1, What is the profit maximizing rule?

	A.	The firm should produce all whole units (and fractions thereof, if possible) for which the marginal revenue exceeds the marginal costs.
	B.	The firm should maximize revenue and minimize cost.
	C.	The firm should produce all whole units (and fractions thereof, if possible) for which the product exceeds the average variable cost.
	D.	The firm should produce all whole units (and fractions thereof, if possible) for which the average revenue exceeds the average total costs.

2, Under what circumstances will a firm decide to shut down, close its doors and produce zero units of output?

	A.	When average revenue is below average total cost.
	B.	When average revenue fails to cover variable costs.
	C.	When average revenue fails to cover average fixed costs.
	D.	Any of the above circumstances would cause the firm to shut down.

3, In a purely competitive market, we might expect to see a lot of advertising, as firms try to convince consumers that their product is better than all the rest. true or false

4, If the all the products in a market are homogeneous, the only factor that will determine from whom the customer buys the product is its price. true or false

5, In a purely competitive industry, economic profits are not sustainable in the long run because other firms are free to enter the industry in search of economic profits. true or false

6, Consider the previous question. Given this information, and assuming you're only interested in maximizing your income, you will:

	A.	Exit the zerc industry and go to work for Roto Rooter.
	B.	Remain in the zerc industry because you're making a profit.
	C.	Exit the industry and go to work for Acme Widget Company.
	D.	Exit the industry and work for Bill's Flange Company.

7, Suppose you own a zerc firm. For a given preiod of time, your revenue from the sale of zercs was $500. In producing your zercs, you had to use $50 of wood, $60 of plastic and $100 of stainless steel. You had to lease a zerc-making maching for $100 per period, and you had to pay your worker $150 per period. Instead of tending to your widget firm, you could have been working at Acme Widget Company, earning $40 per period, or (not and) Bill's Flange Company for $60 per period, or Roto-Rooter for $80 per period. Your accountant computes your profits at ?------- per period, you economist computes your profits at ?------ per period. (Enter only the dollar amount, no decimal points or dollar signs. If a value is negative, don't for get the minus sign).

8, Which of the following is characteristic of a purely competitive firm in equilibrium?

	A.	The firm is making both economic and accounting profits.
	B.	The firm is making no accounting profits.
	C.	The firm is making no economic profits.
	D.	The firm is making economic losses but zero accounting profits.

9, Which of the following does not correctly complete the sentence? Pure competition:

	A.	Requires the existence of homogeneous products in a particular market.
	B.	Requires that firms be able to enter and exit the industry easily.
	C.	Requires that all firms be price takers.
	D.	Requires two or more sellers in a market

10, Which of the following features of an industry does not characterize a purely competitive market?

	A.	Heterogeneous products.
	B.	Every firm in the industry is a price taker.
	C.	No barriers to entry.
	D.	A large number of buyers and sellers.

11,