Econ Chapter 6 – Flashcards
Unlock all answers in this set
Unlock answersquestion
True or False: The structures of the markets in which business firms sell their products in the U.S. economy are very similar.
answer
False
question
True or False: There are significant obstacles to entry in a purely competitive industry.
answer
False
question
True or False: In a purely competitive industry individual firms do not have control over the price of their product.
answer
True
question
True or False: Imperfectly competitive markets are defined as all markets except those that are purely competitive.
answer
True
question
True or False: One reason for studying the pure competition model is that most industries are purely competitive.
answer
False
question
True or False: The purely competitive firm views an average revenue schedule as identical to its marginal revenue schedule.
answer
True
question
True or False: The demand curves for an individual firm in a purely competitive industry are perfectly inelastic.
answer
True
question
True or False: Price and average revenue are the same in pure competition.
answer
True
question
True or False: Total revenue for each sales level is found by multiplying price by the quantity the firm can sell at that price.
answer
True
question
True or False: Marginal revenue is the change in average revenue that results from selling one more unit of output.
answer
False
question
True or False: In pure competition, price is equal to marginal revenue and also equal to average revenue.
answer
True
question
True or False: Under purely competitive conditions, the product price charged by the firm increases as output increases.
answer
False
question
True or False: The purely competitive firm can maximize its economic profit (or minimize its loss) only by adjusting its output.
answer
True
question
True or False: Economic profit is the difference between total revenue and average revenue.
answer
False
question
True or False: The break-even point means that the firm is realizing normal profits, but not economic profits.
answer
True
question
True or False: A purely competitive firm that wishes to produce and not close down will maximize profits or minimize losses at that output at which marginal costs and marginal revenue are equal.
answer
True
question
True or False: Assuming that the purely competitive firm chooses to produce and not close down, to maximize profits or minimize losses it should produce at that point where price equals average cost.
answer
False
question
True or False: If a purely competitive firm is producing output less than its profit-maximizing output, marginal revenue is greater than marginal cost.
answer
True
question
True or False: If, at the profit-maximizing level of output for the purely competitive firm, price exceeds the minimum average variable cost but is less than average total cost, the firm will make a profit.
answer
False
question
True or False: A purely competitive firm will produce in the short run the output at which marginal cost and marginal revenue are equal provided that the price of the product is greater than its average variable cost of production.
answer
True
question
True or False: The short-run supply curve of the purely competitive firm is the segment of the firm's short-run marginal cost curve that lies above the firm's average variable cost curve.
answer
True
question
True or False: The short-run supply curve of a purely competitive firm tends to slope upward from left to right because of the law of diminishing returns.
answer
True
question
True or False: An increase in the price of a variable input will shift the marginal cost or short-run supply curve downward.
answer
False
question
True or False: An improvement in technology that raises productivity will shift the marginal cost or the short-run supply curve downward.
answer
True
question
True or False: Product price is a given fact to the individual competitive firm, but the supply plans of all competitive firms as a group are a basic determinant of product price.
answer
True
question
For which market model are there a very large number of firms? (a) Monopolistic competition (b) Oligopoly (c) Pure monopoly (d) Pure competition
answer
D
question
In which market model is the individual seller of a product a price taker? (a) Pure competition (b) Pure monopoly (c) Monopolistic competition (d) Oligopoly
answer
A
question
Which industry comes closest to being purely competitive? (a) Agriculture (b) Retail trade (c) Electricity (d) Automobile
answer
A
question
In a purely competitive industry, (a) each existing firm will engage in various forms of nonprice competition (b) new firms are free to enter and existing firms are able to leave the industry very easily (c) individual firms have a price policy (d) each firm produces a differentiated (nonstandardized) product
answer
B
question
The demand schedule or curve confronted by the individual competitive firm is (a) perfectly inelastic (b) inelastic but not perfectly inelastic (c) perfectly elastic (d) elastic but not perfectly elastic
answer
C
question
Total revenue for producing 10 unit of output is $6. Total revenue for producing 11 units of output is $8. Given this information, the (a) average revenue for producing 11 units is $2 (b) average revenue for producing 11 units is $8 (c) marginal revenue for producing the 11th unit is $2 (d) marginal revenue for producing the 11th unit is $8
answer
C
question
In pure competition, product price is (a) greater than marginal revenue (b) equal to marginal revenue (c) equal to total revenue (d) greater than total revenue
answer
B
question
Suppose that when 2000 units of output are produced, the marginal cost of the 2001st unit is $5. This amount is equal to the minimum of average total cost, and marginal cost is rising. If the optimal level of output in the short run is 2500 units, then at that level (a) marginal cost is greater than $5 and marginal cost is less than the average total cost (b) marginal cost is greater than $5 and marginal cost is greater than average total cost (c) marginal cost is less than $5 and marginal cost is greater than average total cost (d) marginal cost is equal to $5 and marginal cost is equal to average total cost
answer
B
question
The Zebra Inc. is selling in a purely competitive market. Its output is 250 units, which sell for $2 each. At this level of output, marginal cost is $2 and average variable cost is $2.25. The firm should (a) produce zero units of output (b) decrease output to 200 units (c) continue to produce 250 units (d) increase output to maximize profits
answer
A
question
The Zebra Inc. is selling in a purely competitive market. Its output is 250 units, which sell for $2 each. At this level of output, marginal cost is $2 and average variable cost is $2.25. The firm should (a) produce zero units of output (b) decrease output to 200 units (c) continue to produce 250 units (d) increase output to maximize profits
answer
A
question
The Zebra Inc. is selling in a purely competitive market. Its output is 250 units, which sell for $2 each. At this level of output, marginal cost is $2 and average variable cost is $2.25. The firm should (a) produce zero units of output (b) decrease output to 200 units (c) continue to produce 250 units (d) increase output to maximize profits
answer
A
