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| 1 | |
Economic profit per unit is equal to: |
| | A) | P - ATC |
| | B) | AR - AVC |
| | C) | MR - MC |
| | D) | P - MC |
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| 2 | |
Economists assume that firms seek to maximize: |
| | A) | accounting profit |
| | B) | economic profit |
| | C) | economic profit per unit |
| | D) | total revenue minus explicit costs |
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| 3 | |
Use the following data from a purely competitive industry to answer the next question.
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Refer to the data. At the equilibrium price, each of the 1,000 identical firms in this industry will produce: |
| | A) | 85 units of output |
| | B) | 850 units of output |
| | C) | 800 units of output |
| | D) | 8000 units of output |
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| 4 | |
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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| 5 | |
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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| 6 | |
Pure competition is characterized by all of the following except: |
| | A) | a downward-sloping market demand curve |
| | B) | a perfectly elastic demand curve facing each firm |
| | C) | equality of marginal revenue and price for each firm in a given market |
| | D) | positive long-run economic profits |
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| 7 | |
Use the following diagram 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. True or false: The firm will produce q units and incur an economic loss. |
| | A) | True |
| | B) | False |
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| 8 | |
Assume the ZYX Corporation is producing 50 units of output and selling it in a competitive market for $3 per unit. Its average fixed cost is $1 and its average variable cost is $2.50; marginal cost is $2.75. In the short run, this corporation: |
| | A) | should shut down |
| | B) | should expand production |
| | C) | should produce less (but still a positive amount) |
| | D) | is maximizing profit |
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| 9 | |
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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| 10 | |
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 |
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