.00.The market price of the product is $1.25.To maximize profit or minimize losses,the firm should:

Correct AnswerverifiedShow Answer

The Campus Crustacean Company receives $2 per box for its crawfish and is selling 1600 boxes to maximize its profits.What is the per-unit profit on a box of crawfish at the profit-maximizing level of output if the variable cost is $1 per box and fixed costs are $1200?

Correct AnswerverifiedShow Answer

If MR > MC for a competitive firm,it should raise its price and increase its level of output.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified