1-(Consider This) An unprofitable motel will stay open in the short-run if:
a.price (average nightly room rate) exceeds average variable cost.
b.marginal revenue exceeds marginal cost.
c.price (average nightly room rate) exceeds average fixed cost.
d.marginal revenue exceeds price.
2-Firms seek to maximize:
a.per unit profit.
b.total revenue.
c.total profit.
d.market share.
3-If a purely competitive firm is maximizing economic profit:
a.it is necessarily maximizing per-unit profit.
b.it may or may not be maximizing per unit profit.
c.then per-unit profit will be minimized.
d.it is necessarily overallocating resources to its product.
4-Price is constant or given to the individual firm selling in a purely competitive market because:
a.the firm's demand curve is downsloping.
b.of product differentiation reinforced by extensive advertising.
c.each seller supplies a negligible fraction of total supply.
d.there are no good substitutes for its product.
5.If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing:
a.marginal revenue and marginal cost.
b.price and minimum average variable cost.
c.total revenue and total cost.
d.total revenue and total fixed cost.
6.Economists would describe the U.S. automobile industry as:
a.purely competitive.
b.an oligopoly.
c.monopolistically competitive.
d.a pure monopoly.
7.The fact that a purely competitive firm's total revenue curve is linear and upsloping to the right implies that:
a.product price increases as output increases.
b.product price decreases as output increases.
c.product price is constant at all levels of output.
d.marginal revenue declines as more output is produced.
8.A perfectly elastic demand curve implies that the firm:
a.must lower price to sell more output.
b.can sell as much output as it chooses at the existing price.
c.realizes an increase in total revenue which is less than product price when it sells an extra unit.
d.is selling a differentiated (heterogeneous) product.

9.In the short run, a purely competitive firm will earn a normal profit when:
a.P = AVC.
b.P > MC.
c.that firm's MR = market equilibrium price.
d.P = ATC.
10.An industry comprised of a very large number of sellers producing a standardized product is known as:
a.monopolistic competition.
b.oligopoly.
c.pure monopoly.
d.pure competition.
11.An industry comprised of 40 firms, none of which has more than 3 percent of the total market for a differentiated product is an example of:
a.monopolistic competition.
b.oligopoly.
c.pure monopoly.
d.pure competition.
12.(Last Word) Oil wells and seasonal resorts will often shut down temporarily because:
a.prices for their output temporarily fall below their average variable costs of production.
b.fixed costs temporarily rise, making production unprofitable.
c.variable costs for pumping oil and operating resorts fluctuate significantly.
d.government regulations require seasonal shutdowns for maintenance purposes.
13.On a per unit basis economic profit can be determined as the difference between:
a.marginal revenue and product price.
b.product price and average total cost.
c.marginal revenue and marginal cost.
d.average fixed cost and product price.
14.In the short run, a purely competitive seller will shut down if product price:
a.equals average revenue.
b.is greater than MC.
c.is less than AVC.
d.is less than ATC.
15.If a profit-seeking competitive firm is producing its profit-maximizing output and its total fixed costs fall by 25 percent, the firm should:
a.use more labor and less capital to produce a larger output.
b.not change its output.
c.reduce its output.
d.increase its output.