ECON 202 OLE MISS HAYES MIDTERM EXAM
2025/2026 WITH ACTUAL CORRECT
QUESTIONS AND VERIFIED DETAILED
ANSWERS |CURRENTLY TESTING
QUESTIONS AND SOLUTIONS|ALREADY
GRADED A+|NEWEST|BRAND NEW
VERSION!!|GUARANTEED PASS
A firm's economic profit is usually higher than its accounting profit.
false
When a firm does more of something, it gets better at it. This learning-by-doing is
a source of economies of scale.
Which of the following is a short-run adjustment?
A local bakery hires two additional bakers.
If a firm decides to produce no output in the short run, its costs will be
its fixed costs.
When the total product is at its maximum level, the marginal product is zero.
true
A purely competitive seller is
a "price taker."
The demand schedule or curve confronted by the individual, purely competitive firm is
perfectly elastic.
The marginal revenue curve of a purely competitive firm
is horizontal at the market price.
1|Page
,In the short run, a purely competitive firm that seeks to maximize profit will produce
where total revenue exceeds total cost by the maximum amount.
The MR = MC rule applies
to firms in all types of industries.
The MR = MC rule can be restated for a purely competitive seller as P = MC because
each additional unit of output adds exactly its price to total revenue.
In the short run, the individual competitive firm's supply curve is that segment of the
marginal cost curve lying above the average variable cost curve.
Marginal revenue is the addition to total revenue resulting from the sale of one more unit of
output.
true
A purely competitive firm should produce in the short run if its total revenue is sufficient to
cover its
total variable costs.
If MR > MC for a competitive firm, it should reduce its level of output in order to make MR equal
to MC.
false
A firm sells a product in a purely competitive market. The marginal cost of the product at the
current output is $4.00 and the market price is $4.50. What should the firm do?
increase output if the minimum possible average variable cost is below $4.50
As long as its total revenues are greater than its total costs, a firm will earn positive economic
profits.
true
In which of the following industry structures is the entry of new firms the most difficult?
pure monopoly
Which of the following distinguishes the short run from the long run in pure competition?
Firms can enter and exit the market in the long run but not in the short run.
2|Page
, The primary force encouraging the entry of new firms into a purely competitive industry is
economic profits earned by firms already in the industry.
If a purely competitive firm is producing at the MR = MC output level and earning an economic
profit, then
new firms will enter this market.
Long-run competitive equilibrium
results in zero economic profits.
Which of the following will not hold true for a competitive firm in long-run equilibrium?
P equals AFC.
In the long run for a purely competitive market, firms will earn only normal profits.
true
Which of the following statements is correct?
Economic profits induce firms to enter an industry; losses encourage firms to leave.
Resources are efficiently allocated when production occurs where
price is equal to marginal cost.
If firms are losing money in a purely competitive industry, then the long-run adjustments in this
situation will cause the market supply to
decrease, and consequently the representative firm's profits will increase.
If there is a decrease in demand for a product in a purely competitive industry, it results in an
industry contraction that will end when the product price is
equal to its marginal cost.
The MR = MC rule applies
in both the short run and the long run.
Pure monopoly refers to
a single firm producing a product for which there are no close substitutes.
Pure monopolists may obtain economic profits in the long run because
of barriers to entry.
3|Page
2025/2026 WITH ACTUAL CORRECT
QUESTIONS AND VERIFIED DETAILED
ANSWERS |CURRENTLY TESTING
QUESTIONS AND SOLUTIONS|ALREADY
GRADED A+|NEWEST|BRAND NEW
VERSION!!|GUARANTEED PASS
A firm's economic profit is usually higher than its accounting profit.
false
When a firm does more of something, it gets better at it. This learning-by-doing is
a source of economies of scale.
Which of the following is a short-run adjustment?
A local bakery hires two additional bakers.
If a firm decides to produce no output in the short run, its costs will be
its fixed costs.
When the total product is at its maximum level, the marginal product is zero.
true
A purely competitive seller is
a "price taker."
The demand schedule or curve confronted by the individual, purely competitive firm is
perfectly elastic.
The marginal revenue curve of a purely competitive firm
is horizontal at the market price.
1|Page
,In the short run, a purely competitive firm that seeks to maximize profit will produce
where total revenue exceeds total cost by the maximum amount.
The MR = MC rule applies
to firms in all types of industries.
The MR = MC rule can be restated for a purely competitive seller as P = MC because
each additional unit of output adds exactly its price to total revenue.
In the short run, the individual competitive firm's supply curve is that segment of the
marginal cost curve lying above the average variable cost curve.
Marginal revenue is the addition to total revenue resulting from the sale of one more unit of
output.
true
A purely competitive firm should produce in the short run if its total revenue is sufficient to
cover its
total variable costs.
If MR > MC for a competitive firm, it should reduce its level of output in order to make MR equal
to MC.
false
A firm sells a product in a purely competitive market. The marginal cost of the product at the
current output is $4.00 and the market price is $4.50. What should the firm do?
increase output if the minimum possible average variable cost is below $4.50
As long as its total revenues are greater than its total costs, a firm will earn positive economic
profits.
true
In which of the following industry structures is the entry of new firms the most difficult?
pure monopoly
Which of the following distinguishes the short run from the long run in pure competition?
Firms can enter and exit the market in the long run but not in the short run.
2|Page
, The primary force encouraging the entry of new firms into a purely competitive industry is
economic profits earned by firms already in the industry.
If a purely competitive firm is producing at the MR = MC output level and earning an economic
profit, then
new firms will enter this market.
Long-run competitive equilibrium
results in zero economic profits.
Which of the following will not hold true for a competitive firm in long-run equilibrium?
P equals AFC.
In the long run for a purely competitive market, firms will earn only normal profits.
true
Which of the following statements is correct?
Economic profits induce firms to enter an industry; losses encourage firms to leave.
Resources are efficiently allocated when production occurs where
price is equal to marginal cost.
If firms are losing money in a purely competitive industry, then the long-run adjustments in this
situation will cause the market supply to
decrease, and consequently the representative firm's profits will increase.
If there is a decrease in demand for a product in a purely competitive industry, it results in an
industry contraction that will end when the product price is
equal to its marginal cost.
The MR = MC rule applies
in both the short run and the long run.
Pure monopoly refers to
a single firm producing a product for which there are no close substitutes.
Pure monopolists may obtain economic profits in the long run because
of barriers to entry.
3|Page
