ECO 165 - Exam 2

A purely competitive seller is: both a "price maker" and a "price taker." neither a "price maker" nor a "price taker." a "price taker." a "price maker."

a "price taker"

A perfectly elastic demand curve implies that the firm: must lower price to sell more output. can sell as much output as it chooses at the existing price. realizes an increase in total revenue which is less than product price when it sells an extra unit. is selling a differentiated (heterogeneous) product.

can sell as much output as it chooses at the existing price.

For a purely competitive seller, price equals: average revenue. marginal revenue. total revenue divided by output. all of these.

all of these

Marginal revenue is the: change in product price associated with the sale of one more unit of output. change in average revenue associated with the sale of one more unit of output. difference between product price and average total cost. change in total revenue associated with the sale of one more unit of output.

change in total revenue associated with the sale of one more unit of output.

The demand curve in a purely competitive industry is _____, while the demand curve to a single firm in that industry is _____. perfectly inelastic, perfectly elastic downsloping, perfectly elastic downsloping, perfectly inelastic perfectly elastic, downsloping

downsloping, perfectly elastic

Price is constant or given to the individual firm selling in a purely competitive market because: the firm's demand curve is downsloping. of product differentiation reinforced by extensive advertising. each seller supplies a negligible fraction of total supply. there are no good substitutes for its product.

each seller supplies a negligible fraction of total supply.

In the short run the individual competitive firm's supply curve is that segment of the: average variable cost curve lying below the marginal cost curve. marginal cost curve lying above the average variable cost curve. marginal revenue curve lying below the demand curve. marginal cost curve lying between the average total cost and average variable cost curves.

marginal cost curve lying above the average variable cost curve.

A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating: price and average total cost. price and average fixed cost. marginal revenue and marginal cost. price and marginal revenue.

marginal revenue and marginal cost.

The demand schedule or curve confronted by the individual purely competitive firm is: relatively elastic, that is, the elasticity coefficient is greater than unity. perfectly elastic. relatively inelastic, that is, the elasticity coefficient is less than unity. perfectly inelastic.

perfectly elastic.

The MR = MC rule applies: to firms in all types of industries. only when the firm is a "price taker." only to monopolies. only to purely competitive firms.

to firms in all types of industries.

Firms seek to maximize: per unit profit. total revenue. total profit. market share.

total profit

Which of the following statements applies to a purely competitive producer? It will not advertise its product. In long-run equilibrium it will earn an economic profit. Its product will have a brand name. Its product is slightly different from those of its competitors.

It will not advertise its product

In the short run, a purely competitive firm will earn a normal profit when: P = AVC. P > MC. that firm's MR = market equilibrium price. P = ATC.

P = ATC

In the short run a purely competitive firm will always make an economic profit if: P = ATC. P > AVC. P = MC. P > ATC.

P > ATC

Which of the following is characteristic of a purely competitive seller's demand curve? Price and marginal revenue are equal at all levels of output. Average revenue is less than price. Its elasticity coefficient is 1 at all levels of output. It is the same as the market demand curve.

Price and marginal revenue are equal at all levels of output