Chapter 8_ Perfect Competition (Multiple Choice).txt

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Chapter 8_ Perfect Competition (Multiple Choice).txt
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Ch 8
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    • author "Rosenauer"
    • tags ""
    • folders "Microeconomics"
    • description ""
    • fileName "Chapter 8: Perfect Competition (Multiple Choice)"
    • Market structure is defined as the:
    • A. Number of firms in each industry.
    • B. Similarity of the product sold.
    • C. Ease of entry into and exit from the market.
    • D. All of the above.
    • D. All of the above.
  1. Perfect competition is defined as market structure in which:
    A. There are many small sellers.
    B. The product is homogenous.
    C. It is very easy for firms to enter or exit the market.
    D. All of the above.
    D. All of the above.
  2. Which of the following best illustrates perfect competition?
    A. Wheat farming.
    B. General Motors advertising campaign for its cars.
    C. Orange growers setting quotas under the Sunkist cooperative.
    D. All of the above.
    A. Wheat farming.
    (this multiple choice question has been scrambled)
  3. Which of the following is not a characteristic of a perfectly competitive market?
    A. There is a large number of small firms.
    B. Firms are price makers, not price takers.
    C. Firms sell a homogeneous product.
    D. Firms can easily enter or exit the market.
    B. Firms are price makers, not price takers.
    (this multiple choice question has been scrambled)
  4. Which of the following is true of a perfectly competitive firm?
    A. The firm's short-run supply curve is its MC curve below its AVC curve.
    B. The firm will not earn an economic profit in the long run.
    C. The firm is a price maker.
    D. If the firm wishes to maximize profits it will produce an output level in which total revenue equals total cost.
    B. The firm will not earn an economic profit in the long run.
    (this multiple choice question has been scrambled)
  5. If a firm has no abiliy to select the price of its product, it:
    A. Has a horixontal individual demand curve.
    B. Will go out of business due to losses.
    C. Is a price-maker.
    D. Cannot maximize profit.
    A. Has a horixontal individual demand curve.
    (this multiple choice question has been scrambled)
  6. Because a competitive firm is a price take, it faces a demand cuve that is:
    A. Perfectly inelastic.
    B. Relatively inelastic.
    C. Perfectly elastic.
    D. Relatively elastic.
    C. Perfectly elastic.
    (this multiple choice question has been scrambled)
  7. A firm operating a perfectly competitive market is a price taker because:
    A. No firm has a significant market share.
    B. No firm's product is perceived as different.
    C. Setting a price higher than the going price results in zero sales.
    D. All of the above.
    D. All of the above.
  8. Under perfect competition, which of the following are the same (equal) at all levels of output?
    A. Marginal cost and marginal revenue.
    B. Price and marginal cost.
    C. Price and marginal revenue.
    D. All of the above.
    C. Price and marginal revenue.
    (this multiple choice question has been scrambled)
  9. If a perfectly competitive firm sells 50 units of output at a market price of $10 per unit, its marginal revenue is:
    A. More than $10.
    B. Less than $10.
    C. $10
    D.$5300.
    C. $10
    (this multiple choice question has been scrambled)
  10. Marginal revenue is the change in:
    A. Total revenue resulting from a one unit change in output.
    B. Total revenue resulting from a change in marginal cost.
    C. Price resulting from a one unit change in output.
    D. None of the above.
    A. Total revenue resulting from a one unit change in output.
    (this multiple choice question has been scrambled)
  11. When the price of a good is a constant, the marginal revenue per unit of output is the same as:
    A. Average total cost.
    B. Total revenue.
    C. Profit per unit.
    D. Quantity of output.
    E. Price.
    E. Price.
    (this multiple choice question has been scrambled)
  12. A perfectly competitive firm in the shortrun maximizes its profit by producing the output where:
    A. Marginal cost equals price.
    B. Marginal cost equals marginal revenue.
    C. Total revenue minus total cost is at a maximum.
    D. All of the above.
    D. All of the above.
  13. In the short run, a perfectly competitive firm's most profitable level of output is where:
    A. Total revenue minus total cost is at a maximum.
    B. Marginal cost equals marginal revenue.
    C. Both of the above.
    D. Neither of the above.
    C. Both of the above.
  14. A perfectly competitive firm in the shortrun can earn:
    A. Positive economic profits.
    B. Negative economic profits.
    C. Zero economic profits.
    D. All of the above are possible.
    D. All of the above are possible.
  15. A perfectly competitive firm maximizes profits or minimizes losses in the shortrun by producing at the output level at which:
