ECON CH9 HW
Which of the following industries most closely approximates pure competition? A. agriculture B. farm implements C. clothing D. steel
A
Which of the following is not a characteristic of pure competition? A. price strategies by firms B. a standardized product C. no barriers to entry D. a larger number of sellers
A
Which of the following statements is correct? A. Economic profits induce firms to enter an industry; losses encourage firms to leave. B. Economic profits induce firms to leave an industry; profits encourage firms to leave. C. Economic profits and losses have no significant impact on the growth or decline of an industry. D. Normal profits will cause an industry to expand.
A
Which of the following statements is correct? A. The demand curve for a purely competitive firm is perfectly elastic, but the demand curve for a purely competitive industry is downsloping. B. The demand curve for a purely competitive firm is downsloping, but the demand curve for a purely competitive industry is perfectly elastic. C. The demand curves are downsloping for both a purely competitive firm and a purely competitive industry. D. The demand curves are perfectly elastic for both a purely competitive firm and a purely competitive industry.
A
Which of the following will not hold true for a competitive firm in long-run equilibrium? A. P equals AFC B. P equals minimum ATC C. MC equals minimum ATC D. P equals MC
A
A competitive firm will maximize profits at that output at which: A. total revenue exceeds total cost by the greatest amount. B. total revenue and total cost are equal. C. price exceeds average total cost by the largest amount. D. the difference between marginal revenue and price is at a maximum.
A
A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its: A. total variable costs. B. total costs. C. total fixed costs. D. marginal costs.
A
An industry comprised of 40 firms, none of which has more than 3 percent of the total market for a differentiated product is an example of: A. monopolistic competition. B. oligopoly. C. pure monopoly. D. pure competition.
A
In which of the following industry structures is the entry of new firms the most difficult? A. pure monopoly B. oligopoly C. monopolistic competition D. pure competition
A
Suppose a purely competitive, increasing-cost industry is in long-run equilibrium. Now assume that a decrease in consumer demand occurs. After all resulting adjustments have been completed, the new equilibrium price: A. and industry output will be less than the initial price and output. B. will be greater than the initial price, but the new industry output will be less than the original output. C. will be less than the initial price, but the new industry output will be greater than the original output. D. and industry output will be greater than the initial price and output.
A
A decreasing-cost industry is one in which: A. contraction of the industry will decrease unit costs. B. input prices fall or technology improves as the industry expands. C. the long-run supply curve is perfectly elastic. D. the long-run supply curve is upsloping.
B
A perfectly elastic demand curve implies that the firm: A. must lower price to sell more output. B. can sell as much output as it chooses at the existing price. C. realizes an increase in total revenue which is less than product price when it sells an extra unit. D. is selling a differentiated (heterogeneous) product.
B
A purely competitive firm's short-run supply curve is: A. perfectly elastic at the minimum average total cost. B. upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve. C. upsloping and equal to the portion of the marginal cost curve that lies above the average total cost curve. D. upsloping only when the industry has constant costs.
B
A purely competitive firm: A. must earn a normal profit in the short run. B. cannot earn economic profit in the long run. C. may realize either economic profit or losses in the long run. D. cannot earn economic profit in the short run.
B
An increasing-cost industry is associated with: A. a perfectly elastic long-run supply curve. B. an upsloping long-run supply curve. C. a perfectly inelastic long-run supply curve. D. an upsloping long-run demand curve.
B
An industry comprised of four firms, each with about 25 percent of the total market for a product is an example of: A. monopolistic competition. B. oligopoly. C. pure monopoly. D. pure competition.
B
Assume that society places a higher value on the last unit of X produced than the value of the resources used to produce that unit. With no spillovers, this information means that: A. total cost is greater than total revenue. B. price is greater than marginal cost. C. marginal cost is greater than price. D. resources are being overallocated to X.
B
In the short run a purely competitive firm that seeks to maximize profit will produce: A. where the demand and the ATC curves intersect. B. where total revenue exceeds total cost by the maximum amount. C. that output where economic profits are zero. D. at any point where the total revenue and total cost curves intersect.
B
In which of the following market structures is there clear-cut mutual interdependence with respect to price-output policies? A. pure monopoly B. oligopoly C. monopolistic competition D. pure competition
B
Question 29 of 50 In the short run a purely competitive seller will shut down if: A. it cannot produce at an economic profit. B. price is less than average variable cost at all outputs. C. price is less than average fixed cost at all outputs. D. there is no point at which marginal revenue and marginal cost are equal.
B
The demand schedule or curve confronted by the individual purely competitive firm is: A. relatively elastic, that is, the elasticity coefficient is greater than unity. B. perfectly elastic. C. relatively inelastic, that is, the elasticity coefficient is less than unity. D. perfectly inelastic.
B
Under pure competition in the long run: A. neither allocative efficiency nor productive efficiency are achieved. B. both allocative efficiency and productive efficiency are achieved. C. productive efficiency is achieved, but allocative efficiency is not. D. allocative efficiency is achieved, but productive efficiency is not.
B
When a firm is maximizing profit it will necessarily be: A. maximizing profit per unit of output. B. maximizing the difference between total revenue and total cost. C. minimizing total cost. D. maximizing total revenue.
B
When a purely competitive firm is in long-run equilibrium: A. marginal revenue exceeds marginal cost. B. price equals marginal cost. C. total revenue exceeds total cost. D. minimum average total cost is less than the product price.
