Chapter 11 Perfect Competition - Sample Questions …

1 Chapter 11 Perfect Competition - Sample QuestionsMULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the ) Perfect Competition is an industry withA) a few firms producing identical ) many firms producing goods that differ ) a few firms producing goods that differ somewhat in ) many firms producing identical )2) In a perfectly competitive industry, there areA) many buyers and many ) many sellers, but there might be only one or two ) many buyers, but there might be only one or two ) one firm that sets the price for the others to )3) In Perfect Competition , the product of a single firmA) is sold to different customers at different ) has many Perfect complements produced by other ) has many Perfect substitutes produced by other )

2 Is sold under many differing brand )4) In Perfect Competition , restrictions on entry into an industryA) do not ) apply to labor but not to ) apply to both capital and ) apply to capital but not to )5) In Perfect Competition ,A) there are significant restrictions on ) each firm can influence the price of the ) there are few ) all firms in the market sell their product at the same )6) The price elasticity of demand for any particular perfectly competitive firm's output isA) less than ) equal to ) ) )7) The demand for wheat from farm A is perfectly elastic because wheat from farm A is a(n)A) Perfect complement to wheat from farm B. B) Perfect substitute for wheat from farm ) normal ) inferior )8) In Perfect Competition , the elasticity of demand for the product of a single firm isA) ) ) )between 0 and )19) In Perfect Competition , the elasticity of demand for the product of a single firm isA) infinite, because many other firms produce identical ) zero, because many other firms produce identical ) zero, because the firm produces a unique ) infinite, because the firm produces a unique )10) In Perfect Competition , an individual firmA) has a price elasticity of supply equal to ) faces unitary elasticity of ) has a price elasticity of supply equal to ) faces infinitely elastic )11) If Steve's Apple Orchard, Inc.

3 Is a perfectly competitive firm, the demand for Steve's apples hasA) elasticity equal to the price of ) unitary ) infinite ) zero )12) In a perfectly competitive industry, the price elasticity of demand for the marketdemand is_____ and the price elasticity of demand for an individual firm's demand is ) infinite; less than infiniteB) infinite; infiniteC) less than infinite; less than infiniteD) less than infinite; infinite12)13) A perfectly competitive firm's demand curve isA) perfectly ) the same as the market demand ) downward ) the same as the firm's marginal revenue )14) The market for fish is perfectly competitive. So, the price elasticity of demand for fish from a singlefisheryA) is sometimes greater than and sometimes less than the elasticity of demand for fish ) is greater than the elasticity of demand for fish ) is less than the elasticity of demand for fish ) equals the elasticity of demand for fish )15) In Perfect Competition , the price of the product is determined where the industryA) elasticity of supply equals the industry elasticity of ) supply curve and industry demand curve ) fixed cost is ) average variable cost equals the industry average total )16) Economists assume that a perfectly competitive firm's objective is to maximize itsA) ) economic profit.

4 C) output ) quantity )217) Total economic profit isA) total revenue minus total opportunity ) marginal revenue minus marginal ) total revenue divided by total ) marginal revenue divided by marginal )18) The economic profit of a perfectly competitive firmA) is less than its total ) is greater than its total ) equals its total ) is less than its total revenue if its supply curve is inelastic and is greater than its total revenueif its supply curve is )19) In Perfect Competition , a firm that maximizes its economic profit will sell its goodA)below the market ) above the market )below the market price if its supply curve is inelastic and above the market price if its supplycurve is ) at the market )20) The above figure shows a firm's total revenue line.

5 The firm must be in a market withA) monopolistic ) ) Perfect ) )21) For a perfectly competitive firm, curve Ain the above figure is the firm'sA) average fixed cost ) average variable cost ) total revenue ) total fixed cost )322) The figure above portrays a total revenue curve for a perfectly competitive firm. Curve A is straightbecause the firmA) has Perfect ) wants to maximize its ) is a price ) faces constant returns to )23) The figure above portrays a total revenue curve for a perfectly competitive firm. The firm'smarginal revenue from selling a unit of outputA) equals $ ) equals $ ) equals $ ) cannot be )24) The figure above portrays a total revenue curve for a perfectly competitive firm. The price of theproduct in this industryA) equals $ ) equals $ ) equals $ ) cannot be )25) In the above figure showing a perfectly competitive firm's total revenue line, the firm's marginalrevenueA) does not change as output ) falls as output ) rises as output ) cannot be ) Quantity Price5$156$157$1526) In the above table, if the firm sells 5 units of output, its total revenue isA) $ ) $ ) $ ) $ )27) In the above table, if the quantity sold by the firm rises from 5 to 6, its marginal revenue isA) $ ) $ ) $ ) $ )28) In the above table, if the quantity sold by the firm rises from 6 to 7, its marginal revenue isA) $ ) $ ) $ ) $ )29) In Perfect Competition , the marginal revenue of an individual firmA)

