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1 Competitive Markets and the Profit-Maximizing Firm Online Quiz Questions

Use this free practice quiz with 20 questions to review 1 Competitive Markets and the Profit-Maximizing Firm, test your knowledge, and prepare for your next test or exam.

20 questions
01
True or false
1 point

A firm earns more total revenue than it spends on direct cash expenses. This alone guarantees that its economic profit is positive.

  1. A

    True

  2. B

    False

02
Choose one
1 point

A competitive firm sells 55 units at a market price of $6\$6 per unit. What is its total revenue?

  1. A

    $11\$11

  2. B

    $30\$30

  3. C

    $36\$36

  4. D

    $56\$56

03
Choose all
1 point

Which choices describe costs that change as a firm's output changes? Select all correct answers.

  1. A

    Materials used for each unit produced

  2. B

    Rent on a facility already leased

  3. C

    Fixed costs

  4. D

    Variable costs

04
Written response
1 point

What is the economic term for the value of the next-best use of a firm's resources?

05
True or false
1 point

If fixed cost stays unchanged as output changes, marginal cost reflects the change in variable cost rather than a change in fixed cost.

  1. A

    True

  2. B

    False

06
Choose one
1 point

A price-taking firm charges more than the market price for an identical product. What is the most likely result?

  1. A

    The firm will raise the market price for all sellers.

  2. B

    Buyers can purchase the identical product from other sellers.

  3. C

    The firm will sell more because its price is higher.

  4. D

    The firm can choose any price without affecting demand.

07
Choose all
1 point

Which are features of the perfectly competitive market model? Select all correct answers.

  1. A

    Many buyers and sellers

  2. B

    Identical products

  3. C

    Broad access to relevant market information

  4. D

    Free entry and exit

  5. E

    A single seller controls the market

  6. F

    Firms sell products that are distinct from one another

08
Choose one
1 point

At its current output, a firm has MR>MCMR > MC. What happens to profit if it produces one more unit?

  1. A

    Producing another unit necessarily lowers profit.

  2. B

    The firm should stop producing because its costs exceed revenue.

  3. C

    Producing another unit increases profit.

  4. D

    The firm has already maximized profit, regardless of marginal cost.

09
Written response
1 point

A firm's total revenue rises by $24\$24 as its output increases from 44 units to 77 units. What is its marginal revenue in dollars per unit?

10
Choose one
1 point

A firm has fixed costs of $40\$40 and produces 88 units. What is its average fixed cost per unit?

  1. A

    $5\$5 per unit

  2. B

    $8\$8 per unit

  3. C

    $32\$32 per unit

  4. D

    $40\$40 per unit

11
Choose one
1 point

A firm's total cost is $95\$95, including fixed costs of $35\$35. What is its variable cost?

  1. A

    $35\$35

  2. B

    $60\$60

  3. C

    $95\$95

  4. D

    $130\$130

12
Open ended
1 point

Explain how a perfectly competitive firm uses marginal revenue and marginal cost to choose output, and why that output rule alone does not show whether the firm earns a profit.

13
True or false
1 point

True or false: Identical products and free entry and exit are characteristics of the perfectly competitive market model.

  1. A

    True

  2. B

    False

14
Choose one
1 point

A small firm sells an identical product in a perfectly competitive market. If it charges more than the market price, buyers can switch to other sellers. Which demand condition does the firm face?

  1. A

    The firm can sell more only by lowering its price below the market price.

  2. B

    The firm faces horizontal demand at the market price.

  3. C

    The firm can raise its price without losing buyers.

  4. D

    The firm determines the market price by choosing its output.

15
Written response
1 point

A firm sells 99 units at a price of $7\$7 per unit. Using TR=P×QTR=P\times Q, what is its total revenue?

16
Choose one
1 point

For a firm, rent on an already leased facility does not change with output during the period, while the materials used to make each unit increase with output. How should these costs be classified?

  1. A

    The lease is variable; the materials are fixed.

  2. B

    The lease is fixed; the materials are variable.

  3. C

    Both the lease and materials are fixed.

  4. D

    Both the lease and materials are variable.

17
Choose one
1 point

A firm produces 1212 units with total cost $240\$240. What is its average total cost, using ATC=TC/QATC=TC/Q?

  1. A

    $12\$12 per unit

  2. B

    $18\$18 per unit

  3. C

    $20\$20 per unit

  4. D

    $240\$240 per unit

18
Written response
1 point

A firm's total cost rises from $120\$120 to $158\$158 when its output increases from 1010 to 1212 units. Using MC=ΔTC/ΔQMC=\Delta TC/\Delta Q, what is the marginal cost per unit over this change?

19
Fill in the blank
1 point

A firm receives $60 by selling 12 units. The revenue per unit, found by dividing total revenue by quantity, is called .

20
Fill in the blank
1 point

A competitive firm sells one additional unit at the market price. The extra revenue from that sale is called .