Question 1

1. If a firm can maximize its profit by producing the output where price is equal to its
marginal cost, the firm is operating in

A. a monopolistically competitive market

B. a perfectly competitive market
C. an oligopolistic market
D. a monopolistic market

2.5 points

Question 2

1. If a firm is a price taker, the demand curve faced by the firm is

A. upward sloping
B. vertical
C. downward sloping
D. horizontal

2.5 points

Question 3

1. Kevin's Golf-a-Rama sells golf balls in a perfectly competitive market. At its current
level of golf ball production, Kevin has marginal costs equal to $2. If the market price of
golf balls is $1, Kevin should

A. decrease the level of golf ball production

B. continue producing the current level of production
C. increase the production of golf balls
D. raise the price of its golf balls

2.5 points

Question 4

1. For the perfectly competitive firm

 A. price always equals marginal revenue
B. price always equals average cost
C. price always equals marginal cost
D. price always equals average variable cost

2.5 points

Question 5

1. In which of the following market structures can you find differentiated products?

A. oligopoly
B. monopoly
C. monopolistic competition and oligopoly
D. perfect competition

2.5 points

Question 6

1. Which of the following is NOT a characteristic of a perfectly competitive market?

A. no barriers to entry
B. an individual firm having no control over price
C. a small number of firms in a market
D. selling a standardized product

2.5 points

Question 7

1. A perfectly competitive market

A. is made up of a large number of firms

B. consists of only one firm
C. is dominated by one firm
D. consists of at most five firms
2.5 points

Question 8

1. Who are the price takers in a perfectly competitive market?

A. the buyers
B. neither the buyers nor the sellers
C. the sellers
D. both the buyers and the sellers

2.5 points

Question 9

1. A firm will not shut down in the long-run as long as the firms revenue

A. is larger than the firm's variable cost

B. is greater than the firm's marginal cost.
C. is less than the total cost
D. is greater than the fixed cost

2.5 points

Question 10

1. In the short run, a firm considers its fixed cost as a(n)

A. sunk cost
B. variable cost
C. marginal cost
D. implicit cost

2.5 points

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