Microeconomics and Behavior Robert H Frank 9th Edition-Test Bank

Microeconomics and Behavior Robert H Frank 9th Edition-Test Bank

Chapter 10
Perfect Competition

Multiple Choice Questions

1. Which of the following is not a condition for perfect competition?

A. Firms take prices as given.

B. Firms sell a standardized product.

C. Firms are protected by barriers to entry.

D. Firms have perfect information.

2. The profit maximizing output level for a perfectly competitive firm is always where

A. P = MC.

B. P = AVC.

C. MC = ATC.

D. MC = AVC.

3. In the graph below at a price of P*, the profit maximizing level of output is

A. Q*.

B. above Q*.

C. below Q* but above zero.

D. zero.

4. In the graph below at P*, the firm is making __________ economic profits.

A. positive

B. negative

C. zero

D. an indeterminate level of

5. Which statement is true of the graph shown?

A. The marginal cost curve should not cross the AFC while it is falling.

B. If an ATC curve was drawn in the graph it would intersect the MC curve but not any other curve.

C. The shut down point of the firm would be at an output more than Q*.

D. The marginal cost curve crosses the AFC curve at the lowest point of the AFC curve.

6. In the graph below if the price persists at P*, the profit maximizing firm will

A. shut down immediately.

B. shut down in the long run.

C. operate indefinitely.

D. have a strategy that cannot be predicted without an ATC curve.

7. When the perfectly competitive firm maximizes profits the price of its product always equals

A. average revenue.

B. marginal revenue.

C. marginal costs.

D. All of the choices are correct

8. If a firm’s demand curve falls below its AVC curve, then the firm should

A. shut down now.

B. operate in the short run but not the long run.

C. set price = marginal cost.

D. shutdown in the long-run.