Economics (McConnell) AP Edition, 19th Edition

Chapter 8: Pure Competition in the Short Run

Quiz

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
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
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
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
6
The market for which of the following most closely approximates pure competition?
A)feed corn
B)breakfast cereal
C)MP3 players
D)computers
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
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
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
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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