    A. Total revenue equals total cost.
    B. Marginal revenue equals marginal cost.
    C. Total revenue is at a maximum.
    D. None of the above.
    B. Marginal revenue equals marginal cost.
    (this multiple choice question has been scrambled)
  16. A perfectly competitive firm sells its output for $100 per unit and marginal cost is $100 per unit. To maximize shortrun profit, the firm should:
    A. Shut down.
    B. Maintain its current output.
    C. Decrease output.
    D. Increse output.
    B. Maintain its current output.
    (this multiple choice question has been scrambled)
  17. In the short run, a perfectly competitive firm is producing at a price below average total cost, its economic profit is:
    A. Positive.
    B. Negative.
    C. Normal
    D. Zero.
    B. Negative.
    (this multiple choice question has been scrambled)
  18. In the short run, if a perfectly competitive firm is producing at a price above average total cost, its economic profit must be:
    A. Negative.
    B. Zero.
    C. Positive.
    D. Normal.
    C. Positive.
    (this multiple choice question has been scrambled)
  19. A competitive firm maximizes its profits (or minimizes is losses) by producing the quantity where the market price equals the firm's:
    A. Average fixed cost.
    B. Marginal cost.
    C. Average total cost.
    D. Aberage variable cost.
    B. Marginal cost.
    (this multiple choice question has been scrambled)
  20. A perfectly competitive firm's shortrun supply curve is the:
    A. Average total cost curve.
    B. Demand curve above the marginal revenue curve.
    C. Same as the market supply curve.
    D. Marginal cost curve above the average variable cost curve.
    D. Marginal cost curve above the average variable cost curve.
  21. Above the shutdown point, a competitive firm's supply curve coincides with its:
    A. Marginal cost curve.
    B. Marginal revenue curve.
    C. Average total cost curve.
    D. Average variable cost curve.
    A. Marginal cost curve.
    (this multiple choice question has been scrambled)
  22. As shown in Exhibit 3, the firm's economic profit is maximum at an output of:
    A. 5 units per day.
    B. 15 units per day.
    C. 10 units per day.
    D. 20 units per day.
    D. 20 units per day.
    (this multiple choice question has been scrambled)
  23. In Exhibit 3, if the price of firm's product is $2.00 per unit, the firm will produce:
    A. 20 units per day.
    B. 5 units per day.
    C. 15 units per day.
    D. 10 units per day.
    C. 15 units per day.
    (this multiple choice question has been scrambled)
  24. As shown in Exhibit 3, the price at which the firm earns zero economic profit in the shortrun is:
    A. $2.00 per unit.
    B. More than $2.00 per unit.
    C. $4.00 per unit.
    D. $1.00 per unit.
    E. $1.50 per unit.
    A. $2.00 per unit.
    (this multiple choice question has been scrambled)
  25. If the price of the firm's product in Exhibit 3 is $1.50 per unit, which intersects AVC at point B, the firm should:
    A. Shut down temporarily.
    B. Stay in operation for the time being even though it is making a pure economic loss.
    C. Shut down permanently.
    D. Continue to operate because it is earning a positive economic profit.
    B. Stay in operation for the time being even though it is making a pure economic loss.
    (this multiple choice question has been scrambled)
  26. As shown in Exhibit 3, the firm will produce in the short run if the price is at least equal to:
    A. $1.00 per unit (point A).
    B. $4.00 per unit (point D).
    C. $2.00 per unit (point C).
    D. $1.50 per unit (point B).
    D. $1.50 per unit (point B).
    (this multiple choice question has been scrambled)
  27. In Exhibit 4, this firm is currently producing 14 units of output. What would you advise this firm to do?
    A. Increase output to 16.
    B. Increase output to 17.
    C. Decrease output to 13.
    D. Increse output to 15.
    E. Remain at 14 units of output.
    A. Increase output to 16.
    (this multiple choice question has been scrambled)
  28. If a firm decreases output when MR>MC, then:
    A. Profit will increase.
    B. Profit will remain the same.
    C. The firm is minimizing losses.
    D. Profit will decrease.
    E. Profit will equal zero.
    D. Profit will decrease.
    (this multiple choice question has been scrambled)
  29. If a firm increases output when MR A. Profit will increase.
    B. Profit will remain the same.
    C. Profit will equal zero.
    D. Profit will decrease.
    E. The firm is minimizing losses.
    D. Profit will decrease.
    (this multiple choice question has been scrambled)
  30. If a firm decreases output when MR A. Profit will equal zero.
    B. Profit will increase.
    C. Profit will decrease.
    D. The firm is minimizing losses.
    E. Profit will remain the same.
    B. Profit will increase.
    (this multiple choice question has been scrambled)
  31. In Exhibit 8, product price in this market is fixed at $35. This firm is currently operating where MR=MC. Which of the following is true?
