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Under what circumstances should a company stop saving into a sinking fund?


A) When the firm foresees closure and has no reason to replace depreciating equipment.
B) When prices of new equipment are rising dramatically.
C) Firms should never stop saving into a sinking fund.
D) When technological innovation in the industry is stagnant.

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The total revenue of a purely competitive firm from selling 6 units of output is $48. Based on this information, the unit price of the output must be


A) $8.
B) $42.
C) $288.
D) $54.

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If MR > MC for a competitive firm, it should reduce its level of output in order to make MR equal to MC.

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The accompanying table applies to a purely competitive industry composed of 100 identical firms. The equilibrium price in this purely competitive market is A) $5. B) $4. C) $3. D) $2. The accompanying table applies to a purely competitive industry composed of 100 identical firms. The equilibrium price in this purely competitive market is


A) $5.
B) $4.
C) $3.
D) $2.

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If the supply and demand curves in the provided graph represent the market supply and demand for a purely competitive industry, then the demand curve that an individual firm in the industry faces A) is identical to the market demand. B) is equal to the marginal-revenue curve, which is a flat line at Pā‚€ . C) is more elastic than the market demand but has a marginal-revenue curve lying below it. D) has the same slope as the market demand, but at Pā‚€ its quantity demanded is only a fraction of Qā‚€ . If the supply and demand curves in the provided graph represent the market supply and demand for a purely competitive industry, then the demand curve that an individual firm in the industry faces


A) is identical to the market demand.
B) is equal to the marginal-revenue curve, which is a flat line at Pā‚€ .
C) is more elastic than the market demand but has a marginal-revenue curve lying below it.
D) has the same slope as the market demand, but at Pā‚€ its quantity demanded is only a fraction of Qā‚€ .

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The first table shows cost data for a single firm. Now suppose that there are 600 identical firms in this industry, each with the same cost data. Suppose, too, that the demand curve for this industry is as shown in the second table. Based on all these data, the equilibrium price of the product in the market will be A) $60. B) $95. C) $120. D) $75. The first table shows cost data for a single firm. Now suppose that there are 600 identical firms in this industry, each with the same cost data. Suppose, too, that the demand curve for this industry is as shown in the second table. The first table shows cost data for a single firm. Now suppose that there are 600 identical firms in this industry, each with the same cost data. Suppose, too, that the demand curve for this industry is as shown in the second table. Based on all these data, the equilibrium price of the product in the market will be A) $60. B) $95. C) $120. D) $75. Based on all these data, the equilibrium price of the product in the market will be


A) $60.
B) $95.
C) $120.
D) $75.

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For a purely competitive seller, price equals


A) average revenue.
B) marginal revenue.
C) total revenue divided by output.
D) all of these.

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Assume the price of a product sold by a purely competitive firm is $5. Given the data in the accompanying table, at what output level is total profit highest in the short run? Assume the price of a product sold by a purely competitive firm is $5. Given the data in the accompanying table, at what output level is total profit highest in the short run? A) 40. B) 20. C) 30. D) 50.


A) 40.
B) 20.
C) 30.
D) 50.

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Marginal revenue is the


A) change in product price associated with the sale of one more unit of output.
B) change in average revenue associated with the sale of one more unit of output.
C) difference between product price and average total cost.
D) change in total revenue associated with the sale of one more unit of output.

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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 $2.00. The market price of the product is $4.00. To maximize profits or minimize losses, the firm should


A) continue producing 800 units.
B) continue production, but reduce output.
C) increase production.
D) shut down.

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What is the relationship between marginal cost and the short-run supply curve for the purely competitive firm?

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The short-run supply curve is the portio...

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Increasing the share of your income that you save is good for you. Therefore, it would be good for the whole economy if everyone saved more. This exemplifies the


A) post hoc fallacy.
B) fallacy of composition.
C) use of loaded terminology.
D) confusion between correlation and causation.

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The table shows the total costs for a purely competitive firm. If the firm shuts down in the short run, the total cost will be A) $ 0. B) $2,500. C) $2,700. D) $3,100. The table shows the total costs for a purely competitive firm. If the firm shuts down in the short run, the total cost will be


A) $ 0.
B) $2,500.
C) $2,700.
D) $3,100.

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A purely competitive firm will be willing to produce even at a loss in the short run, as long as


A) the loss is smaller than its total variable costs.
B) the loss is smaller than its marginal costs.
C) the loss is smaller than its total fixed costs.
D) price exceeds marginal costs.

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If a purely competitive firm is producing at the P = MC output and realizing an economic profit, at that output


A) marginal revenue is less than price.
B) marginal revenue exceeds ATC.
C) ATC is being minimized.
D) total revenue equals total cost.

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Using the total revenue and total cost method, determine the level of output the purely competitive firm should produce in the short run?

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First, find total revenue by multiplying...

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The short-run supply curve for a purely competitive industry can be found by


A) multiplying the AVC curve of the representative firm by the number of firms in the industry.
B) adding horizontally the AVC curves of all firms.
C) summing horizontally the segments of the MC curves lying above the AVC curve for all firms.
D) adding horizontally the immediate market period supply curves of each firm.

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How does pure competition differ from other basic market models?

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The other basic market models are pure m...

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The accompanying table shows cost data for a firm that is selling in a purely competitive market. If the product price is $180, the per-unit economic profit at the profit-maximizing output is A) $0 B) $238 C) $34 D) $73 The accompanying table shows cost data for a firm that is selling in a purely competitive market. If the product price is $180, the per-unit economic profit at the profit-maximizing output is


A) $0
B) $238
C) $34
D) $73

Correct Answer

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


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.

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