1. Marginal revenue for a purely competitive firm
A. is greater than price.
B. is less than price.
C. is equal to price.
D. may be either greater or less than price.

2. A purely competitive seller is
A. both a "price maker" and a "price taker."
B. neither a "price maker" nor a "price taker."
C. a "price maker."
D. a "price taker."

3. In the short run, a purely competitive firm will operate (not shutdown) if
A. P = ATC.
B. P > AVC.
C. P = MC.
D. P > ATC.

4. Marginal revenue may be defined as the
A. change in product price associated with the sale of one more unit of output.
B. change in average revenue associated with the sale of one more unit of output.
C. difference between product price and average total cost.
D. change in total revenue associated with the sale of one more unit of output.

5. The loss of a purely competitive firm that closes down in the short run
A. is equal to its total variable costs.
B. is zero.
C. is equal to its total fixed costs.
D. cannot be determined.

6. In the short-run, the individual competitive firm's supply curve is that segment of the
A. average variable cost curve that lies below the marginal cost curve.
B. marginal cost curve that lies above the average variable cost curve.
C. marginal revenue curve that lies below the demand curve.
D. marginal cost curve that lies between the average total cost and average variable cost curves.

7. Which of the following is a feature of pure competition?
A. firm's demand curve is perfectly inelastic
B. each firm sells an identical product
C. barriers to entry exist
D. the firm is a "price maker"

8. A competitive firm will maximize profits at the output at which
A. the excess of total revenue over total cost is greatest.
B. total revenue and total cost are equal.
C. price exceeds average variable cost by the largest amount.
D. the difference between marginal revenue and price is at a maximum.
E. the difference between price and marginal cost is at a minimum.

9. Price is constant, or "given" (i.e. perfectly elastic demand), for the individual firm selling in a purely competitive market because
A. the firm's demand curve is down-sloping.
B. of product differentiation reinforced by extensive advertising.
C. each seller supplies an identical product
D. there are no good substitutes for its product.

10. In a purely competitive industry, in the short-run,
A. the firm can operate at a loss.
B. the firm can operate at a profit.
C. the firm can shutdown.
D. all of the above are possible

11. If a firm is making a normal profit, this means that
A. a zero economic profit is being earned.
B. a negative economic profit is being earned.
C. a positive economic profit is being earned.
D. none of the above

12. In the long-run, the typical firm in pure competition will earn
A. positive economic profit.
B. negative economic profit.
C. zero economic profit.
D. none of the above

13. In the long-run, the typical firm in pure competition will operate
A. at minimum average total cost.
B. at maximum average total cost.
C. below minimum average variable cost.
D. none of the above

14. The term "productive efficiency" refers to
A. any short-run equilibrium position of a competitive firm.
B. the production of the product-mix most desired by consumers.
C. the production of a good at the lowest average total cost.
D. fulfilling the condition P = MC.

15. In the long-run, the typical purely competitive firm is efficient because, for the last unit produced,
A. price equals minimum average variable cost.
B. price equals minimum average total cost.
C. price equals minimum average fixed cost.
D. price equals marginal cost.

Figure 1: This figure describes FireLess, a purely competitive firm that manufactures a standardized, generic smoke detector in the North American market. The quantity levels in the graph below are daily production levels. FireLess incurs total fixed costs of approximately $360 per day.