Econ 001 - Principles of Microeconomics » Summer 2019 » Quiz 9
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Question #1
Which of the following statement(s) are true for a perfectly competitive firm that is seeking to maximize profits?,,
A.
Price is equal to marginal revenue.
B.
A profit-seeking firm should expand production into the zone where marginal cost is greater than marginal revenue.
C.
The best production choice is at a quantity where price is equal to marginal cost.
Question #2
If a perfectly competitive firm is producing output at a point where marginal revenue is equal to marginal cost, then it should:
A.
decrease output in order to maximize profits.
B.
stick with that level of production in order to maximize profits.
C.
increase output in order to maximize profits.
Question #3
The profit-maximizing choice for a perfectly competitive firm will occur where marginal revenue is equal to ________.
A.
fixed cost
B.
variable revenue
C.
marginal cost
Question #4
If a perfectly competitive firm is a price taker, then:
A.
it must be a relatively small player compared to its competitors in the overall market.
B.
it can increase or decrease its output without affecting overall quantity supplied in the market.
C.
quality differences will be very perceptible and will play a major role in purchasers' decisions.
D.
pressure from competing firms will force acceptance of the prevailing market price.
Question #5
Firms in a perfectly competitive market are said to be “price takers”—that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent?
A.
Yes, you would raise the price slightly.
B.
Yes, you would raise the price enough to meet your target pricing.
C.
No, you would not raise the price.
Question #6
Which of the following are assumptions of perfect competition?,,
A.
consumers have all the relevant information to make rational buying decisions.
B.
There are many buyers and sellers.
C.
The products are identical.
Question #7
In the ________, the perfectly competitive firm will react to losses by ________.
A.
long run : increasing capital inputs
B.
short run : increasing price
C.
short run : increasing physical inputs
D.
long run : reducing production or shutting down
Question #8
Which of the following statements accurately explains why profits for firms in a perfectly competitive industry tend to vanish in the long run?
A.
Firms that experience losses try to increase supply to cover their costs, leading to zero profits.
B.
Prices drop when other perfectly competitive firms see an opportunity to earn profits and enter the market.
C.
The demand for products falls over time, so firms are unable to generate revenue.
Question #9
In the ________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where ________.
A.
long run : fixed costs can be eliminated
B.
short run : fixed costs can be reduced
C.
short run : losses are smallest
D.
long run : variable costs can be increased
Question #10
Pete produces wheat in a purely competitive market. The market’s demand curve is a:
A.
vertical line.
B.
downward sloping line.
C.
horizontal line.
Question #11
A firm specific demand curve is:
A.
a curve showing the relationship between market supply and demand.
B.
a curve showing the relationship between a firm’s costs and the quantity of output a firm can produce.
C.
a curve showing the relationship between the price charged by a specific firm and the quantity the firm can sell.
Question #12
The demand curve for a firm in a perfectly competitive industry is:
A.
perfectly inelastic
B.
perfectly elastic
C.
unit elastic
Question #13
If a firm is producing so that the point chosen along the production possibility frontier is socially preferred, then that firm is said to have achieved:
A.
productive efficiency
B.
allocative efficiency
C.
utility-maximizing efficiency
Question #14
In perfect competition if firms produce where P=MC they ensure ________ because the social benefits of production as measured by the price that people are willing to pay, are in balance with the ________ to society of that production.
A.
allocative efficiency : marginal costs
B.
economic efficiency : total revenues
C.
allocative efficiency : costs
D.
economic efficiency : marginal revenues
Question #15
What condition is being met when goods are being produced and sold at the lowest possible average cost?
A.
productive efficiency
B.
allocative efficiency
C.
marginal cost efficiency
Question #16
If the price that a firm charges is lower than its ________ of production, the firm will suffer losses.
A.
average cost
B.
variable cost
C.
fixed cost
D.
marginal cost
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