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A purely competitive firm is producing at the point where its marginal cost equals the price of its product. If the firm increases its output, then total revenue will


A) increase and profits will increase.
B) decrease and profits will increase.
C) increase and profits will decrease.
D) decrease and profits will decrease.

E) B) and C)
F) C) and D)

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Suppose a bridge for automobiles was constructed across a river and all the costs associated with its construction have been paid. The amount of traffic is such that there are no foreseeable problems of overcrowding in the use of the bridge. Assume, also, that the extra cost associated with traffic crossing the bridge is for all practical purposes equal to zero. What toll should be charged to achieve the most efficient use of the bridge?

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No toll should be charged, in ...

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Average revenue and marginal revenue are equal at each output level in


A) pure competition.
B) monopolistic competition.
C) monopoly.
D) oligopoly.

E) B) and D)
F) B) and C)

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For a purely competitive firm, the demand curve facing it is the same as its marginal revenue curve.

A) True
B) False

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When a firm is maximizing profit, it will necessarily be


A) maximizing profit per unit of output.
B) maximizing the difference between total revenue and total cost.
C) minimizing total cost.
D) maximizing total revenue.

E) A) and B)
F) B) and D)

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Refer to the accompanying diagram. At the profit-maximizing output, total revenue will be A) 0 AHE. B) 0 BGE. C) 0 CFE. D) ABGE. Refer to the accompanying diagram. At the profit-maximizing output, total revenue will be


A) 0 AHE.
B) 0 BGE.
C) 0 CFE.
D) ABGE.

E) None of the above
F) All of the above

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The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for the firm's product is $28, the competitive firm will A) produce 4 units at a loss of $17.40. B) produce 7 units at a loss of $14.00. C) shut down in the short run. D) produce 6 units at a loss of $23.80. The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for the firm's product is $28, the competitive firm will


A) produce 4 units at a loss of $17.40.
B) produce 7 units at a loss of $14.00.
C) shut down in the short run.
D) produce 6 units at a loss of $23.80.

E) A) and D)
F) A) and C)

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The MR = MC rule can be restated for a purely competitive seller as P = MC because


A) each additional unit of output adds exactly its price to total revenue.
B) the firm's average revenue curve is downsloping.
C) the market demand curve is downsloping.
D) the firm's marginal revenue and total revenue curves will coincide.

E) A) and C)
F) A) and B)

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The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $87, it will produce A) 9 units at an economic profit of zero. B) 6 units at a loss of $90. C) 9 units at an economic profit of $281.97. D) 8 units at an economic profit of $130.72. The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $87, it will produce


A) 9 units at an economic profit of zero.
B) 6 units at a loss of $90.
C) 9 units at an economic profit of $281.97.
D) 8 units at an economic profit of $130.72.

E) C) and D)
F) A) and D)

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The table shows the total costs for a purely competitive firm. If the product sells for $800 a unit, the firm's short run profit-maximizing (or loss-minimizing) output is A) 4. B) 1. C) 2. D) 5. The table shows the total costs for a purely competitive firm. If the product sells for $800 a unit, the firm's short run profit-maximizing (or loss-minimizing) output is


A) 4.
B) 1.
C) 2.
D) 5.

E) C) and D)
F) A) and B)

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The accompanying table gives cost data for a firm that is selling in a purely competitive market. At 6 units of output, total fixed cost is ____ and total cost is ____. A) $25; $50 B) $50; $300 C) $100; $200 D) $150; $300 The accompanying table gives cost data for a firm that is selling in a purely competitive market. At 6 units of output, total fixed cost is ____ and total cost is ____.


A) $25; $50
B) $50; $300
C) $100; $200
D) $150; $300

E) C) and D)
F) All of the above

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Which is necessarily true for a purely competitive firm in short-run equilibrium?


A) Marginal revenue minus marginal cost equals zero.
B) Price minus average total cost equals zero.
C) Total revenue minus total cost equals zero.
D) Marginal revenue is zero.

E) A) and D)
F) A) and C)

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A firm should continue to operate even at a loss in the short run if


A) its output is above the break-even point.
B) its revenues are less than its fixed costs.
C) it can cover its variable costs and some of its fixed costs.
D) it has some fixed costs that cannot be brought down to zero.

E) All of the above
F) B) and D)

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In the accompanying graph, at what level of output will the firm earn a maximum unit-profit margin (or profit per unit) ? A) 0 A B) 0 B C) 0 C D) 0 K In the accompanying graph, at what level of output will the firm earn a maximum unit-profit margin (or profit per unit) ?


A) 0 A
B) 0 B
C) 0 C
D) 0 K

E) None of the above
F) A) and B)

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A purely competitive firm currently producing 30 units of output earns marginal revenues of $12 from each extra unit of output it sells. If it sells 30 units, then its total revenues would be


A) $360.
B) $240.
C) $120.
D) indeterminate based on the information given.

E) A) and B)
F) None of the above

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A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 1,000 units is $2.5. The minimum possible average variable cost is $2. The market price of the product is $2.5. To maximize profits or minimize losses, the firm should


A) continue producing 1,000 units.
B) continue production, but reduce output.
C) increase production.
D) shut down.

E) B) and C)
F) All of the above

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The table gives data for a purely competitive firm. The marginal revenue from the third unit of output is A) 105. B) 24. C) 35. D) -12. The table gives data for a purely competitive firm. The marginal revenue from the third unit of output is


A) 105.
B) 24.
C) 35.
D) -12.

E) A) and D)
F) A) and B)

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The accompanying table gives cost data for a firm that is selling in a purely competitive market. If there were 1,000 identical firms in this industry and total, or market, demand is as shown in the second table, equilibrium price will be A) $32. B) $42. C) $36. D) $20. The accompanying table gives cost data for a firm that is selling in a purely competitive market. If there were 1,000 identical firms in this industry and total, or market, demand is as shown in the second table, equilibrium price will be The accompanying table gives cost data for a firm that is selling in a purely competitive market. If there were 1,000 identical firms in this industry and total, or market, demand is as shown in the second table, equilibrium price will be A) $32. B) $42. C) $36. D) $20.


A) $32.
B) $42.
C) $36.
D) $20.

E) C) and D)
F) B) and C)

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In the standard model of pure competition, a profit-maximizing firm will shut down in the short run if price is below


A) marginal cost.
B) average cost.
C) average fixed cost.
D) average variable cost.

E) None of the above
F) All of the above

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The accompanying table applies to a purely competitive industry composed of 100 identical firms. If each of the 100 firms in the industry is maximizing its profit and earning only a normal profit, each must have a total cost of A) $18,000. B) $20,000. C) $22,000. D) $14,000. The accompanying table applies to a purely competitive industry composed of 100 identical firms. If each of the 100 firms in the industry is maximizing its profit and earning only a normal profit, each must have a total cost of


A) $18,000.
B) $20,000.
C) $22,000.
D) $14,000.

E) C) and D)
F) A) and B)

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