Question 1

In maximizing profit, a firm will always produce that output where total revenues are at a maximum.

Accepted Answer

A) True 
 B)False

Question 2

The Campus Crustacean Company receives $2 per box for its crawfish and is selling 1,600 boxes to maximize its profits. What is the profit per box of crawfish at this equilibrium level of output if the average variable cost is $1 per box and total fixed costs are $1,200?

Accepted Answer

A)   $0.25
B)   $0.50
C)   $1.00
D)   $1.25E) A) and B)
F) A) and C)

Question 3

Given the accompanying table, what is the short-run profit-maximizing level of output for the firm?   Output  Total Reverue  Total Cost 1$422833126416952014\begin{array} { | c | c | c| } \hline 	ext { Output } & 	ext { Total Reverue } & 	ext { Total Cost } \\hline 1 & \$ 4 & 2 \\hline 2 & 8 & 3 \\hline 3 & 12 & 6 \\hline 4 & 16 & 9 \\hline 5 & 20 & 14 \\hline\end{array} Output 12345​ Total Reverue $48121620​ Total Cost 236914​​

Accepted Answer

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

Question 4

In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if

Accepted Answer

A)   marginal cost is greater than average revenue.
B)   average cost is greater than average revenue.
C)   average fixed cost is greater than average revenue.
D)   total revenue is less than total variable cost.E) C) and D)
F) All of the above

Question 5

If a purely competitive firm is producing at some output 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) All of the above
F) A) and B)

Question 6

Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound of pork would be

Accepted Answer

A)   $36.
B)   $3.
C)   12 lb.
D)   1 lb.E) B) and C)
F) A) and D)

Question 7

If MR > MC for a competitive firm, it should reduce its level of output in order to make MR equal to MC.

Accepted Answer

A) True 
 B)False

Question 8

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 C)
F) All of the above

Question 9

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 that elicits customer loyalty.
D)   Its product is slightly different from those of its competitors.E) B) and C)
F) A) and D)

Question 10

A firm reaches a break-even point (normal profit position)  where

Accepted Answer

A)   marginal revenue cuts the horizontal axis.
B)   marginal cost intersects the average variable cost curve.
C)   total revenue equals total variable cost.
D)   total revenue and total cost are equal.E) All of the above
F) B) and C)

Question 11

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

Accepted Answer

A)   its output is above the break-even point.
B)   its revenues are less than its fixed costs.
C)   it can cover its variable costs and some of its fixed costs.
D)   it has some fixed costs that cannot be brought down to zero.E) All of the above
F) C) and D)

Question 12

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

Accepted Answer

A)   pricing strategies by firms
B)   a standardized product
C)   no barriers to entry
D)   a larger number of sellersE) A) and B)
F) B) and C)

Question 13

The prices of raw materials increase in a purely competitive industry. This change will result in a(n)

Accepted Answer

A)   decrease (downward shift)  in the average total cost curve for firms in the industry.
B)   decrease (downward shift)  in the marginal revenue curve for firms in the industry.
C)   increase (upward shift)  in the marginal cost curve for firms in the industry.
D)   increase (rightward shift)  in the short-run supply curve for firms in the industry.E) None of the above
F) A) and B)

Question 14

Which idea is inconsistent with pure competition?

Accepted Answer

A)   price-taking behavior
B)   product differentiation
C)   freedom of entry or exit for firms
D)   a large number of buyers and sellersE) A) and B)
F) All of the above

Question 15

If there are many firms in an industry, then it must be a purely competitive market.

Accepted Answer

A) True 
 B)False

Question 16

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) B) and D)
F) B) and C)

Question 17

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) B) and D)
F) None of the above

Question 18

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 19

Which of the following is not a valid generalization concerning the relationship between price and costs for a purely competitive seller in the short run?

Accepted Answer

A)   Price must be at least equal to average total cost.
B)   Price times quantity produced must be equal to or greater than total variable cost for some level of output or the firm will close down in the short run.
C)   Price may be equal to, greater than, or less than average total cost.
D)   Price must be equal to or greater than minimum average variable cost for the firm to continue producing.E) B) and D)
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 competitionE) B) and D)
F) B) and C)

Exam 10: Pure Competition in the Short Run

A firm reaches a break-even point (normal profit position) where

Correct Answer
verified

If there are many firms in an industry, then it must be a purely competitive market.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Which of the following is not a valid generalization concerning the relationship between price and costs for a purely competitive seller in the short run?

Correct Answer
verified

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

Correct Answer
verified

In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if

Correct Answer
verified

Which idea is inconsistent with pure competition?

Correct Answer
verified

Correct Answer
verified

The Campus Crustacean Company receives $2 per box for its crawfish and is selling 1,600 boxes to maximize its profits. What is the profit per box of crawfish at this equilibrium level of output if the average variable cost is $1 per box and total fixed costs are $1,200?

Correct Answer
verified

Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound of pork would be

Correct Answer
verified

The prices of raw materials increase in a purely competitive industry. This change will result in a(n)

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

In maximizing profit, a firm will always produce that output where total revenues are at a maximum.

Correct Answer
verified

If MR > MC for a competitive firm, it should reduce its level of output in order to make MR equal to MC.

Correct Answer
verified

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 Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Exam 10: Pure Competition in the Short Run

A firm reaches a break-even point (normal profit position) where

Correct AnswerverifiedShow Answer

If there are many firms in an industry, then it must be a purely competitive market.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is not a valid generalization concerning the relationship between price and costs for a purely competitive seller in the short run?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if

Correct AnswerverifiedShow Answer

Which idea is inconsistent with pure competition?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The Campus Crustacean Company receives $2 per box for its crawfish and is selling 1,600 boxes to maximize its profits. What is the profit per box of crawfish at this equilibrium level of output if the average variable cost is $1 per box and total fixed costs are $1,200?

Correct AnswerverifiedShow Answer

Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound of pork would be

Correct AnswerverifiedShow Answer

The prices of raw materials increase in a purely competitive industry. This change will result in a(n)

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

Correct AnswerverifiedShow Answer

In maximizing profit, a firm will always produce that output where total revenues are at a maximum.

Correct AnswerverifiedShow Answer

If MR > MC for a competitive firm, it should reduce its level of output in order to make MR equal to MC.

Correct AnswerverifiedShow Answer

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

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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