1.In pure competition, in the long run:

a.Both allocative efficiency and productive efficiency are being achieved

b.Allocative efficiency and productive efficiency are not achieved

c.Allocative efficiency is being achieved but productive efficiency is not

d.neither allocative efficiency nor productive efficiency is achieved

Question 2

Assume a purely competitive, Constant-Cost industry is in long run equilibrium. If a declinein demand occurs, firms will:

a.leave the industry, price will return to equilibrium and quantity produced will decrease

b.leave the industry, and price and output will both increase

c.leave the industry and price and output will both decline

d.enter the industry, and price and quantity will both increase

Question 3

When a purely competitive firm is in long-run equilibrium:

a.average cost equals price

b.marginal revenue equal marginal cost

c.total revenue equals total cost

d.all of the above are true

e.price equals marginal cost

Question 4

In the short run, a purely competitive firm that seeks to maximize profit will produce:

a.where total cost exceeds total revenue by the maximum amount.

b.that output where economic profits are zero.

c.where the marginal cost and the marginal revenue are equal

d.at any point where the total revenue and total cost curves intersect.

e.where total revenue is equal to total cost

Question 5

If all discrimination in America was eliminated, we would expect that the economy would

a.be able to produce at some point outside of its production possibilities curve

b.produce more consumer goods and fewer investment goods

c.produce at some point closer to its production possibilities curve

d.have a less concave production possibilities curve

e.none of these choices

6.Assume the market for ball bearings is purely competitive. Currently, each of the firms in this market is making an economic profit. We would expect:

a.supply to decrease

b.demand to increase

c.demand to decrease

d.supply to increase

e.both demand and supply to increase

Question 7

In the industry model for pure competition, price is determined where the industry:

a.average total cost curve equals total variable costs

b.demand intersects the firm's marginal cost curve

c.marginal cost equals the marginal benefit.

d.total cost is greater than total revenue

e.demand and supply curves intersect

Instructions for Questions 8-13 Review this graph and use it to answer questions 8-13. Answer the next six questions on the basis of the following diagram P/C The curves are not labeled intentionally, but you might want to C label them to answer E the questions. B F A Quantity O QRefer to the diagram of a single rm in a per'l'lectl'yr competitive market. This rm will realize an economic prot at a price of: Refer to the diagram of a single firm in a perfectly competitive market. The firm will operate, but at a loss, at a price of: COSTS MC ATC P AVC P. P 2 P Q1 Q2 Q: QUANTITYRefer to the diagram of a single rm in a perfectly competitive market. This rm will no longer choose to operate at 1am,r price less than: Refer to the diagram of a single rm in a perfectly competitive market. The rm's supply curve could be described as: Refer to the diagram of a single firm in a perfectly competitive market. This firm will earn a normal profit at a price of: COSTS MC ATC PA AVC PA P Q Q2 Q) QUANTITY