6. In a purely competitive industry: (a) There will be no economic profits in either the short or the long run (b) Economic profits may persist in the long run if consumer demand is strong (c) There may be economic profits in the short run, but not in the long run (d) There may be economic profits in the long run, but not in the short run (e) None of the above 7. Suppose that a firm faces a horizontal demand curve P = $10 and it produces Q = 5,000 units in order to maximize its profit. Then: (a) the firm's marginal cost is less than $10. (b) the firm's marginal revenue is less than $10. (c) the firm's marginal revenue is $10. (d) the firm's marginal revenue is more than $10. (e) none of the above. 8. The basic characteristic of the short run is that: (a) barriers to entry prevent new firms from entering the industry. (b) the firm does not have sufficient time to change the size of its plant. (c) the firm does not have sufficient time to cut its rate of output to zero. (d) a firm does not have sufficient time to change the amounts of any of the resources it employs. (e)none of the above. 9. In the long run: (a) all costs are variable costs. (b) all costs are fixed costs. (c) variable costs tend to be greater than fixed costs. (d) fixed costs tend to be greater than variable costs. (e) none of the above. 10.A firm in perfect competition faces the demand function P = $40. This implies that it: (a) can sell any quantity at $40 a unit. (b) can sell some quantity at prices higher than $40 a unit. (c) will have the incentive to "cut" the market and sell at less than $40 a unit. (d) must price its product based on its own marginal cost function. (e) none of the above.11.When the demand function is given by P = $51, the marginal revenue: {a} is less than the price. (b) is greater than the price because the demand is flat. (c) is equal to the price because all units are sold at the satne price. {d} can never be equal to the price. (e) none of the above. 12.3%. firm in perfect competition is selling Q = Sill} at the price P = 2h. The marginal revenue at this point: {a} cannot be determined from the given data. (b) is 15. {c} is 10. {d} is s. (e) none of the above. 13.The demand curve confronted by a firm in a purely competitive market is: {a} relatively elastic, that is, the elasticity coefcient is greater than unity. (b) perfectly elastic. (c) relatively inelastic, that is, the elasticity coefficient is less than unity. {d} perfectly inelastic. (e) none of the above. 14.Which of the following is a characteristic of a purely competitive seller's demand curve? {213) {a} Price and marginal revenue are equal at all levels of output. (b) Average revenue is less than price. {c} Its elasticity is I'1" at all levels of output. (d) It is the same as the market demand curve. (e) None of the above. 15.The Ajax Manufacturing Company is selling a purely competitive market. Its output is l units which sell at $4 each. At this level of output total cost is $600, total fitted cost is $10!}, and the marginal cost is $4. The firm should: (a) reduce output to about St} units. (b) expand its production. {c} continue to produce l units. (d) produce zero units of output. {e} none of the above. Answer Questions 16 and IT on the basis of the following cost data for a purely competitive seller: Output I Total Cost Ill' 55!} l I 9!} 2 12!] 3 I 14!] 4 I'll] 5 2H} 6 I 26!} T 33!} 16.1f product price is 56D, the rm will: {a} produce five units and realize a less {b} produce four units and realize a $12 prot. to} produce six units and realize a 51m prot. {d} produce three units and realize a $40 loss. {e} none of the above. lllf product price is $45. the firm will: {a} produce four units and realize a $12K! prot. {b} produce five units and realize a $15 prot. to} produce six units and realize a Hill prot. {d} do none of the above. 18.Assume a purely competitive rm is selling 20!} units of output at $3 each. At this output. its total lld cost is 51m and its total variable cost is $33). On the basis of this information. we can say that the rm: {a} is maximizing its prots. {b} is making a profit, hut not necessarily the maximum prot. {c} is incurring losses. {d} is doing none of the above. Answer Questions 19 - 22 based on the following cost data for a competitive seller. Total Output Total Fixed Cost Total Variable Cost Total Cost 0 $50 $0 $50 50 70 120 2 50 120 170 50 150 200 50 220 270 50 300 350 50 390 440 19. These data are for: (a) the long run. (b) the short run. (c) both the short and the long run. (d) none of the above. 20.At five units of output, average fixed cost, average variable cost, and average total cost are: (a) $10, $60 and $70 respectively. (b) $50, $40 and $90 respectively. (c) $10, $70 and $80 respectively. (d) $5, $25 and $30 respectively. 21. The marginal cost of the fifth unit of output: (a) is $80 (b) is $90 (c) is $50 (d) cannot be determined from the information given. 22. If product price is $75, the firm will: (a) produce three units of output (b) produce four units of output (c) produce five units of output (d) produce six units of outputSection a {50 marks] 1 . A pound of fertilizers sells for $180. Corn, which is produced using fertilizers, sells for $90 per bushel in a perfectly competitive market. The last pound of fertilizers used by a prot-maximizing farmer will increase the output of corn by (a) 0.5 bushels (b) l bushel {c} 2 bushels {d} 3 bushels 2. The daily wage rate for a farm labourer is $120. A farmer hires labourers to produce wheat which sells for $30 per bushel in a perfectly competitive market. The last worker hired by the profit-maximizing farmer will increase the daily output of wheat by {a} 0.25 bushels {b} 2 bushels (c) 4 bushels (d) 30 bushels (e) 150 bushels 3. A rm in perfect competition will discontinue production in the short run if: (a) Price is less than marginal cost (b) Price is less than average variable cost {c} Price is less than average total cost (d) Price is less than marginal revenue (e) None of the above 4. A firm reaches a break-even point where: (a) Marginal revenue cuts the horizontal axis (b) Marginal cost intersects the average variable cost curve {c} Total revenue equals total variable cost {d} Total revenue and total cost are equal 5. In the short-run. a purely competitive firm will shut down: {a} At any point where price is less than the minimum AVE {b} Between the two break-even points (c) At any point where total revenue is less than total cost {d} At any point where the rm is not making an economic prot {e} At any point where price is less than the minimum ATE