### Microeconomics Practice Set - 8: Price and Output Under Perfect Competition

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1. Which of the following industries most closely approximates the perfectly competitive model?

1. Automobile

2. cigarette

3. newspaper

4. wheat farming.

2. Given the supply of a commodity in the market period, the price of the commodity is determined by

1. the market demand curve alone

2. the market supply curve alone

3. the market demand curve and the market supply curve

4. none of the above

3. Total profits are maximized where

1. TR equals TC

2. the TR curve and the TC curve are parallel

3. the TR curve and the TC curve are parallel and TC exceeds TR

4. the TR curve and the TC curve are parallel and TR exceeds TC

4. The best, or optimum, level of output for a perfectly competitive firm is given by the point where

1. MR equals AC

2. MR equals MC

3. MR exceeds MC by the greatest amount

4. MR equals MC and MC is rising

5. At the best, or optimum, short-run level of output, the firm will be

1. maximizing total profits

2. minimizing total losses

3. either maximizing total profits or minimizing total losses

4. maximizing profits per unit

6. If P exceeds AVC but is smaller than AC at the best level of output, the firm is

1. making a profit

2. incurring a loss but should continue to produce in the short run

3. incurring a loss and should stop producing immediately

4. breaking even

7. At the shut-down point

1. P = AVC

2. TR = TVC

3. the total losses of the firm equal TFC

4. all of the above

8. The short-run supply curve of the perfectly competitive firm is given by

1. the rising portion of its MC curve over and above the shut-down point

2. the rising portion of its MC curve over and above the break-even point

3. the rising portion of its MC curve over and above the AC curve

4. the rising portion of its MC curve

9. When the perfectly competitive firm and industry are both in long-run equilibrium

1. P = MR = SMC = LMC

2. P = MR = SAC = LAC

3. P = MR = lowest point on the LAC curve

4. all of the above

10. When the perfectly competitive firm but not the industry is in long-run equilibrium

1. P = MR = SMC = SAC

2. P = MR = LMC = LAC

3. P = MR = SMC = LMC = SAC = LAC

4. P = MR = SMC = LMC = SAC = lowest point on the LAC curve

11. An increase in output in a perfectly competitive and constant cost industry which is in long-run equilibrium will come

1. entirely from new firms

2. entirely from existing firms

3. either entirely from new firms or entirely from existing firms

4. partly from new firms and partly from existing firms

12. If factor prices and factor quantities move in the same direction, we have

1. a constant cost industry

2. an increasing cost industry

3. a decreasing cost industry

4. any of the above