1) Total revenue minus total cost is equal to:

A. the rate of return

B. marginal revenue

C. profit

D. net cost

2) Perfectly competitive firms must make all of the following decisions EXCEPT:

A. how much output to supply

B. which production technology to use

C. how much of each input to demand

D. what price to charge for its output

3) In the short run:

A. existing firms do NOT face limits imposed by a fixed input

B. all firms have costs that they must bear regardless of their output

C. new firms can enter an industry

D. existing firms can exit an industry

4) Which statement is TRUE? Fixed costs:

A. do not exist in the long run

B. depend on the firm's level of output

C. are zero if the firm is producing nothing

D. are the difference between total costs and average variable costs

5) Which statement is NOT TRUE? Variable costs:

A. are equal to total costs in the long run

B. are zero if output is zero

C. are equal to the difference between total cost and total fixed cost

D. remain constant as output goes up

6) Total cost is calculated as:

A. the sum of total fixed cost and total variable cost

B. the product of average total cost and price

C. the sum of all the firm's explicit costs

D. the sum of average fixed cost and average variable cost

7) As output increases, average fixed costs:

A. decrease

B. initially decrease and then increase

C. remain constant

D. increase

8) Short-run costs that depend on the level of output are:

A. total fixed cost only

B. total variable costs only

C. total costs only

D. both total variable costs and total costs

9) Which statement is NOT TRUE regarding the total variable cost curve?

A. it increases as output increase

B. it shows the variable cost of production given current factor price

C. it starts at the origin

D. it is a horizontal line

10) If we know average total cost and the amount of output, then we can always calculate total cost by:

A. adding average total cost and the amount of output

B. subtracting the amount of output from average total cost

C. multiplying average total cost by the amount of output

D. dividing average total cost by the amount of output

11) What is the characteristic of a perfectly competitive firm that causes it to be a price taker?

A. many buyers and sellers

B. homogeneous product

C. free entry and exit

D. Both A and B are correct

12) Consumers do not have a strong preference for the output of one seller over that of another in a perfectly competitive market because:

A. there a large number of firms in the market

B. the firms sell a standardized product

C. there are no barriers to entry

D. an individual firm has control over price

13) Who are the price takers in a perfectly competitive market?

A. both the buyers and the sellers

B. the buyers

C. neither the buyers nor the sellers

D. the sellers

14) Which of the following is NOT a characteristic of a monopolistically competitive market?

A. There is only one firm selling a product

B. There are many firms selling products that are similar but not identical

C. There are many firms that have some control over price

D. There are no artificial barriers to entry

15) A firm that has market power has the ability:

A. to affect the price of its own product

B. to conduct illegal activities without fear of prosecution

C. to command consumer to buy any quantity from them

D. to drive its competition out of the market