chp 10 test bank - CHAPTER 10COMPETITIVE MARKETS MULTIPLE...

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CHAPTER 10—COMPETITIVE MARKETS MULTIPLE CHOICE 1. If P = $8 and MC = $5 + 0. 2Q, the competitive firm's profit-maximizing level of output is: a. 5 b. 0.2 c. 8 d. 15 ANS: D 2. In the long run, firms will offer supply at the point where P = MR = MC if: a. MC is rising. b. MC is falling. c. MC is constant. d. P > AC ANS: D 3. Graphically, competitive market supply is measured by the: a. vertical difference of competitor demand curves. b. vertical sum of competitor demand curves. c. horizontal difference of competitor MC curves. d. horizontal sum of competitor MC curves. ANS: D 4. For a firm in perfectly competitive market equilibrium: a. MR < AR b. P > AC c. P > MR d. P = MC ANS: D 5. Competition tends to be light when: a. potential entrants are few. b. capital requirements are nominal. c. standards for skilled labor and other inputs are modest. d. regulatory barriers are modest. ANS: A 6. By itself, a reduction in import tariffs (taxes) will: a. reduce quantity demanded. b. enhance domestic competition. c. enhance the profits of domestic competitors. d. reduce import competition. ANS: B 7. Above-normal profits in a perfectly competitive market are caused by: a. increases in demand that are successfully anticipated.
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b. decreases in cost that are successfully anticipated. c. increases in productivity that are successfully anticipated. d. luck. ANS: D 8. In a perfectly competitive market: a. sellers and buyers have perfect information. b. entry and exit are difficult. c. sellers produce similar, but not identical products. d. each seller can affect the market price by changing output. ANS: A 9. The firm demand curve in a competitive market is: a. upward sloping. b. downward sloping. c. horizontal. d. vertical. ANS: C 10. A firm will earn normal profits when price: a. equals average total cost. b. equals average variable cost. c. equals marginal cost. d. exceeds minimum average total cost. ANS: A 11. In the short run, a perfectly competitive firm will shut down and produce nothing if: a. excess profits equal zero. b. total cost exceeds total revenue. c. total variable cost exceeds total revenue. d. the market price falls below the minimum average total cost. ANS: C 12. In the long run, firms will exit a perfectly competitive industry if: a. excess profits exceed zero. b. excess profits are less than zero. c. total profit equals zero. d. excess profits equal zero. ANS: B 13. Perfect competition always prevails in markets with: a. few buyers and sellers. b. many buyers and sellers. c. an even balance of power between sellers and buyers. d. a single buyer. ANS: C 14. In perfectly competitive markets, profits are maximized when: a. MC = AC
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b. P > AC c. MR = MC d. MR = P ANS: C 15. Economic profit: a. cannot be negative. b.
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This note was uploaded on 03/08/2011 for the course ECONABA 635 taught by Professor Leiter during the Summer '10 term at Andrew Jackson.

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chp 10 test bank - CHAPTER 10COMPETITIVE MARKETS MULTIPLE...

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