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The term imperfect competition refers to every market structure besides pure competition.

A) True
B) False

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In answering the question,assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. Refer to the information.For a purely competitive firm,total revenue graphs as a:


A) straight,upsloping line.
B) straight line,parallel to the vertical axis.
C) straight line,parallel to the horizontal axis.
D) straight,downsloping line.

E) A) and D)
F) B) and C)

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If a purely competitive firm shuts down in the short run:


A) its loss will be zero.
B) it will realize a loss equal to its total variable costs.
C) it will realize a loss equal to its total fixed costs.
D) it will realize a loss equal to its explicit costs.

E) None of the above
F) A) and B)

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In the short run,a purely competitive firm that seeks to maximize profit will produce:


A) where the demand and the ATC curves intersect.
B) where total revenue exceeds total cost by the maximum amount.
C) that output at which economic profits are zero.
D) at any point where the total revenue and total cost curves intersect.

E) All of the above
F) A) and C)

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Price and marginal revenue are identical for an individual purely competitive seller.

A) True
B) False

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Oligopoly firms may produce either standardized or differentiated products.

A) True
B) False

Correct Answer

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An industry comprised of four firms,each with about 25 percent of the total market for a product,is an example of:


A) monopolistic competition.
B) oligopoly.
C) pure monopoly.
D) pure competition.

E) C) and D)
F) B) and D)

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Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market.  Average  Average  Average  Total  Fixed  Variable  Total  Marginal  Output  Cost  Cost  Cost  Cost 1$150.00$25.00$175.00$25.00275.0023.0098.0021.00350.0020.0070.0014.00437.5021.0058.5024.00530.0023.0053.0031.00625.0025.0050.0035.00721.4328.0049.4346.01818.7533.0051.7668.07916.6739.0055.6786.951015.0048.0063.00128.97\begin{array}{ccccc}& \text { Average } & \text { Average } & \text { Average } & \\\text { Total } & \text { Fixed } & \text { Variable } & \text { Total } & \text { Marginal } \\\text { Output } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost }\\\hline1 & \$ 150.00 & \$ 25.00 & \$ 175.00 & \$ 25.00 \\2 & 75.00 & 23.00 & 98.00 & 21.00 \\3 & 50.00 & 20.00 & 70.00 & 14.00 \\4 & 37.50 & 21.00 & 58.50 & 24.00 \\5 & 30.00 & 23.00 & 53.00 & 31.00 \\6 & 25.00 & 25.00 & 50.00 & 35.00 \\7 & 21.43 & 28.00 & 49.43 & 46.01 \\8 & 18.75 & 33.00 & 51.76 & 68.07 \\9 & 16.67 & 39.00 & 55.67 & 86.95 \\10 & 15.00 & 48.00 & 63.00 & 128.97\end{array} Refer to the data.If the market price for this firm's product is $24,it will produce:


A) 4 units at a loss of $150.
B) 6 units at a loss of $90.
C) 3 units at an economic profit of zero.
D) 4 units at a loss of $138.

E) A) and B)
F) All of the above

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When a firm is maximizing profit,it will necessarily be:


A) maximizing profit per unit of output.
B) maximizing the difference between total revenue and total cost.
C) minimizing total cost.
D) maximizing total revenue.

E) None of the above
F) A) and B)

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Answer the question on the basis of the following cost data for a firm that is selling in a purely competitive market.  Average  Average  Average  Total  Fixed  Variable  Total  Marginal  Output  Cost  Cost  Cost  Cost 1$150.00$25.00$175.00$25.00275.0023.0098.0021.00350.0020.0070.0014.00437.5021.0058.5024.00530.0023.0053.0031.00625.0025.0050.0035.00721.4328.0049.4346.01818.7533.0051.7668.07916.6739.0055.6786.951015.0048.0063.00128.97\begin{array}{ccccc}& \text { Average } & \text { Average } & \text { Average } & \\\text { Total } & \text { Fixed } & \text { Variable } & \text { Total } & \text { Marginal } \\\text { Output } & \text { Cost } & \text { Cost } & \text { Cost } & \text { Cost }\\\hline1 & \$ 150.00 & \$ 25.00 & \$ 175.00 & \$ 25.00 \\2 & 75.00 & 23.00 & 98.00 & 21.00 \\3 & 50.00 & 20.00 & 70.00 & 14.00 \\4 & 37.50 & 21.00 & 58.50 & 24.00 \\5 & 30.00 & 23.00 & 53.00 & 31.00 \\6 & 25.00 & 25.00 & 50.00 & 35.00 \\7 & 21.43 & 28.00 & 49.43 & 46.01 \\8 & 18.75 & 33.00 & 51.76 & 68.07 \\9 & 16.67 & 39.00 & 55.67 & 86.95 \\10 & 15.00 & 48.00 & 63.00 & 128.97\end{array} Refer to the data.If the market price for this firm's product is $15,it will produce:


