INSTRUCTION: Select the BEST answer for each question by marking the circle next to your selection
1.
Given the table below, what is the short-run profit-maximizing level of output for the firm?
Output
Total revenue
Total cost
1
$ 4
$ 2
2
8
3
12
6
4
16
9
5
20
14
A.
2 units
B.
3 units
C.
4 units
D.
5 units
2.
Assume the price of a product sold by a purely competitive firm is $5. Given the data in the accompanying table, at what output is total profit highest in the short run?
$ 70
25
75
30
85
35
100
40
125
45
155
50
190
3.
In which market model would the number of firms be the fewest?
monopolistic competition
pure competition
pure monopoly
oligopoly
4.
Under which market model are the conditions of entry into the market easiest?
5.
Which idea is inconsistent with pure competition?
short-run losses
product differentiation
freedom of entry or exit for firms
a large number of buyers and sellers
6.
Which characteristic would best be associated with pure competition?
few sellers
price taker
nonprice competition
7.
In pure competition, the average revenue of a firm always equals:
marginal cost.
marginal revenue.
average total cost.
total revenue.
8.
Answer the question based on the table below.
Price
Quantity
TFC
TVC
$ 5
$25
$10
10
15
60
At what point on the table would a purely competitive firm cover all of its costs and earn only normal profits?
Q = 5
Q = 10
Q = 15
Q = 20
9.
Let us suppose Harry's, a local supplier of chili and beer, has the following revenue and cost structure: total revenue$3,000 per week total variable cost$2,000 per week total fixed costs$2,000 per week
Harry's should stay open in the long run.
Harry's should shut down in the short run.
Harry's should stay open in the short run.
Harry's should shut down in the short run but reopen in the long run.
10.
R-1 REF 23-45
Refer to the above graph. Which of the output levels is the profit-maximizing output level for this firm?
Q1
Q2
Q3
Q4
11.
Use the table below to answer the next question(s) for a purely competitive firm.
0
$ 0
$ 50
74
80
94
120
117
160
142
200
172
R-2 REF 23-49 (REF23049)
Refer to the above table. The marginal revenue from the third unit of output is:
$40.
$50.
$120.
$160.
12.
Refer to the above table. When the firm produces 3 units of output, it makes an economic:
profit of $3.
loss of $3.
profit of $9.
loss of $9.
13.
Refer to the above table. The marginal cost of the third unit of output is:
$20.
$23.
$24.
$25.
14.
Which is true for a purely competitive firm in short-run equilibrium?
The firm is making only normal profits.
The firm's marginal cost is greater than its marginal revenue.
The firm's marginal revenue is equal to its marginal cost.
A decrease in output would lead to a rise in profits.
15.
R-3 REF 22-68
Using the diagram above, in order to maximize profits, this firm would produce ____________ which would result in ____________.
0D units, a loss equal to ABGH
0E units, a loss equal to ALFH
0D units, economic profits equal to BCFG
0E units, economic profits equal to ABGH
16.
Pure competition produces a socially optimal allocation of resources in the long run because:
marginal cost equals marginal revenue.
marginal cost equals average total cost.
marginal revenue equals price.
marginal cost equals price.
17.
In long-run equilibrium a purely competitive firm will operate where price is:
greater than MR but equal to MC and minimum ATC.
greater than MR and MC, but equal to minimum ATC.
greater than MC and minimum ATC, but equal to MR.
equal to MR, MC, and minimum ATC.
18.
Productive efficiency refers to:
cost minimization, where P =
