Week 5 Quiz Review Question Preview (ID: 22062)


This Quiz Review Will Prepare You For The Week 5 Quiz. Keep In Mind, A Large Percentage Of The Questions This Week Deal With Graphs. These Can Not Be Duplicated On This Review Site, So Be Sure To Study Them Prior To Taking The Quiz. TEACHERS: click here for quick copy question ID numbers.

Which of the following would be a characteristic of the Purely Competitive market structure?
a) Non-price Competition
b) Price Taker
c) Differentiated Products
d) Few Buyers and Sellers

Which of the following would be a feature of the Purely Competitive market structure?
a) Firms producing the products will often have different cost structures.
b) There are significant barriers to entry.
c) Products are standardized or homogeneous.
d) The industry's demand curve is horizontal (perfectly elastic).

When a firm is a price taker, the demand curve for the firm's product is:
a) Downward sloping
b) The same as the total revenue curve.
c) Unitary Elastic
d) Perfectly Elastic

Aristotle grows and sells wheat in a purely competitive market. His demand curve is:
a) Upward sloping
b) Downward sloping
c) Horizontal
d) Vertical

Let's assume that the total revenue for producing 5 units of product is $35 and the total revenue for producing 6 units is $36. We can conclude that:
a) The marginal revenue for producing the 6th unit is $1.
b) The marginal revenue for producing the 6th unit is $6.
c) The average revenue for producing the 6th unit is $1.
d) The average revenue for producing the 6th unit is $7.

In pure competition, a profit maximizing firm will shut down when:
a) Average revenue is greater than average cost.
b) Marginal revenue is greater than average cost.
c) Marginal cost is greater than marginal revenue.
d) Total revenue is less than total variable costs.

In Pure Competition, a firm profit maximizes by setting:
a) Average Revenue = Average Cost
b) Total Revenue = Total Cost
c) Marginal Revenue = Marginal Cost
d) Average Revenue = Average Variable Cost

If a local flower shop has the following cost and revenue situation: Total Revenue = $4,000, Total Fixed Cost = $2,000 and Total Variable Cost = $3,000, then in the short-run the firm should:
a) Exit the market, they are losing money.
b) Shut down production, they are not covering their totalcosts .
c) Shut down production, they are not covering their fixed costs.
d) Keep producing in the short run.

A profit maximizing firm will expand output:
a) As long as the marginal revenue it receives is greater than the marginal cost it has to pay.
b) Until total revenue = total cost.
c) Until average variable cost = average revenue.
d) Until marginal cost begins to rise.

Let's assume that a profit maximizing firm has a marginal revenue of $10 and a marginal cost of $8.
a) The firm should decrease production and increase price.
b) The firm should increase production and increase price.
c) The firm should increase production and leave price unchanged.
d) The firm should decrease production and decrease price.

MR = MC will maximize a firms profits:
a) Only if the firm is a price taker.
b) Only in Pure Competition.
c) Only if the firm is a Monopoly.
d) In all types of industries and market structures.

Tom's Trucks produces toy trucks. Currently their production is at 500 units that they sell for $5 per truck. The Marginal cost of a truck is $5 and the average variable cost is $5.75.
a) Tom's Trucks should produce zero units.
b) Tom's Trucks should increase production to 600 units.
c) Tom's Trucks should produce 400 units.
d) Tom's Trucks should keep producing 500 units.

In the short run, the firm's supply curve is:
a) Average variable cost above marginal cost.
b) Marginal cost above average variable cost.
c) Marginal revenue above the demand curve.
d) Marginal cost between the average variable and average total cost curves.

When a firm produces less, they can reduce:
a) Marginal Revenue
b) Variable costs but not fixed costs.
c) Fixed costs but not variable costs.
d) All costs.

If a purely competitive firm shuts down in the short run, they will:
a) not realize a loss.
b) realize a loss equal to their variable costs.
c) realize a loss equal to their fixed costs.
d) realize a loss equal to their total costs.

Let's assume that industry demand increases in the short run for a purely competitive industry.
a) An individual firm will build a bigger production facility in order to increase production
b) They will experience no increase in costs if they choose to increase production.
c) They will earn higher profits or experience smaller losses.
d) They will spend more money on advertising.

Let's assume that the potato market is a purely competitive market. If demand shifts to the right for this market and increases the profits that potato farmers are making, in the long run we can expect:
a) Profits to fall as more farmers start producing potatoes and increase market supply.
b) Profits to fall as some farmers leave the industry or choose to plant other crops causing supply to fall.
c) Profits to rise as more potato farmers start advertising, shifting demand further to the right.
d) Profits to fall as more research is done on the bad health consequences of potato consumption.

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