Microeconomic study chapter 7
In long-run equilibrium under conditions of pure competition and productive efficiency, all firms produce at minimum: 1) average total cost. 2) marginal cost. 3) total cost. 4) average variable cost.
1) average total cost.
If the demand curve facing a firm is perfectly elastic, then: 1) its marginal revenue will equal price 2) its marginal revenue will decrease at an increasing rate 3) its marginal revenue schedule decreases twice as fast as the demand curve 4) it can increase its total revenue by lowering the price of its product.
1) its marginal revenue will equal price
When a competitive firm triples the amount of output it sells, 1) its total revenue triples 2) its variable cost triples 3) its fixed cost triples 4) its profit triples
1) its total revenue triples
When the price is equal to P2, a profit-maximizing perfectly competitive firm's profit will be __________. 1) zero 2) positive 3) negative 4) difficult to tell from the graph
1) zero
The price equals marginal cost rule for profit maximization is a specific example of which of the following principles? 1) Scarcity 2) Cost-benefit 3) Equilibrium 4) Efficiency
2) Cost-benefit
Of the following characteristics, which one applies exclusively to a perfectly competitive firm? 1) It seeks to minimize costs 2) It can sell all it wants to at the prevailing market price 3) It has a narrow range of prices it can change for its output 4) The firm's only decision is how much price to change
2) It can sell all it wants to at the prevailing market price
Refer to the graph for a firm in pure competition. Line B represents: 1) total revenue. 2) marginal revenue. 3) average total cost. 4) average fixed cost.
2) marginal revenue
If firms are losing money in a purely competitive industry, then in the long run this situation will shift the industry: 1) demand curve to the right, and the market price will increase. 2) supply curve to the left, and the market price will increase. 3) supply curve to the right, and the market price will decrease. 4) demand curve to the left, and the market price will decrease.
2) supply curve to the left, and the market price will increase.
The shutdown condition for a firm is where 1) total revenues are less than the total cost of fixed and variable factors of production. 2) total revenues are less than the cost of variable factors of production. 3) total revenues are less than the cost of fixed factors of production. 4) profits are negative.
2) total revenues are less than the cost of variable factors of production.
The table below shows cost data for a firm that is selling in a purely competitive market. Refer to the above cost chart. If the marginal revenue is $6, what output should the firm produce? 1) 10 2) 12 3) 14 4) 20
3) 14
The table below shows cost data for a firm that is selling in a purely competitive market. Refer to the table. If the market price for the firm's product is $180, the competitive firm will produce: 1) 6 units at an economic profit of $100. 2) 6 units at an economic profit of $120. 3) 7 units at an economic profit of $238. 4) 7 units at an economic profit of $278.
3) 7 units at an economic profit of $238.
In which two market models would advertising be used most often? 1) Pure competition and monopolistic competition 2) Pure competition and pure monopoly 3) Monopolistic competition and oligopoly 4) Pure Monopoly and oligopoly
3) Monopolistic competition and oligopoliy
There would be a unique product for which there are few close substitutes under which market model? 1) Monopolistic competition 2) Pure competition 3) Pure monopoly 4) Oligopoly
3) Pure monopoly
In pure competition, the demand for the product of a single firm is perfectly: 1) elastic because the firm produces a unique product. 2) inelastic because the firm produces a unique product. 3) elastic because many other firms produce the same product. 4) inelastic because many other firms produce the same product.
3) elastic because many other firms produce the same product.
A purely competitive firm's output is currently such that its marginal cost is $4 and marginal revenue is $5. Assuming profit maximization, the firm should: 1) cut its price and raise its output. 2) raise its price and cut output. 3) leave price unchanged and raise output. 4) leave price unchanged and cut output.
3) leave price unchanged and raise output.
Allocative efficiency occurs when the: 1) minimum of average total cost equals average revenue. 2) minimum of average total cost equals marginal revenue. 3) marginal cost equals the marginal benefit to society. 4) marginal revenue equals marginal benefit to society.
3) marginal cost equals the marginal benefit to society.
The short-run supply curve for a competitive firm is the: 1) entire MC curve. 2) segment of the MC curve lying below the AVC curve. 3) segment of the MC curve lying above the AVC curve. 4) segment of the AVC curve lying to the right of the MC curve.
3) segment of the MC curve lying above the AVC curve.
The _____ o a perfectly competitive firm coincides with the portion of its marginal cost curve which lies above the AVC curve. 1) production curve 2) Total cost curve 3) supply curve 4) diminishing marginal returns curve
3) supply curve
In the long run, a profit-maximizing firm will choose to exit a perfectly competitive market when 1) average fixed cost is falling. 2) marginal cost exceed marginal revenue at the current level of production. 3) total revenue is less than total cost. 4) price drops below the minimum point of average variable cost curve.
3) total revenue is less than total cost.
Suppose a perfectly competitive firm has marginal costs of $8 when producing 550 units of output. In order for this to be a point of profit maximization, 1) total revenues must exceed total costs. 2) price must be less than $8. 3) total revenues must be equal to $4,400. 4) total revenues must exceed $4,400.
3) total revenues must be equal to $4,400.
The steel and automobile industries would be examples of which market model? 1) Monopolistic competition 2) Pure competition 3) Pure monopoly 4) Oligopoly
4) Oligopoly
In a typical graph for a purely competitive firm, the intersection of the total cost and total revenue curves would be: 1) a point of maximum economic profit. 2) a point of minimum economic loss. 3) a point where MR = MC. 4) a break-even point.
4) a break-even point.
A profit-maximizing firm in the short run will expand output: 1) until marginal cost begins to rise. 2) until total revenue equals total cost. 3) until marginal cost equals average variable cost. 4) as long as marginal revenue is greater than marginal cost.
4) as long as marginal revenue is greater than marginal cost.
One explanation for the existence of an increasing-cost industry is: 1) increasing marginal returns to labor occur. 2) firms produce beyond the point of minimum long-run average total costs. 3) perfectly elastic long-run supply schedules are observed in the industry. 4) as the industry expands, input prices are bid up for some factor of production.
4) as the industry expands, input prices are bid up for some factor of production.
The graph shows the cost functions of Moe's mushroom gathering business, which is perfectly competitive. Moe's supply curve is: 1) curve C to the right of curve A. 2) curve B to the right of curve A. 3) curve A above curve B. 4) curve A above curve C.
4) curve A above curve C.
If there is allocative efficiency in a purely competitive market for a product, the maximum price consumers are willing to pay is: 1) less than marginal benefit. 2) greater than marginal cost. 3) equal to the amount of efficiency or deadweight losses. 4) equal to the minimum price producers are willing to accept.
4) equal to the minimum price producers are willing to accept.
If a competitive firm, is currently producing a level of output at school profit is not maximized, then it must be true that 1) marginal revenue exceeds marginal cost 2) total cost exceeds total revenue 3) variable cost exceeds total revenue 4) non of the above are necessarily correct
4) non of the above are necessarily correct