6 Equals the price of the ) is positive but less than the price of the ) exceeds the price of the ) is )30) In the case of a perfectly competitive firm, theA) firm's marginal revenue exceeds the price of the ) change in the firm's total revenue equals the price of the product multiplied by the change inquantity ) firm's marginal revenue is less than average ) price of the product falls sharply when the quantity the firm sells )431) In Perfect Competition , the firm's marginal revenue curveA) cuts its demand curve from above, going from left to ) always lies below its demand ) cuts its demand curve from below, going from left to ) is the same as its demand )32) At a firm's break-even point, definitely itsA) marginal revenue equals its average fixed ) marginal revenue equals its average variable ) total revenue equals its total opportunity ) marginal revenue exceeds its marginal )33) When Sidney's Sweaters, Inc.

7 Makes exactly zero economic profit, Sidney, the owner,A) makes an income equal to his best alternative forgone ) will boost ) will shut down in the short ) is taking a )34) The break-even point is defined as occurring at an output rate at whichA) total cost is ) total revenue equals total opportunity ) economic profit is ) marginal revenue equals marginal ) Output Total Revenue Total Cost0$0$251$30$492$60$693$90$914$120$117 5$150$1476$180$18035) In the above table, the price of the product isA) $ ) $ ) $ ) $ )36) In the above table, the firmA) must be in a perfectly competitive industry, because its marginal revenue is ) cannot be in a perfectly competitive industry, because its short-run economic profits aregreater than ) cannot be in a perfectly competitive industry, because its long-run economic profits aregreater than ) must be in a perfectly competitive industry, because its marginal cost curve eventually )37) In the above table, the marginal revenue from the fourth unit of output isA) $ ) $ ) $ ) $ )538) In the above table, if the firm produces 2 units of output, it will make an economicA) loss of $ ) profit of $ ) loss of $ ) profit of $ ) Output (balloons per hour) Total Cost (dollars per hour)0$ $ $ $ $ $ $ ) In the above table, the firm's total fixed cost of production isA) $ ) $ ) $ ) $ )40)

8 In the above table, the average fixed cost at 4 units of output isA) $ ) $ ) $ ) $ )41) In the above table, the average variable cost at 2 units of output isA) $ ) $ ) $ ) $ )42) In the above figure, by increasing its output from Q1toQ2, the firmA) increases its ) increases its marginal ) reduces its marginal ) decreases its )43) In the above figure, by increasing its output from Q2to Q3, the firmA) increases its marginal ) reduces its marginal ) decreases its ) increases its )644) The above figure illustrates a firm's total revenue and total cost curves. Which one of the followingstatements is FALSE?A) At output Q1 the firm makes zero economic ) At an output above Q3 the firm incurs an economic ) Economic profit is the vertical distance between the total revenue curve and the total ) At output Q2 the firm incurs an economic )45) The feature of the above figure that indicates that the firm is a perfectly competitive firm is theA) fact that the total cost and total revenue curves are farthest apart at output is ) shape of the total revenue ) fact that the total cost and total revenue curves cross ) shape of the total cost )46) In the above figure, the firm is making an economic loss atA) point ) points band ) points a, b, and ) point )47) In the above figure, the firm is breaking even at pointsA)a and )

9 B and )cand )a and )48) In the above figure, when the firm produces output corresponding to point c, the firm's marginalcostA) is less than its marginal ) equals its average ) exceeds its marginal ) equals its marginal )749) For a perfectly competitive firm, in a diagram with quantity on the horizontal axis and both totalrevenue and total cost on the vertical axis, the firm's _____ is a straight line ) total cost curve; through the originB) total revenue curve; with zero slopeC) total cost curve; with zero slopeD) total revenue curve; through the origin49)50) A perfectly competitive firm maximizes its profit by producing the output at which its marginalcost equals itsA) average variable ) marginal ) average total ) average fixed )51) For a firm in Perfect Competition , a diagram shows quantity on the horizontal axis and both thefirm's marginal cost (MC) and its marginal revenue (MR) on the vertical axis.

10 The firm'sprofit-maximizing quantity occurs at the point where theA)MC curve intersects the MR curve from above, going from left to ) slope of the MC curve is )MC curve intersects the MR curve from below, going from left to )MC and MR curves are )52) A firm will expand the amount of output it produces as long as itsA) average total revenue exceeds its average variable ) marginal revenue exceeds its marginal ) marginal cost exceeds its marginal ) average total revenue exceeds its average total )53) A perfectly competitive firm is producing at the point where its marginal cost equals its marginalrevenue. If the firm boosts its output, its total revenue will _____ and its profit will ) fall; fallB) fall; riseC) rise; riseD) rise; fall53)54) A perfectly competitiv