Question 1

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output is $4.00 and the market price is $4.50. What should the firm do?

Accepted Answer

A)   shut down if the minimum possible average variable cost is below $4.50
B)   decrease output if the minimum possible average variable cost is below $4.50
C)   increase output if the minimum possible average variable cost is below $4.50
D)   decrease output if the minimum possible average variable cost is above $4.50

Question 2

Which of the following is true under conditions of pure competition?

Accepted Answer

A)   There are differentiated products.
B)   The market demand curve is perfectly elastic.
C)   No single firm can influence the market price by changing its production level.
D)   Each individual firm has the ability to set its own price.

Question 3

Although individual purely competitive firms can influence the price of their product, these firms as a group cannot influence market price.

Accepted Answer

A) True 
 B)False

Question 4

Technological advance improves productivity in a purely competitive industry. This change will result in a shift

Accepted Answer

A)   down of the individual firm's MC curve, causing the market supply curve to shift to the left.
B)   down of the individual firm's MC curve, causing the market supply curve to shift to the right.
C)   up of the individual firm's MC curve, causing the market supply curve to shift to the left.
D)   up of the individual firm's MC curve, causing the market supply curve to shift to the right.

Question 5

(Consider This)  An unprofitable motel will stay open in the short run if

Accepted Answer

A)   price (average nightly room rate)  exceeds average variable cost.
B)   marginal revenue exceeds marginal cost.
C)   price (average nightly room rate)  exceeds average fixed cost.
D)   marginal revenue exceeds price.

Question 6

Assume for a competitive firm that MC = AVC at $12, MC = ATC at $20, and MC = MR at $16. This firm will

Accepted Answer

A)   realize a profit of $4 per unit of output.
B)   maximize its profit by producing in the short run.
C)   minimize its losses by producing in the short run.
D)   shut down in the short run.

Question 7

Rent (Binding 20-Year Lease)  $1,000 Per Week Sales $2,000 Per Week Raw Material Cost $1,000 Per Week Value of Your Own Labor $500 Per Week
As president and owner of the Sour Grapes Lemonade Company, you face the costs shown. To maximize your financial well-being, you should

Accepted Answer

A)   continue to operate in the short run because rent is less than sales.
B)   shut down because variable costs exceed fixed costs.
C)   shut down because the company is losing money.
D)   continue operating in the short run.

Exam 10: Pure Competition in the Short Run

Assume for a competitive firm that MC = AVC at $12, MC = ATC at $20, and MC = MR at $16. This firm will

Correct Answer
verified

Technological advance improves productivity in a purely competitive industry. This change will result in a shift

Correct Answer
verified

(Consider This) An unprofitable motel will stay open in the short run if

Correct Answer
verified

Which of the following is true under conditions of pure competition?

Correct Answer
verified

Rent (Binding 20-Year Lease) $1,000 Per Week Sales $2,000 Per Week Raw Material Cost $1,000 Per Week Value of Your Own Labor $500 Per Week As president and owner of the Sour Grapes Lemonade Company, you face the costs shown. To maximize your financial well-being, you should

Correct Answer
verified

Although individual purely competitive firms can influence the price of their product, these firms as a group cannot influence market price.

Correct Answer
verified

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output is $4.00 and the market price is $4.50. What should the firm do?

Correct Answer
verified

Exam 10: Pure Competition in the Short Run

Assume for a competitive firm that MC = AVC at $12, MC = ATC at $20, and MC = MR at $16. This firm will

Correct AnswerverifiedShow Answer

Technological advance improves productivity in a purely competitive industry. This change will result in a shift

Correct AnswerverifiedShow Answer

(Consider This) An unprofitable motel will stay open in the short run if

Correct AnswerverifiedShow Answer

Which of the following is true under conditions of pure competition?

Correct AnswerverifiedShow Answer

Rent (Binding 20-Year Lease) $1,000 Per Week Sales $2,000 Per Week Raw Material Cost $1,000 Per Week Value of Your Own Labor $500 Per Week As president and owner of the Sour Grapes Lemonade Company, you face the costs shown. To maximize your financial well-being, you should

Correct AnswerverifiedShow Answer

Although individual purely competitive firms can influence the price of their product, these firms as a group cannot influence market price.

Correct AnswerverifiedShow Answer

A firm sells a product in a purely competitive market. The marginal cost of the product at the current output is $4.00 and the market price is $4.50. What should the firm do?

Correct AnswerverifiedShow Answer

Correct Answer
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