Multiple Choice Questions
1. In the long run, which of the following outcomes is most likely for a firm?
a. Zero accounting profits but positive economic profits
b. Zero accounting profits
c. Positive accounting profits and positive economic profits
d. Zero economic profits but positive accounting profits

2. At the individual firm level, which of the following types of firms faces a downwards loping demand curve?
a. Both a perfectly competitive firm and a monopoly
b. Neither a perfectly competitive firm nor a monopoly
c. A perfectly competitive firm but not a monopoly
d. A monopoly but not a perfectly competitive firm

3. Which of the following types of firms are guaranteed to make positive economic profit?
a. Both a perfectly competitive firm and a monopoly
b. Neither a perfectly competitive firm nor a monopoly
c. A perfectly competitive firm but not a monopoly
d. A monopoly but not a perfectly competitive firm

4. What is the main difference between a competitive firm and a monopoly firm?
a. The number of customers served by the firm.
b. Monopoly firms are more efficient and therefore have lower costs.
c. Monopoly firms can generally earn positive profits over a longer period of time.
d. Monopoly firms enjoy government protection from competition.

5. Which of the products below is closest to operating in a perfectly competitive industry?
a. Nike shoes
b. Eggs
c. Perdue Chicken
d. Restaurants

6. A firm in a perfectly competitive market (a price taker) faces what type of demand curve?
a. Unit elastic
b. Perfectly inelastic
c. Perfectly elastic
d. None of the above
7. A perfectly competitive firm's profit-maximizing price is $15. At MC = MR, the output is 100 units. At this level of production, average total costs are $12. The firm's profits are
a. $300 in the short run and long run
b. $300 in the short run
c. $500 in the short run and long run
d. $500 in the short run

8. What would happen to revenues if a competitive firm raised price?
a. They would increase.
b. They would increase but profit would decrease.
c. They would increase along with profit.
d. They would fall to zero.

9. If a firm in a perfectly competitive industry is experiencing average revenues greater than average costs, in the long run
a. Some firms will leave the industry and price will rise.
b. Some firms will enter the industry and price will rise.
c. Some firms will leave the industry and price will fall.
d. Some firms will enter the industry and price will fall.

10. A sudden decrease in the market demand in a competitive industry leads to
a. Losses in the short run and average profits in the long run.
b. Above-average profits in the short run and average profits in the long run.
c. New firms being attracted to the industry.
d. Demand creating supply.