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Name: __________________________ Date: _____________
1.If a California avocado stand operates in a perfectly competitive market, that stand owner will be a price:
A) maker.B) each firm takes the market price as given for its output level, recognizing that the price will change if it alters its output significantly.
an individual firm cannot alter the market price even if it doubles its output. C)
D) the market sets the price, and each firm can take it or leave it by setting a different price.B) select the lowest price available in a competitive market. C) select the average of prices available in a competitive market.
have no ability to affect the price of a good in a market. D)
B) fierce quality competition.
C) the inability of any one firm to influence price.
cartel. D)
8.The assumptions of perfect competition imply that:
A) individuals in the market determine the market price. B) firms in the market accept the market price as given.C) no individual or firm has enough power to affect price.
D) the price is determined by how many years are left in the product's patent.
A) large; standardized; no
B) small; standardized; little or no
C) small; differentiated; no
D) large; differentiated; extensive12.One characteristic of a perfectly competitive market is that there are _____ sellers of the good or service.
B) Profits may be positive in the short run. C) There are many firms.
Products are differentiated. D)
A) no noticeable effect; standardized
B) a huge effect; standardized
C) a huge effect; differentiated
D) no noticeable effect; differentiated16.Which of the following is a necessary condition for perfect competition? A) A small number of firms control a large share of the total market. B) Movement into and out of the market is limited.
D) There are no obstacles to entry into or exit from the industry.
18.The perfectly competitive model assumes all of the following EXCEPT: A) a great number of buyers.
B) a standardized product.
ease of entry. C)
D) ease of exit.B) easy entry to and exit from the market.
C) standardized product.patents and copyrights that serve as barriers to entry into the industry. D)
cooperation and interdependence between sellers. D)
24.People in the eastern part of Beirut are prevented by border guards from traveling to the western part of Beirut to shop for or sell food. This situation violates the perfect competition assumption of:
A) price-setting behavior.
25.When perfect competition prevails, which of the following characteristics of firms are we likely to observe?
A) They erect and maintain barriers to new firms.
C) at any price, the more sold, the higher a firm's marginal revenue.
D) the firm's total revenue curve is nonlinear.
total output times the price of that output. D)
29.If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 11 units is:
A) $10.B) $20.
C) $200.
B) nominal revenue.
C) average revenue.
C) downward-sloping.
D) relatively elastic.
D) relatively but not perfectly elastic.
34.Marginal revenue:
35.The marginal revenue received by a firm in a perfectly competitive market:
A) is greater than the market price.
marginal revenue is:
A) $10.
37.Marginal revenue is a firm's:
A) ratio of profit to quantity.B) ratio of average revenue to quantity.
C) increase output up to the point that the marginal benefit of an additional unit of output is equal to the marginal cost.
D) always attempt to minimize average variable cost.
40.A perfectly competitive firm will maximize profits when the: A) marginal revenue equals marginal cost.
B) marginal revenue is lower than average variable cost. C) price is lower than marginal cost.
D) shut down, because the firm is losing money.
42.Zoe's Bakery operates in a perfectly competitive industry and has standard cost curves. The variable costs at Zoe's Bakery increase, so all of the cost curves (except fixed cost) shift upward. The demand for Zoe's pastries does not change, nor does the firm shut down. To maximize profits after the variable cost increase, Zoe's Bakery will _____ its price and _____ its level of production.
C) equal to marginal revenue and is constant under perfect competition.
equal to marginal revenue and varies under perfect competition. D)
45.For a firm producing at any level of output LOWER THAN the most profitable one, an increase in output adds:
A) more to total cost than to total revenue.B) more to total revenue than to total cost.
B) MR = MC.
C) Q× (P – ATC) = 0.
D) P < AVC.
D) decreases with the quantity of output sold by the firm.
49.The marginal revenue received by a firm in a perfectly competitive market: A) is unrelated to the market price.
B) $30.
C) more than $30.
D) $300.53.Marginal revenue is a firm's:
A) ratio of the change in total revenue to the change in output. B) ratio of average revenue to total revenue.C) profit per unit times the number of units sold.
D) $250.
55.If a perfectly competitive firm sells 300 units of output at $1 per unit, its marginal revenue is:
A) less than $1.total revenue and total variable cost are the same. D)
57.The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where _____ equals _____.
59.If a perfectly competitive firm is producing a quantity where MC < MR, then profit: A) is maximized.
B) can be increased by increasing production. C) can be increased by decreasing production.
