MICROECON quiz 4

In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is a. equal to the price. b. greater than the price. c. equal to the average cost. d. less than the price.

a. equal to the price.

Which of the following is true under conditions of pure competition? a. no single firm can influence the market price by changing its output b. there are differentiated products c. the market demand curve is perfectly elastic d. each individual firm has the ability to set its own price

a. no single firm can influence the market price by changing its output

Long-run competitive equilibrium a. results in zero economic profits. b. will never change once it is realized. c. is not economically efficient. d. is realized only in constant-cost industries.

a. results in zero economic profits.

Assume that the market for corn is purely competitive. Currently, firms growing corn are suffering economic losses. In the long run, we can expect a. some firms to exit causing the market price of corn to rise. b. new firms to enter causing the market price of corn to fall. c. some firms to exit causing the market price of corn to fall. d.new firms to enter causing the market price of corn to rise.

a. some firms to exit causing the market price of corn to rise.

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 would be a. $36. b. $3. c. 12 lbs. d. 1 lb.

b. $3

It shows the cost curves for a competitive firm. If the market price of the product is $1.25 per unit, then the firm will produce how many units in the short run? a. 35 b. 20 c. 15 d. 0

b. 20

In a purely competitive industry, each firm a. determines its own price. b. can easily enter or exit the industry c. produces a differentiated product. d. engages in various forms of nonprice competition.

b. can easily enter or exit the industry

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. The market price of the product is $4. To maximize profits, the firm should a. continue production, but produce less than 800 units. b. increase production to more than 800 units. c. shut down. d. continue producing 800 units.

b. increase production to more than 800 units.

Given the data in the table below, what is the short-run profit-maximizing level of output for the firm? a. 2 units b. 3 units c. 4 units d. 5 units

c. 4 units

Which of the following is a reason why individual firms under pure competition would not find it gainful to advertise their product? a. Firms do not make long-run profits. b. The market demand curve cannot be increased. c. Firms produce a homogeneous product. d. The quantity of the product demanded is very large.

c. Firms produce a homogeneous product.

Which is a feature of a purely competitive market? a. the industry's demand curve is perfectly elastic b. significant barriers to entry into the industry c. products are standardized or homogeneous d. price differences between firms producing the same product

c. products are standardized or homogeneous

What is the lowest price at which the firm will start producing output in the short run? a. $1.25 b. $0.90 c. $1.05 d. $0.60

d. $0.60

Assume the price of a product sold by a purely competitive firm is $5. Given the data in the accompanying table, at what output level is total profit highest in the short run? a. 50 b. 20 c. 30 d. 40

d. 40

At the profit-maximizing level of output, the firm earns economic profits given by the area a. ACFH. b. 0AHE. c. BCFG. d. ABGH.

d. ABGH.

A purely competitive seller is a. a "price maker." b. neither a "price maker" nor a "price taker." c. both a "price maker" and a "price taker." d. a "price taker."

d. a "price taker."

A profit-maximizing firm in the short run will expand output a. until marginal cost begins to rise. b. until total revenue equals total cost. c. until marginal cost equals average variable cost. d. as long as marginal revenue is greater than marginal cost.

d. as long as marginal revenue is greater than marginal cost.

A purely competitive firm does not try to sell more of its product by lowering its price below the market price because a. its demand curve is inelastic, so total revenue will decline. b. its competitors would not permit it. c. this would be considered unethical price chiseling. d. it can sell all it wants to at the market price.

d. it can sell all it wants to at the market price.

Assume that the market for soybeans is purely competitive. Currently, firms growing soybeans are experiencing economic profits. In the long run, we can expect a. some firms to exit causing the market price of soybeans to fall. b. some firms to exit causing the market price of soybeans to rise. c. new firms to enter causing the market price of soybeans to rise. d. new firms to enter causing the market price of soybeans to fall.

d. new firms to enter causing the market price of soybeans to fall.

T-Shirt Enterprises is selling in a purely competitive market. It is producing 3,000 units, selling them for $2 each. At this level of output, the average total cost is 2.50 and the average variable cost is $2.20. Based on these data, the firm should a. continue to produce 3,000 units. b. increase output to 3,500 units. c. decrease output to 2,500 units. d. shut down in the short run.

d. shut down in the short run.

In pure competition, if the market price of the product is initially higher than the minimum average total cost of the firms, then a. other firms will enter the industry and the industry supply will increase. b. some firms will exit the industry and the industry supply will decrease. c. other firms will enter the industry and the industry supply will decrease. d. some firms will exit the industry and the industry supply will increase.

d. some firms will exit the industry and the industry supply will increase.

The graphs suggest that in the long run, assuming no changes in the given information, the market a. supply curve will shift to the left. b. demand curve will shift to the right. c. demand curve will shift to the left. d. supply curve will shift to the right.

d. supply curve will shift to the right.

A firm should continue to operate even at a loss in the short run if a. its revenues are less than its fixed costs. b. it has some fixed costs that cannot be brought down to zero. c. its output is above the break-even point. d.it can cover its variable costs and some of its fixed costs.

d.it can cover its variable costs and some of its fixed costs.