1. A perfectly competitive firm can A. usually not sell all the output it produc
ID: 1099436 • Letter: 1
Question
1. A perfectly competitive firm can
A. usually not sell all the output it produces, but still "over-produces" because there are some periods when it can sell the extra output at very profitable prices.
B. sell all of its output at the prevailing market price.
C. sell additional output only by lowering its price.
D. set a higher price to customers who are willing to pay more.
E. raise its price in order to increase its total revenue.
2. A monopoly occurs when
A. each of many firms produces a product that is slightly different from that of the other firms.
B. one firm sells a good that has no close substitutes and a barrier blocks entry for other firms.
C. a few firms control the market.
D. there are many firms producing the same product.
E. one firm is larger than the many other firms that make an identical product.
3. We know that a perfectly competitive firm is a price taker because
A. its demand curve is horizontal.
B. its MC curve slopes upward.
C. MC and ATC are equal at the profit-maximizing amount of output.
D. it has no supply curve.
E. its ATC curve is U-shaped.
4. When logging in the Pacific Northwest destroys forests that hikers would have used for eco-tourism, the destruction of the trails is an example of
A. an external benefit.
B. a government cost.
C. a private cost.
D. an external cost.
E. None of the other choices answers is correct.
5. If the United States imposed a quota on the amount of salmon imported from Chile, the result would be ________ salmon prices in the United States and ________ in the quantity of salmon demanded in the United States.
A. lower; an increase
B. lower; a decrease
C. higher; no change
D. higher; a decrease
E. higher; an increase
6. A cost that arises from the production or consumption that falls on someone other than the producer or consumer is called
A. a public choice impact.
B. a private good.
C. a negative benefit.
D. a negative externality.
E. a positive externality.
7. Which of the following is always true for a single-price monopolist?
A. P < MR
B. P > MR
C. P = elasticity of demand
D. P = MR
E. None of the other choices answers is correct because none of them is always true.
8. For a perfectly competitive firm, profit is maximized at the output level where
I. total revenue exceeds total cost by the largest amount.
II. marginal revenue equals marginal cost.
III. price equals marginal cost.
A. i only
B. ii and iii
C. i, ii, and iii
D. ii only
E. i and ii
Explanation / Answer
1. B. sell all of its output at the prevailing market price.
2. B. one firm sells a good that has no close substitutes and a barrier blocks entry for other firms.
3. A. its demand curve is horizontal.
4. D. an external cost.
5. D. higher; a decrease
6. D. a negative externality.
7. B. P > MR
8. B. ii and iii
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