1. Perfect competition is:
A. not an abstraction from reality; it is reality.
B. an "ideal type"-that is, a model or guidepost for comparison.
C. the only market structure in the United States.
D. the best of all possible worlds.
E. found in the U.S. steel industry.
2. At the other end of the market continuum from perfect competition is:
A. the corporation.
B. oligopoly.
C. the partnership.
D. monopsony.
E. monopoly.
3. A competitive firm:
A. can consider only its location in setting price.
B. must base its competitive price on product differentiation.
C. has the ability to set its own price.
D. must accept the price determined by the intersection of the market supply and demand curves.
E. has no supply curve.
4. The marginal cost curve above the minimum average variable cost:
A. indicates points where the firm will realize an economic profit.
B. covers the area where a firm should shut down.
C. is equal to the firm's marginal revenue curve.
D. is the firm's short-run supply curve.
5. A monopolist will have a marginal revenue curve that is:
A. identical to the demand curve.
B. identical to the marginal cost curve.
C. below the demand curve.
D. above the marginal cost curve.
6. In a perfectly competitive industry, if TR > TC, then in the long run:
A. firms will exit the industry.
B. new firms will enter the industry.
C. there will be no change in the number of firms.
D. market supply will shift to the left.
E. firms will make economic profits.
7. A firm in a(n) industry will have the most elastic demand curve:
A. monopolistic
B. oligopolistic
C. monopolistically competitive
D. perfectly competitive
8. Monopolistically competitive and perfectly competitive firms are different because the former:
A. can have positive economic profits in the short run, whereas the latter cannot.
B. can have negative economic profits in the short run, whereas the latter cannot.
C. has economic profits of zero in the long run, whereas the latter has positive or negative economic profits.
D. earns normal profits of zero in the long run, whereas the latter has positive or negative normal profits.
E. faces a negatively sloped demand curve, whereas the latter does not.
9. If, in the short run, a perfectly competitive firm is producing at a point where total cost is greater than total revenue, then the firm should:
A. shut down because economic profits are negative.
B. continue to produce as long as P > AVC.
C. continue to produce because accounting profits are positive.
D. set a higher price for its output.
E. set a lower price for its output.
10. A firm in perfect competition is assumed to be:
A. a price leader.
B. a developer of new inventions.
C. small in size, relative to the size of the industry.
D. large in size, relative to the size of the industry.