B
A constant-cost industry is one in which: A. resource prices fall as output is increased. B. resource prices rise as output is increased. C. resource prices remain unchanged as output is increased. D. small and large levels of output entail the same total costs.
C
A one-firm industry is known as: A. monopolistic competition. B. oligopoly. C. pure monopoly. D. pure competition.
C
A purely competitive seller is: A. both a "price maker" and a "price taker." B. neither a "price maker" nor a "price taker." C. a "price taker." D. a "price maker."
C
If a purely competitive firm shuts down in the short run: A. its loss will be zero. B. it will realize a loss equal to its total variable costs. C. it will realize a loss equal to its total fixed costs. D. it will realize a loss equal to its total costs.
C
In a purely competitive industry: A. there will be no economic profits in either the short run or the long run. B. economic profits may persist in the long run if consumer demand is strong and stable. C. there may be economic profits in the short run, but not in the long run. D. there may be economic profits in the long run, but not in the short run.
C
Marginal revenue for a purely competitive firm: A. is greater than price. B. is less than price. C. is equal to price. D. may be either greater or less than price.
C
Price is constant or given to the individual firm selling in a purely competitive market because: A. the firm's demand curve is downsloping. B. of product differentiation reinforced by extensive advertising. C. each seller supplies a negligible fraction of total supply. D. there are no good substitutes for its product.
C
Question 30 of 50 The fact that a purely competitive firm's total revenue curve is linear and upsloping to the right implies that: 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.
C
Suppose that at 500 units of output marginal revenue is equal to marginal cost. The firm is selling its output at $5 per unit and average total cost at 500 units of output is $6. On the basis of this information we: A. can say that the firm should close down in the short run. B. can say that the firm can produce and realize an economic profit in the short run. C. cannot determine whether the firm should produce or shut down in the short run. D. can assume the firm is not using the most efficient technology.
C
The vertical distance between the horizontal axis and any point on a pure competitor's demand curve measures: A. total revenue. B. total cost. C. product price, marginal revenue, and average revenue. D. the quantity demanded.
C
The MR
MC rule applies: A. in the short run, but not in the long run. B. in the long run, but not in the short run. C. in both the short run and the long run. D. only to a purely competitive firm. =C
Which of the following is true concerning purely competitive industries? A. There will be economic losses in the long run because of cut-throat competition. B. Economic profits will persist in the long run if consumer demand is strong and stable. C. In the short run, firms may incur economic losses or earn economic profits, but in the long run they earn normal profits. D. There are economic profits in the long run, but not in the short run.
C
A firm reaches a break-even point (normal profit position) where: 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.
D
An industry comprised of a very large number of sellers producing a standardized product is known as: A. monopolistic competition. B. oligopoly. C. pure monopoly. D. pure competition.
D
Assume a purely competitive, increasing-cost industry is in long-run equilibrium. If a decline in demand occurs, firms will: A. leave the industry, price will decrease, and quantity produced will increase. B. enter the industry and price and quantity will both increase. C. leave the industry and price and output will both increase. D. leave the industry and price and output will both decline.
D
Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation: A. should close down in the short run. B. is maximizing its profits. C. is realizing a loss of $60. D. is realizing an economic profit of $40.
D
For a purely competitive firm total revenue: A. is price times quantity sold. B. increases by a constant absolute amount as output expands. C. graphs as a straight upsloping line from the origin. D. has all of these characteristics.
D
For a purely competitive seller, price equals: A. average revenue. B. marginal revenue. C. total revenue divided by output. D. all of these.
D
If a purely competitive firm is producing at some level less than the profit-maximizing output, then: 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.
D
Marginal revenue is the: A. change in product price associated with the sale of one more unit of output. B. change in average revenue associated with the sale of one more unit of output. C. difference between product price and average total cost. D. change in total revenue associated with the sale of one more unit of output.
D
Question 28 of 50 Assume that a decline in consumer demand occurs in a purely competitive industry which is initially in long-run equilibrium. We can: A. predict that the new price will be greater than the original price. B. predict that the new price will be less than the original price. C. predict that the new price will be the same as the original price. D. not compare the original and the new price without knowing about cost conditions in the industry.
D
The short-run supply curve of a purely competitive producer is based primarily on its: A. AVC curve. B. ATC curve. C. AFC curve. D. MC curve.
D
When compact disc (CD) players first came on the market, they sold for over $1,000. Now they cost only $100. These facts imply that: A. the CD industry was once competitive, but is now monopolistic. B. fewer firms produce CD players than was the case five or ten years ago. C. the demand curve for CD players has shifted leftward. D. the CD player industry is a decreasing-cost industry.
D
If a purely competitive firm is producing at the MR
MC output level and earning an economic profit, then: A. the selling price for this firm is above the market equilibrium price. B. new firms will enter this market. C. some existing firms in this market will leave. D. there must be price fixing by the industry's firms.=B
A firm finds that at its MR
MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should: A. shut down in the short run. B. produce because the resulting loss is less than its TFC. C. produce because it will realize an economic profit. D. liquidate its assets and go out of business.=B
The MR
MC rule can be restated for a purely competitive seller as P = MC because: A. each additional unit of output adds exactly its price to total revenue. B. the firm's average revenue curve is downsloping. C. the market demand curve is downsloping. D. the firm's marginal revenue and total revenue curves will coincide.=A
