Question 1

If a purely competitive firm is producing a level of output greater than its profit-maximizing output,then marginal revenue is greater than marginal cost.

Accepted Answer

A) True 
 B)False

Question 2

A firm sells a product in a purely competitive market.The marginal cost of the product at the current output is $3.00 and the market price is $2.50.What should the firm do?

Accepted Answer

A)   Shut down if the minimum possible average variable cost is $2.00.
B)   Increase output if the minimum possible average variable cost is $2.00.
C)   Increase output if the minimum possible average variable cost is $2.50.
D)   Decrease output if the minimum possible average variable cost is $2.00.

Question 3

In the short run the individual competitive firm's supply curve is the 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.

Question 4

The individual firm's short-run supply curve is the part of its:

Accepted Answer

A)   average total cost curve that is upsloping.
B)   average variable cost curve that is upsloping.
C)   marginal cost curve lying above its average variable cost curve.
D)   marginal cost curve lying above its average total cost curve.

Question 5

Refer to the above graph for a firm in pure competition.Line A represents:

Accepted Answer

A)   total revenue.
B)   average revenue.
C)   average total cost.
D)   average fixed cost.

Question 6

Refer to the above graphs.Which statement is true?

Accepted Answer

A)   The firm will increase production.
B)   The firm is experiencing economic losses.
C)   The firm is breaking even.
D)   The firm is making economic profit.

Question 7

Refer to the above diagram.All data are for the short run.The firm represented in this diagram is selling under conditions of:

Accepted Answer

A)   pure monopoly.
B)   pure competition.
C)   monopolistic competition.
D)   oligopoly.

Question 8

Which is true of a purely competitive firm in long-run equilibrium?

Accepted Answer

A)   Average fixed cost equals price.
B)   Marginal cost equals marginal product.
C)   Price equals marginal cost.
D)   Average variable cost equals marginal cost.

Question 9

In the short run,a competitive firm will not produce unless price is equal to average total costs.

Accepted Answer

A) True 
 B)False

Question 10

Consider the purely competitive firm pictured above.The firm is earning:

Accepted Answer

A)   normal profits since its price is above AVC.
B)   economic profits since its price is above AVC.
C)   normal profits since its price just covers ATC.
D)   losses since it is operating at the shutdown point.

Question 11

Which is a feature of a purely competitive market?

Accepted Answer

A)   There are price differences between firms producing the same product.
B)   There are significant barriers to entry into the industry.
C)   The industry's demand curve is perfectly elastic.
D)   Products are standardized or homogeneous.

Question 12

When a purely competitive industry is in long-run equilibrium,which statement is true?

Accepted Answer

A)   Average total cost is less than marginal cost.
B)   Price and average total cost are equal.
C)   Marginal cost is at its maximum level.
D)   Marginal revenue is greater than price.

Question 13

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 the firm can save by continuing to produce in the short run rather than closing down immediately?

Accepted Answer

A)   0beg
B)   0cdg
C)   acdf
D)   abef

Question 14

1 B)  P2 C)  P3 D)  P4" class="answers-bank-image d-inline" rel="preload" > Refer to the above graph.It shows short-run cost curves for a competitive firm.At what price would the firm break even?

Accepted Answer

A)   P1
B)   P2
C)   P3
D)   P4

Question 15

The break-even point means that the firm is realizing economic profits.

Accepted Answer

A) True 
 B)False

Exam 7: Pure Competition

A firm sells a product in a purely competitive market.The marginal cost of the product at the current output is $3.00 and the market price is $2.50.What should the firm do?

Correct Answer
verified

Consider the purely competitive firm pictured above.The firm is earning:

Correct Answer
verified

Refer to the above graph.It shows short-run cost curves for a competitive firm.At what price would the firm break even?

Correct Answer
verified

The break-even point means that the firm is realizing economic profits.

Correct Answer
verified

Refer to the above graphs.Which statement is true?

Correct Answer
verified

Refer to the above graph for a firm in pure competition.Line A represents:

Correct Answer
verified

When a purely competitive industry is in long-run equilibrium,which statement is true?

Correct Answer
verified

Refer to the above diagram.All data are for the short run.The firm represented in this diagram is selling under conditions of:

Correct Answer
verified

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 the firm can save by continuing to produce in the short run rather than closing down immediately?

Correct Answer
verified

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

Correct Answer
verified

If a purely competitive firm is producing a level of output greater than its profit-maximizing output,then marginal revenue is greater than marginal cost.

Correct Answer
verified

Which is a feature of a purely competitive market?

Correct Answer
verified

In the short run,a competitive firm will not produce unless price is equal to average total costs.

Correct Answer
verified

Which is true of a purely competitive firm in long-run equilibrium?

Correct Answer
verified

The individual firm's short-run supply curve is the part of its:

Correct Answer
verified

Exam 7: Pure Competition

A firm sells a product in a purely competitive market.The marginal cost of the product at the current output is $3.00 and the market price is $2.50.What should the firm do?

Correct AnswerverifiedShow Answer

Consider the purely competitive firm pictured above.The firm is earning:

Correct AnswerverifiedShow Answer

Refer to the above graph.It shows short-run cost curves for a competitive firm.At what price would the firm break even?

Correct AnswerverifiedShow Answer

The break-even point means that the firm is realizing economic profits.

Correct AnswerverifiedShow Answer

Refer to the above graphs.Which statement is true?

Correct AnswerverifiedShow Answer

Refer to the above graph for a firm in pure competition.Line A represents:

Correct AnswerverifiedShow Answer

When a purely competitive industry is in long-run equilibrium,which statement is true?

Correct AnswerverifiedShow Answer

Refer to the above diagram.All data are for the short run.The firm represented in this diagram is selling under conditions of:

Correct AnswerverifiedShow Answer

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 the firm can save by continuing to produce in the short run rather than closing down immediately?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a purely competitive firm is producing a level of output greater than its profit-maximizing output,then marginal revenue is greater than marginal cost.

Correct AnswerverifiedShow Answer

Which is a feature of a purely competitive market?

Correct AnswerverifiedShow Answer

In the short run,a competitive firm will not produce unless price is equal to average total costs.

Correct AnswerverifiedShow Answer

Which is true of a purely competitive firm in long-run equilibrium?

Correct AnswerverifiedShow Answer

The individual firm's short-run supply curve is the part of its:

Correct AnswerverifiedShow Answer

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