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| 1 | |
Compared to the downsloping 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 downsloping marginal revenue curve. |
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| 2 | |
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. |
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| 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 |
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| 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. |
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| 5 | |
Individual firms in purely competitive markets: |
| | A) | face unit elastic demand curves. |
| | B) | are "price takers". |
| | C) | engage in significant advertising. |
| | D) | face significant barriers to entry. |
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| 6 | |
The market for which of the following most closely approximates pure competition? |
| | A) | feed corn |
| | B) | breakfast cereal |
| | C) | MP3 players |
| | D) | computers |
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| 7 | |
A competitive firm is currently producing and selling 2000 units per month at the market price of $5.60. Its total cost is $12,000, of which its fixed costs are $1,000, and its marginal cost is $5. 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. |
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| 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. |
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| 9 | |
A purely competitive firm has set its price at the market price of $210. The firm is operating on the upsloping section of its marginal cost curve and t its current output level, its marginal cost is $225. Assuming the firm wishes to maximize profit, it should: |
| | A) | cut its price and increase production. |
| | B) | raise its price and cut production. |
| | C) | cut its price and cut production. |
| | D) | leave price unchanged and cut production. |
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| 10 | |
Use the following diagram to answer the next question.
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Which one of the following price-quantity combinations is not on this competitive firm's short-run supply curve? |
| | A) | P1, 47 |
| | B) | P2, 44 |
| | C) | P3, 40 |
| | D) | P4, 30 |
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