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Topic: Perfect competition, Difficulty: D, Type: RE, Answer: d
If a firm has no ability to select the price of its product, it:
a. will go out of business due to losses.
b. is a price-maker.
c. cannot maximize profit.
d. has a horizontal individual demand curve.
Topic: Price taker, Difficulty: D, Type: RE, Answer: d
A firm operating in 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.
Topic: Price taker, Difficulty: D, Type: RE, Answer: b
Under perfect competition, which of the following are the same (equal) at all levels of output?
a. Price and marginal cost.
b. Price and marginal revenue.
c. Marginal cost and marginal revenue.
d. All of the above.
Topic: Marginal revenue, Difficulty: D, Type: CA, Answer: a
If a perfectly competitive firm sells 10 units of output at a market price of $5 per unit, its
marginal revenue per unit is:
a. $5.
b. $50.
c. more than $5 but less than $50.
d. less than $5.
Topic: Marginal revenue, Difficulty: D, Type: SA, Answer: a
Under perfect competition, no matter how much output is produced, the total revenue curve is a:
a. positively-sloped line.
b. negatively-sloped line.
c. horizontal straight line.
d. U-shaped curve.
e. hill-shaped curve.
Topic: Short-run profit maximization, Difficulty: D, Type: CA, Answer: d
A perfectly competitive firm in the short-run 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.
Topic: Short-run profit maximization, Difficulty: D, Type: CA, Answer: c
A perfectly competitive firm sells its output for $100 per unit and marginal cost is $100 per unit.
To maximize short-run profit, the firm should:
a. increase output.
b. decrease output.
c. maintain its current output.
d. shut down.
Topic: Short-run profit maximization, Difficulty: D, Type: CA, Answer: a
Assume that a firm's marginal revenue just barely exceeds marginal cost. Under these conditions
the firm should:
a. expand output.
b. contract output.
c. maintain output.
d. There is insufficient information to answer the question.
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Topic: Short-run supply curve, Difficulty: D, Type: CA, Answer: b
A perfectly competitive firm's short-run supply curve is the:
a. segment of the marginal cost curve above average fixed cost.
b. segment of the marginal cost curve above the minimum level of average variable cost.
c. upward-sloping segment of the marginal cost curve.
d. both a and b.
Topic: Long-run equilibrium for a competitive firm, Difficulty: D, Type: CA, Answer: d
In long-run equilibrium, the typical perfectly competitive firm has no incentive to:
a. change output.
b. change plant size.
c. enter or leave the industry.
d. do any of the above.
Topic: Long-run equilibrium for a competitive firm, Difficulty: D, Type: CA, Answer: d
In long-run equilibrium, the typical perfectly competitive firm has no incentive to:
a. change output.
b. change plant size.
c. enter or leave the industry.
d. do any of the above.
Topic: Long-run equilibrium for a competitive firm, Difficulty: D, Type: CA, Answer: d
In long-run equilibrium, the perfectly competitive firm sets its price equal to which of the
following?
a. Short-run average total cost.
b. Short-run marginal cost.
c. Long-run average cost.
d. All of the above.
Topic: Long-run equilibrium for a competitive firm, Difficulty: D, Type: CA, Answer: d
In a perfectly competitive industry, assume there is a permanent increase in demand for a
product. The process of transition to a new long-run equilibrium will include:
a. the exit of firms.
b. temporarily lower production costs.
c. both a and b.
d. neither a nor b.
Topic: Long-run equilibrium for a competitive firm, Difficulty: D, Type: CA, Answer: e
Consider a firm operating with the following: price = 10; MR = 10; MC = 10; ATC = 10. This
firm is:
a. making an economic profit of 10.
b. an example of monopolistic competition.
c. going to go out of business in the long run.
d. a monopolist for a product with a relatively inelastic demand.
e. perfectly competitive in long-run equilibrium.