Chap 10 part 1

Refer to the above information. For a purely competitive firm, marginal revenue graphs as a: A. straight, upsloping line. B. straight line, parallel to the vertical axis. C. straight line, parallel to the horizontal axis. D. straight, downsloping line.

C. straight line, parallel to the horizontal axis.

Firms seek to maximize: A. per unit profit. B. total revenue. C. total profit. D. market share.

C. total profit.

if a firm increases all of its input by 10% and output increases by 15%

encounters economies of scale

long-run competitive equilibrium

results in zero economic profits.

price is less than avc

shutdown because you are not able to cover fixed costs

In the short run the Sure-Screen T-Shirt Company is producing 500 units of output. Its average variable costs are $2.00 and its average fixed costs are $.50. The firm's total costs:

2.5 x500 TC=1250

Which of the following industries most closely approximates pure competition? A. agriculture B. farm implements C. clothing D. steel

A. agriculture

Economists would describe the U.S. automobile industry as: A. purely competitive. B. an oligopoly. C. monopolistically competitive. D. a pure monopoly.

B. an oligopoly.

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

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. is realizing an economic profit of $40. TR: 20X10=200 TC: 160 20X3=60+100

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. pure competition.

the difference between short run and long run is that

LR resources are all variable SR has one variable fixed

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

MC curve lying above AVC curve

Assume a firm closes in the short run and produces no output.

TFC and TC are positive, TVC=0 TR=0 TC=TFC

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:

TR: 20 X 10=200 TC: 100 +30X2=160 40 economic profit

variable cost in short run

baking supplies

In comparing the changes in TVC and TC associated with an additional unit of output, we find that:

changes in TC and TVC are equal

Productive efficiency refers to:

the use of the least-cost method of production.

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

A. It will not advertise its product.

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

A. Price and marginal revenue are equal at all levels of output.

Which of the following is not a valid generalization concerning the relationship between price and costs for a purely competitive seller in the short run? A. Price must be at least equal to average total cost. B. Price times quantity produced must be equal to or greater than total variable cost for some level of output or the firm will close down in the short run. C. Price may be equal to, greater than, or less than average total cost. D. Price must be equal to or greater than minimum average variable cost for the firm to continue producing.

A. Price must be at least equal to average total cost.

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. The demand curve for a purely competitive firm is perfectly elastic, but the demand curve

Which of the following is not a basic characteristic of pure competition? A. considerable nonprice competition B. no barriers to the entry or exit of firms C. a standardized or homogeneous product D. a large number of buyers and sellers

A. considerable nonprice competition

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. each additional unit of output adds exactly its price to total revenue.

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. monopolistic competition.

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. price strategies by firms

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. pure monopoly

In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. Refer to the above information. For a purely competitive firm, total revenue graphs as a: A. straight, upsloping line. B. straight line, parallel to the vertical axis. C. straight line, parallel to the horizontal axis. D. straight, downsloping line.

A. straight, upsloping line.

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

A. to firms in all types of industries.

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. total revenue exceeds total cost by the greatest amount.

Assume that in the short run a firm is producing 100 units of output, has average total costs of $200, and average variable costs of $150. The firm's total fixed costs are:

ATC=200 AVC=150 50X100 AFC=5000

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

B. downsloping, perfectly elastic

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

B. marginal cost curve lying above the average variable cost curve.

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. maximizing the difference between total revenue and total cost.

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. oligopoly

An industry comprised of a small number of firms, each of which considers the potential reactions of its rivals in making price-output decisions is called: A. monopolistic competition. B. oligopoly. C. pure monopoly. D. pure competition

B. oligopoly.

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. oligopoly.

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. perfectly elastic.

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. upsloping and equal to the portion of the marginal cost curve that lies above the average

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. where total revenue exceeds total cost by the maximum amount.

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue: A. may be either greater or less than $5. B. will also be $5. C. will be less than $5. D. will be greater than $5.

B. will also be $5.

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. a "price taker."

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. each seller supplies a negligible fraction of total supply.

The marginal revenue curve of a purely competitive firm: A. lies below the firm's demand curve. B. is downsloping because price must be reduced to sell more output. C. is horizontal at the market price. D. has all of these characteristics

C. is horizontal at the market price.

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

C. marginal revenue and marginal cost.

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. product price is constant at all levels of output.

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

D. all of these.

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

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. has all of these characteristics.

In answering the question, assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. Refer to the above information. For a purely competitive firm: A. marginal revenue will graph as an upsloping line. B. the demand curve will lie above the marginal revenue curve. C. the marginal revenue curve will lie above the demand curve. D. the demand and marginal revenue curves will coincide.

D. the demand and marginal revenue curves will coincide.

Economists use the term imperfect competition to describe: A. all industries which produce standardized products. B. any industry in which there is no nonprice competition. C. a pure monopoly only. D. those markets which are not purely competitive.

D. those markets which are not purely competitive.

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. total revenue and total cost are equal.

when TP is increasing at an increasing rate

MP is positive and increasing

equate profit max or loss

MR=MC

for most producing firms:

average total costs decline as output is carried to a certain level, and then begin to rise.

economic profits are calculated by subtracting

explicit and implicit costs from total revenue.

which of the following is most likely an implicit cost?

forgone rent from building owned and used by company

as output increases, total variable costs

increase at decreasing rate than increasing at an increasing rate

if a purely competitive constant cost industry is realizing economic profits, industry supply

increases, output increases, price and profits fall

If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then:

new firms can join

when MP is rising MC is falling

when MP is falling MC rises