1. Under perfectly competitive conditions, marginal revenue is
a. greater than average revenue
b. equal to average revenue
c. less than average revenue
d. equal to the average variable
2. A firm's break-even point occurs where
a. marginal revenue equals marginal cost
b. marginal revenue equals average variable cost
c. total revenue equals total cost
d. total revenue equals total variable cost
3. The addition to total output resulting from using one more unit of a productive resource is the
a. average product
b. marginal input
c. total product
d. marginal product
4. Unlike a firm in pure competition, a monopolist may be able to
a. block the entry of new firms into the industry
b. continue to earn economic profits in the long run
c. earn economic profits in the short run
d. both (a) and (b)
5. Producer surplus is the difference between the price the firm is willing to sell its goods and the price it actually receives.
a. true
b. false
6. In the long run, under conditions of perfect competition, market forces come into play to
a. enhance profits
b. increase demand
c. eliminate profits
d. separate MR and AR
7. Consumer surplus is the area above the demand curve and below the equilibrium price.
a. true
b. false
8. Under perfect competition, market price is determined by market demand and supply.
a. true
b. false
9. The more that firms advertise, the closer they get to perfect competition.
a. true
b. false
10. Perfect competition assumes that a producer is interested in maximizing profit.
a. true
b. false
11. In the long run, under conditions of perfect competition, the buyer will eventually be able to buy the product at a
a. price equal to the lowest point on the ATC curve past the optimal scale of operation
b. price below cost
c. price equal to the lowest point on the ATC curve at the optimal scale of operation
d. discount
12. The lowest possible ATC curve is attained at the optimal scale of output.
a. true
b. false
13. Perfect competition assumes that all products are identical and that no advertising exists.
a. true
b. false
14. The demand curve for the output of a perfectly competitive firm is
a. perfectly inelastic
b. perfectly elastic
c. a rectangular hyperbola with an elasticity equal to 1
d. identical in shape to the market demand curve
15. If a firm is producing an output level for which the market price exceeds the firm's marginal cost,
a. consumers would be willing only to pay a price lower than what it costs the firm to produce another unit
b. consumers would be willing only to pay a price equal to what it costs the firm to produce another unit
c. consumers would be willing to pay a price greater than what it costs the firm to produce another unit
d. consumers would be willing only to pay a price equal to or lower than what it costs the firm to produce another unit
16. Under conditions of perfect competition, if losses occur in an industry, market forces may come into play to
a. reduce supply
b. lower average revenue
c. increase supply
d. attract new firms
17. An administered price is a price
a. set by overall demand and supply
b. established by a seller
c. set by the government
d. determined through collective bargaining