Managerial Economics 7th Edition By Keat – Test Bank
Managerial Economics, 7e (Keat)
Chapter 8 Pricing and Output Decisions: Perfect Competition and Monopoly (Appendices 8A and 8B)
1) Which of the following markets comes closes to the model of perfect competition?
A) automobile industry
B) information technology industry
C) aerospace industry
2) A feature of perfect competition is
A) use of non-price competition by firms.
B) mutual interdependence among firms.
C) unique products.
D) standardized products.
3) Which is a required characteristic of a perfectly competitive industry?
A) There are few firms so that none can influence market price.
B) Products are highly differentiated.
C) Barriers to entry are high.
D) None of the above
4) Which of the following characteristics is most important in differentiating between perfect competition and all other types of markets?
A) whether or not the product is standardized
B) whether or not there is complete market information about price
C) whether or not firms are price takers
D) All of the above are equally important.
5) Demand facing an individual, perfectly competitive firm is
A) perfectly inelastic at the quantity the firm chooses to produce.
B) perfectly inelastic at the quantity determined by market forces.
C) perfectly elastic at the price the firm chooses to charge.
D) perfectly elastic at the price determined by market forces.
6) In perfect competition
A) the firm’s demand curve is relatively elastic.
B) the firm’s demand curve is relatively inelastic.
C) the firm’s demand curve is perfectly elastic.
D) the firm’s demand curve is perfectly inelastic.
7) For a demand curve that is horizontal, the marginal revenue curve
A) will be to the right of the demand curve and half as steep.
B) will be to the left of the demand curve and half as steep.
C) will be to the right of the demand curve and twice as steep.
D) will be the same as the demand curve.
8) According to the shutdown rule, a firm should produce no output in the short run if
A) price is below minimum average total cost.
B) price is above minimum average total cost.
C) total revenues are lower than total fixed costs.
D) price is below minimum average variable costs.
9) Which of the following conditions would definitely cause a perfectly competitive company to shut down in the short run?
A) P < MC
B) P = MC < AC
C) P < AVC
D) P = MR
10) A normal profit is
A) revenues minus opportunity cost of zero.
B) revenues minus accounting cost of zero.
C) a zero accounting profit.
D) revenues minus accounting and opportunity cost of zero.