Ch.10 Pure Competition in the Short Run

Q: If the market price is $71, the competitive firm will (graph)

C. Cease production and sell what it has already produced to minimize losses

Q: At a market price of $93, this firm (graph)

E. has normal profit, but is just able to cover all of its explicit and implicit costs

question

Which of the following statements best describes a perfectly competitive market?
I. A large number of firms exist
II. Products are differentiated
III. Firms can easily enter or exit the industry

answer

C. I & III only

question

Because the perfectly competitive firm is a price taker, its demand curve is:

answer

C. Horizontal

question

In order to maximize profit, the firm should produce where

answer

B. Marginal Cost= Marginal Revenue

question

At long-run equilibrium for the perfectly competitive firm, the marginal cost is equal to all of the following EXCEPT:

answer

E. average variable cost

question

At a particular output, a perfectly competitive firm's price is $10, marginal cost is $11, average total cost is $12, and average variable cost is $8. The firm should

answer

C. decrease output to minimize loss, but keep producing in the short run

question

If a firm incurs losses, it should continue to produce as long as the price covers the

answer

A. average variable cost

question

If a firm is producing 10 products which it can sell for a price of $5 per unit, and the marginal cost of producing the 11th product is $3, which of the following statements is true?

answer

C. The total profit from selling 11 units is $2 more than the total profit from selling 10 units.

question

An industry is characterized by a large number of firms that produce identical products and have no control over price is

answer

A. perfect competition

question

In a perfectly competitive market, what is the slope of the demand curves for the industry and the individual firm?

answer

C. Downward-Sloping, Horizontal

question

Assume Kenny is a farmer who sells soybeans in a perfectly competitive industry. If the industry equilibrium price for soybeans is $14 per bushel and Kenny sets his price at $15 per bushel, Kenny's

answer

E. total revenue will increase

question

The income a firm earns from selling one additional product is the

answer

A. marginal revenue

question

Using the total-cost---total-revenue approach, assume that a firm calculates that its break-even point is 200 products. This firm will not produce fewer than 200 products because at a lower output, the firm would

answer

B. not earn a normal profit

question

At 0 units of total product, the total fixed cost for this firm is

answer

C. 100

question

Between three and four units of total product, the marginal cost and marginal revenue are

answer

C. Less than ATC, Constant

question

Assuming units of output are not divisible, the shutdown point for this firm in the short run occurs where

answer

D. total output is 8 units, where MR<AVC

question

If the market price is $71, the competitive firm will (graph)

answer

C. Cease production and sell what it has already produced to minimize losses

question

At a market price of $93, this firm (graph)

answer

E. has normal profit, but is just able to cover all of its explicit and implicit costs

question

At a product price of "0h," this firm would maximize profit by producing at an output of (graph20

answer

D. 0s

question

At price "0f," which of the following is true:
I. The firm has a positive economic profit of "feug" and a total fixed cost of "guvj"
II. The firm has a total cost of "gut0" and a fixed cost of "givj"
III. The firm is in a short-run position

answer

E. I, II, and III

question

This firm's short-run shutdown would occur when price is below

answer

C. average variable cost

question

The portion of the firm's marginal cost curve that is above the average variable cost curve is the firm's

answer

A. Short-run supply curve

question

If a firm in a competitive industry is facing an increase in the cost of heating fuel, this firm will find that

answer

B. its marginal, average variable cost, and average total cost curves have shifted upward

question

Because the perfectly competitive firm is a price taker, the price equals:

answer

B. marginal revenue

question

The MR=MC rule for profit maximization applies to forms engaged in
I. Perfect competition
II. Monopolistic competition
III. Oligopoly
IV. Monopoly

answer

E. I, II, III, and IV

question

For the perfectly competitive firm, the MR=MC rule can also be stated as

answer

D. P=MC

1 of 25

question

Which of the following statements best describes a perfectly competitive market?
I. A large number of firms exist
II. Products are differentiated
III. Firms can easily enter or exit the industry

answer

C. I & III only

question

Because the perfectly competitive firm is a price taker, its demand curve is:

answer

C. Horizontal

question

In order to maximize profit, the firm should produce where

answer

B. Marginal Cost= Marginal Revenue

question

At long-run equilibrium for the perfectly competitive firm, the marginal cost is equal to all of the following EXCEPT:

answer

E. average variable cost

question

At a particular output, a perfectly competitive firm's price is $10, marginal cost is $11, average total cost is $12, and average variable cost is $8. The firm should

answer

C. decrease output to minimize loss, but keep producing in the short run

question

If a firm incurs losses, it should continue to produce as long as the price covers the

answer

A. average variable cost

question

If a firm is producing 10 products which it can sell for a price of $5 per unit, and the marginal cost of producing the 11th product is $3, which of the following statements is true?

answer

C. The total profit from selling 11 units is $2 more than the total profit from selling 10 units.

question

An industry is characterized by a large number of firms that produce identical products and have no control over price is

answer

A. perfect competition

question

In a perfectly competitive market, what is the slope of the demand curves for the industry and the individual firm?

answer

C. Downward-Sloping, Horizontal

question

Assume Kenny is a farmer who sells soybeans in a perfectly competitive industry. If the industry equilibrium price for soybeans is $14 per bushel and Kenny sets his price at $15 per bushel, Kenny's

answer

E. total revenue will increase

question

The income a firm earns from selling one additional product is the

answer

A. marginal revenue

question

answer

B. not earn a normal profit

question

At 0 units of total product, the total fixed cost for this firm is

answer

C. 100

question

Between three and four units of total product, the marginal cost and marginal revenue are

answer

C. Less than ATC, Constant

question

Assuming units of output are not divisible, the shutdown point for this firm in the short run occurs where

answer

D. total output is 8 units, where MR<AVC

question

If the market price is $71, the competitive firm will (graph)

answer

C. Cease production and sell what it has already produced to minimize losses

question

At a market price of $93, this firm (graph)

answer

E. has normal profit, but is just able to cover all of its explicit and implicit costs

question

At a product price of "0h," this firm would maximize profit by producing at an output of (graph20

answer

D. 0s

question

answer

E. I, II, and III

question

This firm's short-run shutdown would occur when price is below

answer

C. average variable cost

question

The portion of the firm's marginal cost curve that is above the average variable cost curve is the firm's

answer

A. Short-run supply curve

question

If a firm in a competitive industry is facing an increase in the cost of heating fuel, this firm will find that

answer

B. its marginal, average variable cost, and average total cost curves have shifted upward

question

Because the perfectly competitive firm is a price taker, the price equals:

answer

B. marginal revenue

question

The MR=MC rule for profit maximization applies to forms engaged in
I. Perfect competition
II. Monopolistic competition
III. Oligopoly
IV. Monopoly

answer

E. I, II, III, and IV

question

For the perfectly competitive firm, the MR=MC rule can also be stated as

answer

D. P=MC

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