Micro Econ Ch. 8
A purely competitive firm does not try to sell more of its product by lowering its price below the market price because: It can sell all it wants to at the market price Its competitors would not permit it This would be considered unethical price chiseling Its demand curve is inelastic, so total revenue will decline
A
Creative destruction is most often associated with: Technological advance Government spending Private consumption International trade
A
If a purely competitive firm is facing a situation where the price of its product is lower than the average cost, then all of the following applies, except: Other firms will want to enter the industry because of the positive economic profits The firm may earn economic profits in the long run if it expands its plant in order to exploit economies of scale. The firm may be earning some accounting profits, but less than what it could earn elsewhere The firm is suffering losses, and if things are not expected to improve, the firm will leave the industry
A
If the demand curve faced by an individual firm is downward-sloping, the firm cannot be a: A purely competitive firm A monopoly firm An oligopolistic firm A monopolistically competitive firm
A
Resources are efficiently allocated when production occurs at that output level where price: Equals marginal cost Equals marginal revenue Is equal to average total cost Is greatest over average cost
A
Which of the following is a reason why individual firms under pure competition would not find it gainful to advertise their product? Firms produce a homogeneous product The quantity of the product demanded is very large Firms do not make long-run profits The market demand curve cannot be increased
A
A patent gives a firm the power to charge a price that: Is below equilibrium Is higher than marginal cost Increases the consumer surplus Results in overproduction of a product
B
A purely competitive firm currently producing 20 units of output earns marginal revenues of $12 from each extra unit of output it sells. If it sells 30 units, then its total revenues would be: $240 $360 $120 Indeterminate based on the given information
B
In pure competition, each extra unit of output that a firm sells will yield a marginal revenue that is: Greater than the price Equal to the price Equal to the average cost Less than the price
B
In pure competition, if the market price of the product is initially higher than the minimum average cost of the firms, then: Other firms will enter the industry and the industry supply will decrease Other firms will enter the industry and the industry supply will increase Some firms will exit the industry and the industry supply will decrease Some firms will exit the industry and the industry supply will increase
B
In a purely competitive industry, each firm: Determines its own price Engages in various forms of nonprice competition Can easily enter or exit the industry Produces a differentiated product
C
The market for agricultural products such as wheat or corn would best be described by which market model? Pure monopoly Oligopoly Pure competition Monopolistic competition
C
The representative firm in a purely competitive industry: Will always earn an economic profit in the long run Will always earn a profit in the short run Will earn zero economic profit in the long run May earn either an economic profit or a loss in the long run
C
In which market model are the conditions of entry into the market easiest? Oligopoly Pure monopoly Monopolistic competition Pure competition
D
Which would indicate that a firm is operating under conditions of pure competition and is being productively efficient? Its marginal revenue is less than average revenue Marginal cost equals average variable cost It is making economic profits in the long run It produces at the minimum average total cost
D