    A. This firm is earning a profit of zero.
    B. Price>ATC and the firm is earning a positive profit.
    C. This firm could increase profits by increasing output.
    D. Price E. Price>AVC, andthe firm should stay at its current output.
    E. Price>AVC, andthe firm should stay at its current output.
    (this multiple choice question has been scrambled)
  32. If a firm shuts down in the short run, it will:
    A. Incur losses equal to its fixed costs.
    B. Produce at the output level where MC=MR.
    C. Do this because P>AVC.
    D. Reduce its losses to zero.
    E. Have total revenue greater than total fixed costs.
    A. Incur losses equal to its fixed costs.
    (this multiple choice question has been scrambled)
  33. If a firm in a competitive industry is making zero economic profit but still producing, it must be the case that:
    A. MC = MR < ATC.
    B. MC = ATC > MR.
    C. This situation is not possible.
    D. MC = MR > ATC.
    E. MC = MR = ATC.
    E. MC = MR = ATC.
    (this multiple choice question has been scrambled)
  34. The long run is a planning period:
    A. Durring which the firm can vary its plan size.
    B. Less than five years.
    C. Less than six months.
    D. Less than one year.
    A. Durring which the firm can vary its plan size.
    (this multiple choice question has been scrambled)
  35. In longrun equilibrium, the perfectly competitive firm sets its price equal to which of the following?
    A. Shortrun average total cost.
    B. Shortrun marginal cost.
    C. Longrun average cost.
    D. All of the above.
    D. All of the above.
  36. In longrun equilibrium, a competitve firm produces the level of output at which:
    A. Diseconomies of scale end.
    B. Shortrun average total cost and lont-run average cost are at a minimum.
    C. Marginal cost is at a minimum.
    D. Total revenue is at a maximum.
    B. Shortrun average total cost and lont-run average cost are at a minimum.
    (this multiple choice question has been scrambled)
  37. Which of the following statements is true?
    A. In the shortrun, a perfectly competitive firm produces where total cost is minimum.
    B. To maximize profits, a firm must maximize total revenue.
    C. In longrun equilibrium, a competitive firm produces at the point of minimum average total cost.
    D. In the shortrun, a perfectly competitive firm will close down whenever price is less than average total cost.
    C. In longrun equilibrium, a competitive firm produces at the point of minimum average total cost.
    (this multiple choice question has been scrambled)
  38. If there is a permanent increase in demand for the product of a perfecly competitive industry, the process of transition to a new long-run equilibrium will include:
    A. The entry of new firms.
    B. Temporarily higher profits.
    C. Neither a nor b.
    D. Both a and b.
    D. Both a and b.
    (this multiple choice question has been scrambled)
  39. In long-run equilibrium, the typical perfectly competitve firm will:
    A. Change output in the short run.
    B. Change plant size in the long run.
    C. Earn zero economic profit.
    D. Do any of the above.
    C. Earn zero economic profit.
    (this multiple choice question has been scrambled)
  40. The long-run equilibrium condiion for perfect competition is:
    A. TR = ATC = MR = MC.
    B. P = AVC = MR = MC.
    C. Q = AVC = MR = MC.
    D. P = ATC = MR = MC.
    D. P = ATC = MR = MC.
    (this multiple choice question has been scrambled)
  41. Assume the short-run average total cost for a perfecly competitive industry remains constant as the output of the industry expands. In the long run, the industry supply curve will:
    A. Be perfectly vertical.
    B. Have a positive slope.
    C. Be perfectly horixontal.
    D. Have a negative slope.
    C. Be perfectly horixontal.
    (this multiple choice question has been scrambled)
  42. Assume the short-run average total cost for a perfecly competitive industry decreases as the output of the industry expand. In the long run, the industry supply curve will:
    A. Be perfectly vertical.
    B. Have a negative slope.
    C. Be perfectly horixontal.
    D. Have a positive slope.
    B. Have a negative slope.
    (this multiple choice question has been scrambled)
  43. Assume the short-run average total cost for a perfectly competitive industry increases as the outpur of the industry expands. In the long run, the industry supply curve will:
    A. Has a positive slope.
    B. Be perfectly horixontal.
    C. Be perfectly vertical.
    D. Have a negative slope.
    A. Has a positive slope.
    (this multiple choice question has been scrambled)

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