Week 10 · Quiz

Week 10 — Quiz · Perfect Competition

Principles of Microeconomics · ECON 1 Fall 2026 · Prof. Kessler Fictional sample

Course: Principles of Microeconomics (ECON 1) · Silver Oak University (fictional sample) · Prof. Kessler
Objective 6 · 10 questions · 10 points · closed to AI · one attempt
Auto-graded (Classic QTI): see F-quiz-week-10-qti.xml for the Canvas import. Every numeric answer is pre-computed and independently verified.

Fresh scenario for the quiz (FC=50, same MC structure as W9). Pre-verified: FC=50, VC={Q1:40,Q2:70,Q3:90,Q4:120,Q5:160,Q6:210}. MC = 40,30,20,30,40,50. Min AVC=30 at Q=3 (shutdown price). Min ATC=42 at Q=5. At P=40: Q=5 (P=MC rising arm), TR=200, TC=210, profit=−10. At P=50: Q=6, TR=300, TC=260, profit=+40.

The questions (human-readable; answer key below)

Q1. In perfect competition, a firm is described as a "price taker" because —
A) It sets the price by negotiating with buyers B) It cannot influence the market price and accepts it as given C) It takes prices from its competitors and undercuts them D) It changes its price every time demand changes

Q2. For a perfectly competitive firm, marginal revenue (MR) equals —
A) Total revenue divided by output B) Average total cost C) The market price D) Marginal cost minus average variable cost

Q3. (Fresh cost scenario: FC=50, MC sequence 40, 30, 20, 30, 40, 50 for Q=1 through 6; min AVC = $30 at Q=3; min ATC = $42 at Q=5.) At a market price of $40, the profit-maximizing output for this firm is —
A) Q=1 B) Q=3 C) Q=5 D) Q=6

Q4. Using the same scenario (FC=50), at P=$40 and Q=5: TC=$210, TR=$200. The firm's profit (or loss) is —
A) +$40 B) +$10 C) −$10 (a loss of $10) D) −$50

Q5. The firm in Q4 is losing $10. The correct short-run decision is —
A) Shut down immediately — any loss means stop B) Operate — price ($40) exceeds the shutdown price ($30 = min AVC) C) Exit the market permanently D) Raise the price to cover the loss

Q6. What is the firm's shutdown price (the lowest price at which it will operate in the short run)?
A) $42 (min ATC) B) $40 C) $35 D) $30 (min AVC)

Q7. (Select all that apply.) Which of the following are characteristics of a perfectly competitive market?
☑ A) Many sellers, each producing an identical product ☐ B) Each firm has the power to set its own price ☑ C) Free entry and exit in the long run ☐ D) A single seller controls the market ☑ E) Each firm is a price taker

Q8. (True/False) In the long run, perfectly competitive firms earn zero economic profit because of free entry and exit. → True

Q9. (Matching) Match each term to its description.
- Shutdown price → The minimum average variable cost — the lowest price at which a firm will operate
- Long-run equilibrium price → Equal to minimum average total cost; yields zero economic profit
- P = MR → The price-taker relationship unique to perfect competition
- Short-run shutdown → The decision to produce Q = 0 while remaining in the market

(Distractor: "The price at which MR = 0.")

Q10. If firms in a perfectly competitive industry are earning positive economic profit, the LONG-RUN adjustment is —
A) Existing firms raise their prices to protect profits B) New firms enter, industry supply increases, and price falls until profit returns to zero C) Firms reduce output to maintain the high price D) The government must intervene to restore competition

Answer key & feedback (instructor)

Q	Type	Answer	Feedback (the idea)
1	MC	B	Price taker = no market power; the market price is given, not chosen by the firm.
2	MC	C	P = MR for a price taker; each extra unit sold adds exactly the market price to TR.
3	MC	C=Q5	MC sequence: 40(↓),30,20,30,40(↑ at Q5),50 — P=MC=40 on the rising arm → Q=5. Q=1 also has MC=40 but is on the falling arm.
4	MC	C=−10	TR=40×5=200; TC=210; profit=200−210=−10 (a loss). Equivalently (40−42)×5=−10.
5	MC	B	P=40 > min AVC=30 → operate. Loss=−10 < FC=50; operating is better than shutting down.
6	MC	D=$30	Shutdown price = min AVC = $30 (not min ATC).
7	MA	A,C,E	Many sellers + identical product + price takers + free entry/exit = PC. B and D describe monopoly.
8	TF	True	Free entry eliminates positive profit; free exit eliminates persistent losses; LR equilibrium → P = min ATC → zero economic profit.
9	Match	as above	Distractor "price at which MR=0" is a monopoly concept, not relevant to PC.
10	MC	B	Positive profit → entry → S shifts right → P falls → profit erodes to zero (the long-run self-correction).

Quality gate (self-checked): Q3 (MC table rising arm: Q5 MC=40=P ✓; Q=1 falling-arm trap flagged); Q4 (TR=200, TC=210, profit=−10 ✓; (40−42)×5=−10 ✓); Q5 (P=40>minAVC=30 → operate ✓; loss=10<FC=50 ✓); Q6 (min AVC=30 ✓) — all Python re-verified. Item types include MA, TF, and Matching; no free numeric entry.

This is the human-readable quiz with its vetted answer key and rationale. The import-ready Classic-QTI version (F-quiz-week-10-qti.xml) ships inside the course's .imscc package — it lands in the Canvas gradebook on import.

~ Prof. Kessler's edition · Fall 2026 · built with thecoursemaker.com