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61.If a perfectly competitive firm is producing a quantity where P < MC, then profit: A) is maximized.
D) increasing production.
63.If a perfectly competitive firm is producing a quantity where P = MC, then profit: A) is maximized.
Figure: Total Revenue and Total Cost
D) M.
65.If the price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:
A) produce at a loss.67.In the short run, a perfectly competitive firm produces output and earns ZERO economic profit if:
A) P < ATC.
B) P = ATC.
C) P < MC.
D) P > ATC.68.Which of the following is TRUE?
69.A perfectly competitive firm will earn a profit in the short run when it produces the profit-maximizing quantity of output and the price is:
A) greater than marginal cost.B) less than marginal cost.
B) produce at a profit.
C) shut down production.
B) P = ATC.
C) P > ATC.
74.In the short run, if P > ATC, a perfectly competitive firm: A) produces output and earns zero economic profit. B) produces output and earns an economic profit.
C) produces output and incurs an economic loss.
B) less than marginal cost.
C) greater than average variable cost but less than average total cost. D) greater than average total cost.
78.Suppose a perfectly competitive firm can increase its profits by increasing its output.
Then it must be true that the firm's _____ exceeds its _____.
80.Zoe's Bakery operates in a perfectly competitive industry. When the market price of iced cupcakes is $5, the profit-maximizing output level is 150 cupcakes. Her average total cost is $4, and her average variable cost is $3. Zoe's marginal cost is _____, and her short-run profits are _____.
A) $5; $150
B) $5; $300
C) $1; $150
D) $1; $300
A) $6,000
B) $27,000
$21,000 C)
D) $283.Suppose Sarah's pottery studio is charging the market price, which is just higher than her minimum average total cost. This means that Sarah:
A) is breaking even.B) the marginal revenue, provided that marginal revenue is equal to marginal cost. C) the average fixed cost at the given output level.
the minimum value of average total cost. D)
86.Zoe's Bakery determines that P < ATC and P > AVC. In the short run, Zoe should: A) continue to operate even though she is taking an economic loss.
B) continue to operate, as she is making an economic profit.
run. Its ATC = $6 and AFC = $2. The market price is $3 per head and is equal to MC. To maximize profits or minimize losses, this farm should:
A) increase output.B) reduce output but continue to produce.
C) raise the price.
D) There is not enough information given to answer this question.
A) higher; maximum
B) lower; minimum
higher; minimum C)
D) lower; maximum91.The short-run supply curve for a perfectly competitive firm is its: A) demand curve above its marginal revenue curve.
A) ATC
B) AVC
C) AFC
D) MC
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94.A perfectly competitive firm will incur an economic loss but will continue to produce a positive quantity of output in the short run if the price is:
A) less than marginal cost.B) less than average variable cost.
shut down production. C)
D) produce more than the profit-maximizing quantity.96.The short-run shut-down price is:
A) the price at which economic profit is zero. B) the minimum of the AVC curve.C) rising part of the MC curve beginning where the firm starts earning economic profit.
MC curve below the shut-down point. D)
99.The short-run supply curve for a perfectly competitive firm is the ____ cost curve above the _____ price.
A) average total; break-even
B) average variable; shut-down
C) marginal; break-even
D) marginal; shut-down101.In perfect competition, the profit-maximizing level of output occurs where the: A) MR = MC above minimum AVC.
B) price < marginal cost above minimum AVC. C) MR > MC below minimum AVC.
103.If the price is greater than the average variable cost and less than the average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:
A) continue to produce at an economic loss.B) earn an economic profit.
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D) does not produce output and earns zero economic profit.
B) less than marginal cost.
C) less than average variable cost.
108.If the price is less than the average variable cost at the quantity of output where MR = MC, in the short run a perfectly competitive firm will:
A) produce at a loss.B) produce at a profit.
C) AVC > P > ATC and FC = 0.
D) AVC < P < ATC and FC > 0.
111.A firm's shut-down point is the minimum value of: A) total cost.
B) average variable cost.
C) average total cost.A) input demand
B) short-run supply
C) marginal revenue
D) total revenue114.A competitive firm operating in the short run is maximizing profits and just breaking even. Its costs include a monthly state license fee of $100 that must be paid for as long as the firm operates. If the license fee is raised to $150, what should the firm do to
maximize profits in the short run?Economic profit is always positive in the short run. D)
116.Wenqin is a farmer, and in the short run she produces 100 bushels of wheat. Her average total cost per bushel is $1.75, total revenue is $450, and total fixed costs are $100.
