The Ultimate Microeconomics Proficiency Test!
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Human beings wants are unlimited and the resources required to meet them are most often scarce. Understanding how to allocate the scarce resources to meet the unlimited wants of a firm or an individual forms the basis of microeconomics. Take up the microeconomics proficiency and test your understanding of how firms survive in a competitive market. All the best!
- 1.The only requirement for a market to be perfectly competitive is for the market to have many buyers and sellers
- A.
True
- B.
False
- 2.For a competitive firm, marginal revenue equals the price of the goods it sells
- A.
True
- B.
False
- 3.If a competitive firm sells three times the amount of output, its total revenue also increases by a factor of three
- A.
True
- B.
False
- 4.A firm maximzies profit when it produces output up to the point where marginal cost equals marginal revenue
- A.
True
- B.
False
- 5.If marginal cost exceeds marginal revenue at a firm's current level of output, the firm can increase profit if i increases its level of output
- A.
True
- B.
False
- 6.A competitive firm's short-run supply curve is the portion of its marginal cost curve that lies above its average-total-cost curve
- A.
True
- B.
False
- 7.A competitive firm's long-run supply curve is the portion of its marginal-cost curve that lies above tis average-variable-cost curve
- A.
True
- B.
False
- 8.
- A.
True
- B.
False
- 9.In a competitive market, both buyers and sellers are price takers
- A.
True
- B.
False
- 10.In the long run, if the price firms receive for their output is below their average total costs of production, some firms will exit the market.
- A.
True
- B.
False
- 11.In the short run, the market supply curve for a good is the sum of the quantities supplied by each firm at each price
- A.
True
- B.
False
- 12.The short-run market supply curve is more elastic than the long-run market supply curve
- A.
True
- B.
False
- 13.
- A.
True
- B.
False
- 14.In the long run, if firms are identical and there is free entry and exit in the market, all firms in. the market operate at their efficient scale.
- A.
True
- B.
False
- 15.If the price of a good rises above the minimum average total cost of production, positive economic profits will cause new firms to enter the market, which drives the price back down to the minimum average total cost of production.
- A.
True
- B.
False
- 16.
- A.
There are many buyers and sellers in the market
- B.
The goods offered for sale are largely the same
- C.
Firms can freely enter or exit the market
- D.
Firms generate small but positive economic profits in the long run
- E.
All of the above are characteristics of a competitive market
- 17.Which of the following markets would most closely satisfy the requirements for a competitive market?
- A.
Gold bullion
- B.
Electricity
- C.
Cable television
- D.
Soda
- E.
All of the above represent competitive markets
- 18.If a competitive firm doubles its output, its total revenue
- A.
More than doubles
- B.
Doubles
- C.
Less than doubles
- D.
Cannot be determined because the price of the good may rise or fall
- 19.
- A.
Equal to the price of the good sold
- B.
Average revenue divided by the quantity sold
- C.
Total revenue divided by the price
- D.
Equal to the quantity of the good sold
- 20.The competitive firm maximizes profit when it produces output up to the point where
- A.
Marginal cost equals total revenue
- B.
Marginal revenue equals average revenue
- C.
Marginal cost equals marginal revenue
- D.
Price equals average variable cost
- 21.
- A.
Increased production
- B.
Decreased production
- C.
Maintained production at the current level
- D.
Temporarily shut down
- 22.If a competitive firm is producing a level of output where marginal revenue exceeds marginal cost, the firm could increase profits if it
- A.
Increased production
- B.
Decreased production
- C.
Maintained production at the current level
- D.
Temporarily shut down
- 23.
- A.
Entire marginal-cost curve
- B.
Portion of the marginal-cost curve that lies above the average-total-cost curve
- C.
Portion of the marginal-cost curve that lies above the average-variable-cost curve
- D.
Upward-sloping potion of the average-total-cost curve
- E.
Upward-sloping portion of the average-variable-cost curve
- 24.
- A.
Entire marginal-cost curve
- B.
Portion of the marginal-cost curve that lies above the average-total-cost curve
- C.
Portion of the marginal-cost curve that lies above the average-total-cost curve
- D.
Upward-sloping portion of the average-total-cost curve
- E.
Upward-sloping portion of the average-variable-cost curve
- 25.
- A.
Total costs of staying open are greater than the total revenue due to staying open
- B.
Total costs of staying open are less than the total revenue due to staying open
- C.
Variable costs of staying open are greater than the total revenue due to staying open
- D.
Variable costs of staying open are less than the total revenue due to staying open
- 26.The long-run market supply curve
- A.
Is always more elastic than the short-run market supply curve
- B.
Is always less elastic than the short-run market supply curve
- C.
Has the same elasticity as the short-run market supply curve
- D.
Is always perfectly elastic
- 27.In the long run, some firms will exit the market if the price of the good offered for sale is less than
- A.
Marginal revenue
- B.
Marginal cost
- C.
Average revenue
- D.
Average total cost
- 28.If all firms in a market have identical cost structures and if inputs used in the production of the good in that market are readily available, then the long-run market supply curve for that good should be
- A.
Perfectly elastic
- B.
Downward sloping
- C.
Upward sloping
- D.
Perfectly inelastic
- 29.If an input necessary for production is in limited supply so that an expansion of the industry raises costs for all existing firms in the market, then the long-run market supply curve for a good could be
- A.
Perfectly elastic
- B.
Downward sloping
- C.
Upward sloping
- D.
Perfectly inelastic
- 30.If the long-run market supply curve for a good is perfectly elastic, an increase in the demand for that good will, in the long run, cause
- A.
An increase in the price of the good and an increase in the number of firms in the market
- B.
An increase in the price of the good but no increase in the number of firms in the market
- C.
An increase in the number of firms in the market but no increase in the price of the good
- D.
No impact on either the price of the good or the number of firms in the market
- 31.In long-run equilibrium in a competitive market, firms are operating at
- A.
The minimum of their average-total-cost curves
- B.
The intersection of marginal cost and marginal revenue
- C.
Their efficient scale
- D.
Zero economic profit
- E.
All of the above
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