978-1259723223 Test Bank TBChap010 Part 1

Chapter 10 Pure Competition in the Short Run Answer Key

Multiple Choice Questions

1.

Economists would describe the U.S. automobile industry as

2.

In which of the following market structures is there clear-cut mutual interdependence with

respect to price-output policies?

3.

Which of the following industries most closely approximates pure competition?

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written consent of McGraw-Hill Education.

A c c e s s i b i l i t y :

Keyboard Navigation

Blooms: Understand

D i f f i c u lt y :

02 Medium

Learning Objective: 10–01 Give the names and summarize the main characteristics of the four

basic market models.

Test Bank: I

T o p i c :

Four Market Models

4.

Economists use the term imperfect competition to describe

5.

In which of the following industry structures is the entry of new firms the most difficult?

6.

An industry comprising 40 firms, none of which has more than 3 percent of the total market

for a differentiated product, is an example of

10-3

written consent of McGraw-Hill Education.

B.

oligopoly.

C.

pure monopoly.

D.

pure competition.

AACSB: Knowledge Application

A c c e s s i b i l i t y :

Keyboard Navigation

Blooms: Understand

D i f f i c u lt y :

02 Medium

Learning Objective: 10–01 Give the names and summarize the main characteristics of the four

basic market models.

Test Bank: I

T o p i c :

Four Market Models

7.

An industry comprising four firms, each with about 25 percent of the total market for a

product, is an example of

8.

An industry comprising a very large number of sellers producing a standardized product is

known as

Test Bank: I

T o p i c :

Four Market Models

9.

An industry comprising a small number of firms, each of which considers the potential

reactions of its rivals in making price-output decisions, is

called

10.

Which of the following statements applies to a purely competitive producer?

11.

A purely competitive seller is

10-5

written consent of McGraw-Hill Education.

Blooms: Remember

Difficulty:

01 Easy

Learning Objective: 10–02 List the conditions required for purely competitive markets.

Test Bank: I

T o p i c :

Pure Competition: Characteristics and Occurrence

12.

Which of the following is not a characteristic of pure competition?

13.

Which of the following is not a basic characteristic of pure competition?

14.

The demand schedule or curve confronted by the individual, purely competitive firm is

10-6

written consent of McGraw-Hill Education.

A c c e s s i b i l i t y :

Keyboard Navigation

Blooms: Understand

D i f f i c u lt y :

02 Medium

Learning Objective: 10–03 Explain how demand is seen by a purely competitive seller.

Test Bank: I

T o p i c :

Demand as Seen by a Purely Competitive Seller

15.

Which of the following is characteristic of a purely competitive seller’s demand curve?

16. In answering the question, assume a graph in which dollars are measured on the vertical

axis and output on the horizontal axis.

For a purely competitive firm, total revenue graphs as a

17. In answering the question, assume a graph in which dollars are measured on the vertical

axis and output on the horizontal axis.

For a purely competitive firm, marginal revenue graphs

as a

10-7

written consent of McGraw-Hill Education.

A.

straight, upsloping line.

B.

straight line, parallel to the vertical axis.

C. straight line, parallel to the horizontal axis.

D. straight, downsloping line.

AACSB: Knowledge Application

A c c e s s i b i l i t y :

Keyboard Navigation

Blooms: Understand

D i f f i c u lt y :

02 Medium

Learning Objective: 10–03 Explain how demand is seen by a purely competitive seller.

Test Bank: I

T o p i c :

Demand as Seen by a Purely Competitive Seller

18. In answering the question, assume a graph in which dollars are measured on the vertical

axis and output on the horizontal axis.

For a purely competitive firm,

19.

If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its

marginal revenue

10-8

written consent of McGraw-Hill Education.

T o p i c :

Demand as Seen by a Purely Competitive Seller

20.

Price is constant to the individual firm selling in a purely competitive market because

21.

For a purely competitive seller, price equals

22.

For a purely competitive firm, total revenue

10-9

written consent of McGraw-Hill Education.

Test Bank: I

T o p i c :

Demand as Seen by a Purely Competitive Seller

23.

The marginal revenue curve of a purely competitive firm

24.

The demand curve in a purely competitive industry is , while the demand curve to a single

firm in that industry is .

25.

A perfectly elastic demand curve implies that the firm

10–10

written consent of McGraw-Hill Education.

D i f f i c u lt y :

02 Medium

Learning Objective: 10–03 Explain how demand is seen by a purely competitive seller.

Test Bank: I

T o p i c :

Demand as Seen by a Purely Competitive Seller

26.

The fact that a purely competitive firm‘s total revenue curve is linear and upsloping to the

right implies that

27.

Which of the following statements is correct?

28.

Refer to the diagram, which pertains to a purely competitive firm. Curve A represents

29.

Refer to the diagram, which pertains to a purely competitive firm. Curve C represents

30.

Marginal revenue is the

10–13

written consent of McGraw-Hill Education.

A c c e s s i b i l i t y :

Keyboard Navigation

Blooms: Understand

D i f f i c u lt y :

02 Medium

Learning Objective: 10–03 Explain how demand is seen by a purely competitive seller.

Test Bank: I

T o p i c :

Demand as Seen by a Purely Competitive Seller

31.

Firms seek to maximize

32.

A competitive firm in the short run can determine the profit-maximizing (or loss-

minimizing) output by equating

33.

In the short run, a purely competitive firm that seeks to maximize profit will produce

10–14

written consent of McGraw-Hill Education.

C.

that output at which economic profits are zero.

D.

at any point where the total revenue and total cost curves intersect.

AACSB: Knowledge Application

A c c e s s i b i l i t y :

Keyboard Navigation

Blooms: Understand

D i f f i c u lt y :

02 Medium

Learning Objective: 10–04 Convey how purely competitive firms can use the total-revenue–

total-cost approach to maximize profits or minimize losses in the short run.

Test Bank: I

T o p i c :

Profit Maximization in the Short Run: Total-Revenue–Total-Cost Approach

34.

Refer to the short-run data in the accompanying graph. The profit-maximizing output for this

firm is

10–15

written consent of McGraw-Hill Education.

Blooms: Understand

D i f f i c u lt y :

02 Medium

Learning Objective: 10–04 Convey how purely competitive firms can use the total-revenue–

total-cost approach to maximize profits or minimize losses in the short run.

Test Bank: I

T o p i c :

Profit Maximization in the Short Run: Total-Revenue–Total-Cost Approach

Type: Graph

35.

Refer to the short-run data in the accompanying graph. Which of the following is correct?

Type: Graph

36. A competitive firm will maximize profits at that output at which

37.

Curve (1) in the diagram is a purely competitive firm’s

10–17

written consent of McGraw-Hill Education.

D. total economic profit curve.

AACSB: Knowledge Application

Blooms: Understand

D i f f i c u lt y :

02 Medium

Learning Objective: 10–04 Convey how purely competitive firms can use the total-revenue–

total-cost approach to maximize profits or minimize losses in the short run.

Test Bank: I

T o p i c :

Profit Maximization in the Short Run: Total-Revenue–Total-Cost Approach

Type: Graph

38.

Curve (2) in the diagram is a purely competitive firm’s

10–18

written consent of McGraw-Hill Education.

T o p i c :

Profit Maximization in the Short Run: Total-Revenue–Total-Cost Approach

Type: Graph

39.

Curve (3) in the diagram is a purely competitive firm’s

40.

Curve (4) in the diagram is a purely competitive firm’s

41.

Refer to the diagram. Other things equal, an increase of product price would be shown as