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1
Compared to the downward-sloping demand curve for the output of a competitive industry, a single firm operating in that industry faces:
A)a perfectly inelastic demand curve
B)a perfectly elastic demand curve
C)a unit elastic demand curve
D)a downward-sloping marginal revenue curve
2
Which of the following is a characteristic of equilibrium in long-run competitive markets?
A)Consumer surplus is minimized
B)Producer surplus exceeds consumer surplus
C)Combined consumer and producer surplus is maximized
D)The difference between producer surplus and consumer surplus is maximized
3
Use the following diagram to answer the next question.
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At which of the following prices will the firm produce a positive amount but incur a loss?
A)P1
B)P2
C)P3
D)P3 and P4
4
Answer the next question on the basis of the following cost data for a competitive firm.
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Refer to the above data. If the market price is $35 and the firm produces its optimal amount, it will:
A)realize a $5 profit
B)realize a $50 profit
C)incur a $5 loss
D)incur a $55 loss
5
Competitive firms maximize:
A)total profits by producing where price exceeds average total cost by the greatest amount
B)per unit profits by producing where marginal revenue equals marginal cost
C)total profits by producing where price equals marginal cost
D)market share by producing where price equals average total cost
6
Suppose a decrease in product demand occurs in a decreasing-cost industry. Compared to the original equilibrium the new long-run competitive equilibrium will entail:
A)a higher price and a higher total output
B)a lower price and a lower total output
C)a higher price and a lower total output
D)a lower price and a higher total output
7
A competitive firm is currently producing 2000 units per month at a total cost of $12,000. Its fixed costs are $1,000 and its marginal cost is $5. If the market price is $5.60, this firm:
A)should shut down
B)should increase production
C)is making an economic profit, but not an accounting profit
D)is maximizing profits
8
For all values above minimum average variable cost, a competitive firm's:
A)supply curve is coincident with its marginal cost curve
B)supply curve is coincident with its average total cost curve
C)demand curve is coincident with its average total cost curve
D)demand curve is coincident with its supply curve
9
Use the following diagrams to answer the next question.

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Refer to the above diagrams, which pertain to a purely competitive firm and the industry in which it operates. In the long run we should expect:
A)new firms to enter, market demand to rise, and price to fall
B)demand to increase, and price to rise
C)input prices to fall, supply to increase, and price to fall
D)some firms to exit, supply to decrease, and price to rise
10
In the long run, competitive markets achieve:
A)allocative efficiency because P = min ATC but not productive efficiency because P > min AVC
B)allocative efficiency because P = MC and productive efficiency because P = min ATC
C)productive efficiency because P = min ATC but not allocative efficiency because P > MR
D)neither productive nor allocative efficiency







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