### Quiz 8 of ECON251 Purdue University In Tutorial Library

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### TITLE: Quiz 8 of ECON251 Purdue University

#### CLASS / COURSE: ECON 25100: Microeconomics

QUESTION DESCRIPTION:

Quiz 8 (Chapter 8)

1. Which idea is inconsistent with pure competition?

A. Short-run losses
B. Product differentiation
C. Freedom of entry or exit for firms
D. A large number of buyers and sellers

2. Which is not a required characteristic of a purely competitive industry?

A. Industry demand is highly elastic
B. Firms can enter or leave the industry
C. There are so many firms that none can influence market price
D. Consumers have no reason to prefer one firm's product to another because products are homogeneous

3. A purely competitive firm can be identified by the fact that:

A. There are other firms in the industry producing close substitutes
B. It is making only normal profits in the short run
C. Its average revenue equals marginal revenue
D. It experiences diminishing marginal returns

4. Given the table below, what is the short-run profit-maximizing level of output for the firm?

A. 2 units
B. 3 units
C. 4 units
D. 5 units

5. The table shows the total costs for a purely competitive firm.

Refer to the above table. If the firm shuts down in the short run, the total cost will be:

A. \$1,350
B. \$2,500
C. \$2,700
D. \$3,100

6. In a typical graph for a purely competitive firm, where the total cost and total revenue curves intersect there is a(n):

A. Economic profit
B. Economic loss
C. Normal profit
D. Zero level of output

7. Use the table below to answer the question for a purely competitive firm.

Refer to the above table. The equilibrium price of the product is:

A. \$40
B. \$80
C. \$120
D. \$160

8. The Campus Crustacean Company receives \$2 per box for its crawfish and is selling 1,600 boxes to maximize its profits. What is the profit per box of crawfish at this equilibrium level of output if the average variable cost is \$1 per box and fixed costs are \$1,200?

A. \$.25
B. \$.50
C. \$1.00
D. \$1.25

9. A purely competitive firm is producing at the point where its marginal cost equals the price of its product. If the firm increases its output, then total revenue will:

A. Increase and profits will increase
B. Decrease and profits will increase
C. Increase and profits will decrease
D. Decrease and profits will decrease

10. Refer to the above graph for a purely competitive firm operating at a loss in the short run. Which of the following changes in its market would allow the firm to earn positive profits again?

A. An increase in the market demand
B. An increase in the wages of workers in the industry
C. A decrease in the price of raw materials used by firms in the industry
D. A decrease in the price of the industry's product

11. Refer to the above graph. At what price will the firm make just a normal profit?

A. \$2
B. \$5
C. \$7
D. \$10

12. A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 200 units is \$4.00. The minimum possible average variable cost is \$3.50. The market price of the product is \$3.00. To maximize profit or minimize losses, the firm should:

A. Continue to produce 500 units
B. Produce less than 500 units
C. Produce more than 500 units
D. Shut down

13. In a purely competitive industry:

A. there will be no economic profits in either the short run or the long run.
B. economic profits may persist in the long run if consumer demand is strong and stable.
C. there may be economic profits in the short run, but not in the long run.
D. there may be economic profits in the long run, but not in the short run.

14. If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then:

A. the selling price for this firm is above the market equilibrium price.
B. new firms will enter this market.
C. some existing firms in this market will leave.
D. there must be price fixing by the industry's firms.

15. The primary force encouraging the entry of new firms into a purely competitive industry is:

A. normal profits earned by firms already in the industry.
B. economic profits earned by firms already in the industry.
C. government subsidies for start-up firms.
D. a desire to provide goods for the betterment of society.

16. For a purely competitive firm total revenue:

A. is price times quantity sold.
B. increases by a constant absolute amount as output expands.
C. graphs as a straight upsloping line from the origin.
D. has all of these characteristics.

17. The marginal revenue curve of a purely competitive firm:

A. lies below the firm's demand curve.
B. is downsloping because price must be reduced to sell more output.
C. is horizontal at the market price.
D. has all of these characteristics.

18. Refer to the above diagram. The profit-maximizing output:

A. is n.
B. is k.
C. is h.
D. cannot be determined from the information given.

19. Refer to the above diagram. This firm is selling its product in a(n):

A. purely competitive market
B. oligopoly market.
C. monopolistically competitive market.
D. monopolistic market.

20. Answer the question on the basis of the following data confronting a firm:

Refer to the above data. Assuming total fixed costs equal to zero, the firm's:

A. economic profit is \$12.
B. economic profit is \$16.
C. loss is \$14.
D. economic profit is \$3.

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