A) 0 units at a loss of $150.
B) 3 units at a loss of $168.
C) 3 units at an economic profit of zero.
D) 4 units at a loss of $138.

E) B) and D)
F) B) and C)

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The short-run supply curve slopes upward because producers must be compensated for rising marginal costs.

A) True
B) False

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A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its:


A) total variable costs.
B) total costs.
C) total fixed costs.
D) marginal costs.

E) B) and D)
F) B) and C)

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If a profit-seeking competitive firm is producing its profit-maximizing output and its total fixed costs fall by 25 percent,the firm should:


A) use more labor and less capital to produce a larger output.
B) not change its output.
C) reduce its output.
D) increase its output.

E) A) and B)
F) None of the above

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In answering the question,assume a graph in which dollars are measured on the vertical axis and output on the horizontal axis. Refer to the information.For a purely competitive firm:


A) marginal revenue will graph as an upsloping line.
B) the demand curve will lie above the marginal revenue curve.
C) the marginal revenue curve will lie above the demand curve.
D) the demand and marginal revenue curves will coincide.

E) A) and B)
F) B) and D)

Correct Answer

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The following table applies to a purely competitive industry composed of 100 identical firms. QuantityQuantityDemandedPriceSupplied400,000$5800,000500,0004700,000600,0003600,000700,0002500,000800,0001400,000\begin{array}{lcl}Quantity&&Quantity\\Demanded &Price &Supplied\\\hline400,000 & \$ 5 & 800,000 \\500,000 & 4 & 700,000 \\600,000 & 3 & 600,000 \\700,000 & 2 & 500,000 \\800,000 & 1 & 400,000\end{array} Refer to the table.The equilibrium price in this purely competitive market is:


A) $5.
B) $4.
C) $3.
D) $2.

E) None of the above
F) B) and D)

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C

A purely competitive firm's short-run supply curve is:


A) perfectly elastic at the minimum average total cost.
B) upsloping and equal to the portion of the marginal cost curve that lies above the average variable cost curve.
C) upsloping and equal to the portion of the marginal cost curve that lies above the average total cost curve.
D) upsloping only when the industry has constant costs.

E) All of the above
F) A) and D)

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For a purely competitive firm,total revenue:


A) is price times quantity sold.
B) increases by a constant absolute amount as output expands.
C) graphs as a straight upsloping line from the origin.
D) has all of these characteristics.

E) A) and B)
F) A) and C)

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The short-run supply curve for a purely competitive industry can be found by:


A) multiplying the AVC curve of the representative firm by the number of firms in the industry.
B) adding horizontally the AVC curves of all firms.
C) summing horizontally the segments of the MC curves lying above the AVC curve for all firms.
D) adding horizontally the immediate market period supply curves of each firm.

E) A) and B)
F) A) and C)

Correct Answer

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C

The marginal revenue curve of a purely competitive firm:


A) lies below the firm's demand curve.
B) is downsloping because price must be reduced to sell more output.
C) is horizontal at the market price.
D) has all of these characteristics.

E) A) and D)
F) A) and C)

Correct Answer

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If a firm is confronted with economic losses in the short run,it will decide whether or not to produce by comparing:


A) marginal revenue and marginal cost.
B) price and minimum average variable cost.
C) total revenue and total cost.
D) total revenue and total fixed cost.

E) None of the above
F) B) and C)

Correct Answer

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B

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