### Quiz 9 of ECON251 Purdue University In Tutorial Library

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### TITLE: Quiz 9 of ECON251 Purdue University

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

QUESTION DESCRIPTION:

Quiz 9 (Chapter 9)

1. There is no control over price by firms in:

A. Oligopoly
B. Pure monopoly
C. Pure competition
D. Monopolistic competition

2. 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

3. In a purely competitive industry, each firm:

A. Is a price maker
B. Produces a differentiated product
C. Can easily enter or exit the industry
D. Engages in forms of nonprice competition

4. In pure competition, marginal revenue is:

A. Equal to total revenue
B. Equal to product price
C. Less than product price
D. Greater than product price

5. Refer to the above graph. The amount of profit is measured by the difference between:

A. A and c
B. B and c
C. D and e
D. A and f

6. Farmer Jones is producing wheat, and must accept the market price of \$6.00 per bushel. At this time, her average total costs and her marginal costs both equal \$8.00 per bushel. Her average variable costs are \$5 per bushel. In choosing her optimal output, farmer Jones should:

A. Increase output
B. Increase selling price
C. Produce zero output and close down
D. Reduce output but continue production

7. A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 800 units is \$3.50. The minimum possible average variable cost is \$3.00. The market price of the product is \$4.00. To maximize profit or minimize losses, the firm should:

A. Continue producing 800 units
B. Produce less than 800 units
C. Produce more than 800 units
D. Shut down

8. 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?

A. Shut down if the minimum possible average variable cost is \$3.00
B. Decrease output if the minimum possible average variable cost is \$3.00
C. Increase output if the minimum possible average variable cost is \$3.75
D. Decrease output if the minimum possible average variable cost is \$3.75

9. It shows cost data for a firm that is selling in a purely competitive market.

Refer to the above table. If the market price for the firm's product is \$70, the competitive firm will:

A. Produce 1 unit
B. Produce 2 units
C. Produce 3 units
D. Shut down

10. When a firm produces less output, it can reduce:

A. Its fixed costs but not its variable costs
B. Its variable costs but not its fixed costs
C. Average fixed cost
D. Marginal revenue

11. The purely competitive firm above will:

A. Shut down
B. Produce with short-run losses
C. Produce with long-run economic profits
D. Produce with short-run economic profits

12. The purely competitive firm's supply curve:

A. Is perfectly inelastic in the short run
B. Is horizontal in the long run
C. Is upward sloping when some inputs are fixed
D. Becomes less elastic in the long run

13. Given the above graph, the competitive firm's supply curve is the:

A. MC curve above F
B. MC curve above G
C. MC curve above H
D. MC curve above J

14. Refer to the above graph. At what price will the firm make an economic profit?

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

15. Refer to the above diagram. All data are for the short run. If product price is P3, the firm will:

A. Produce Q1 units and break even
B. Produce Q4 units and make an economic profit
C. Produce Q5 units and break even
D. Shut down

16. If a purely competitive firm is producing at an output where marginal revenue exceeds marginal cost, the firm will increase its profit by:

A. Reducing production to the point where variable costs are minimized
B. Reducing production to the point where unit costs are minimized
C. Reducing its output and simultaneously increasing its price
D. Increasing its output

17. A purely competitive firm, as shown above, will face what kind of change in profits over the long run, assuming industry demand is constant?

A. Profits will increase
B. Profits will decrease
C. Profits will be unchanged
D. Cannot be decided from the information given

18. Refer to the above graphs. Which statement is true?

A. The firm will increase production
B. The firm is experiencing economic losses
C. The firm is breaking even
D. The firm is making economic profit

19. If there is a decrease in demand for a product in a purely competitive industry, it results in an industry:

A. Contraction that will end when the price of the product is greater than its marginal cost
B. Contraction that will end when the price of the product is equal to its marginal cost 100%
C. Expansion that will end when the price of the product is greater than its marginal cost
D. Expansion that will end when the price of the product is equal to its marginal cost

20. When a purely competitive firm is in long-run equilibrium, price is equal to:

A. Marginal cost, but may be greater or less than average cost
B. Minimum average cost, and also to marginal cost 100%
C. Minimum average cost, but may be greater or less than marginal cost
D. Marginal revenue, but may be greater or less than both average and marginal cost

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