Question 1

For a perfectly competitive firm,

Accepted Answer

A) P = AR at all levels of output B) P = AR at the profit-maximizing quantity only C) P > AR at all levels of output D) P < AR at the profit-maximizing quantity only E) P < AR at all levels of output A) P = AR at all levels of output B) P = AR at the profit-maximizing quantity only C) P > AR at all levels of output D) P < AR at the profit-maximizing quantity only E) P < AR at all levels of output

Question 2

Economic theory assumes that the goal of firms is to maximize

Accepted Answer

A) sales 
B) total revenue 
C) profit 
D) price 
E) utility 
A) sales 
B) total revenue 
C) profit 
D) price 
E) utility

Question 3

Which of the following markets best approximates the perfectly competitive market structure?

Accepted Answer

A) automobile manufacturing 
B) insurance 
C) world commodity markets 
D) airlines 
E) manufacture of stereo equipment 
A) automobile manufacturing 
B) insurance 
C) world commodity markets 
D) airlines 
E) manufacture of stereo equipment

Question 4

At its present rate of output, 200 units, a perfectly competitive firm has total cost of $10, 000, marginal cost of $38, and fixed cost of $2, 000, and it charges the market price of $38 per unit.To maximize profit or minimize loss, this firm should

Accepted Answer

A) increase output 
B) reduce output but not to zero 
C) maintain the present rate of output 
D) shut down 
E) raise the price 
A) increase output 
B) reduce output but not to zero 
C) maintain the present rate of output 
D) shut down 
E) raise the price

Question 5

Exhibit 8-14   In Exhibit 8-14, what area represents total cost at the loss-minimizing output?

Accepted Answer

A) 0cda 
B) 0jka 
C) 0efa 
D) 0hib 
E) 0egb 
A) 0cda 
B) 0jka 
C) 0efa 
D) 0hib 
E) 0egb

Question 6

Peg's Kegs sells kegs in a perfectly competitive market.Because low demand forced price below average variable cost, Peg has made the short-run decision to shut down.Her current loss is

Accepted Answer

A) zero 
B) greater than if she had kept operating 
C) the same as the losses she was incurring while operating 
D) equal to fixed cost 
E) less than her total revenue 
A) zero 
B) greater than if she had kept operating 
C) the same as the losses she was incurring while operating 
D) equal to fixed cost 
E) less than her total revenue

Question 7

Individual firms in a perfectly competitive market can

Accepted Answer

A) purchase all they want at the market price 
B) sell all they produce at the market price 
C) earn more profit if they charge a price above the market price 
D) earn more profit if they charge a price below the market price 
E) earn no profit in the short run 
A) purchase all they want at the market price 
B) sell all they produce at the market price 
C) earn more profit if they charge a price above the market price 
D) earn more profit if they charge a price below the market price 
E) earn no profit in the short run

Question 8

If the loss-minimizing output for a perfectly competitive firm is zero, then, at all other output levels,

Accepted Answer

A) price must be greater than average variable cost 
B) the marginal cost curve must slope downward 
C) marginal cost is less than marginal revenue 
D) total revenue is less than total variable cost 
E) total revenue is less than average variable cost 
A) price must be greater than average variable cost 
B) the marginal cost curve must slope downward 
C) marginal cost is less than marginal revenue 
D) total revenue is less than total variable cost 
E) total revenue is less than average variable cost

Question 9

Suppose a perfectly competitive constant-cost industry is in long-run equilibrium when market demand suddenly falls.What happens to the industry in the long run?

Accepted Answer

A) It experiences no change form the original equilibrium 
B) It experiences a higher equilibrium price and produces more output 
C) It experiences a lower equilibrium price but produces more output 
D) It experiences the same equilibrium price but produces more output 
E) It experiences the same equilibrium price but produces less output 
A) It experiences no change form the original equilibrium 
B) It experiences a higher equilibrium price and produces more output 
C) It experiences a lower equilibrium price but produces more output 
D) It experiences the same equilibrium price but produces more output 
E) It experiences the same equilibrium price but produces less output

Question 10

Exhibit 8-10   In Exhibit 8-10, price equals

Accepted Answer

A) $60 
B) $24 
C) $40 
D) $20 
E) $32 
A) $60 
B) $24 
C) $40 
D) $20 
E) $32

Question 11

A perfectly competitive firm finds that: Average total cost is $25;
Average variable cost is $15;
Marginal cost is $20 and increasing;
Price of the product is $22.
This firm should

Accepted Answer

A) produce more output 
B) raise the price of its product 
C) reduce production without shutting down 
D) shut down (reduce output to zero) 
E) do nothing (it is currently maximizing profit) 
A) produce more output 
B) raise the price of its product 
C) reduce production without shutting down 
D) shut down (reduce output to zero) 
E) do nothing (it is currently maximizing profit)

Question 12

Firms in a perfectly competitive market achieve both allocative and productive efficiency in the short run

Accepted Answer

A) True 
 B)False

Question 13

Claude's Copper Clappers sells clappers for $65 each in a perfectly competitive market.At its present rate of output, Claude's marginal cost is $65, average variable cost is $45, and average total cost is $67.To maximize his profit or minimize his loss, Claude should

Accepted Answer

A) increase output 
B) reduce output but not to zero 
C) maintain the present rate of output 
D) shut down 
E) raise the price 
A) increase output 
B) reduce output but not to zero 
C) maintain the present rate of output 
D) shut down 
E) raise the price

Question 14

Exhibit 8-9   In Exhibit 8-9, total revenue at the profit-maximizing output equals

Accepted Answer

A) $2, 400 
B) $4, 000 
C) $5, 200 
D) $5, 600 
E) $6, 000 
A) $2, 400 
B) $4, 000 
C) $5, 200 
D) $5, 600 
E) $6, 000

Question 15

Firm A and B are producers in the same perfectly competitive industry.If Firm A earns a marginal revenue of $17,

Accepted Answer

A) it earns an average revenue less than $17 
B) Firm B earns an average revenue of $17 
C) Firm B will try to charge $16 per unit 
D) it earns an average revenue greater than $17 
E) Firm B earns an average revenue greater than $17 
A) it earns an average revenue less than $17 
B) Firm B earns an average revenue of $17 
C) Firm B will try to charge $16 per unit 
D) it earns an average revenue greater than $17 
E) Firm B earns an average revenue greater than $17

Question 16

Exhibit 8-19 A Single Firm in a Perfectly Competitive Market   Exhibit 8-19 shows the demand and cost situation facing a single perfectly competitive firm.If P5 represents the equilibrium market price.What is the profit-maximizing quantity for the firm?

Accepted Answer

A) Q1 bushels 
B) Q2 bushels 
C) Q3 bushels 
D) Q4 bushels 
E) 0 bushels 
A) Q1 bushels 
B) Q2 bushels 
C) Q3 bushels 
D) Q4 bushels 
E) 0 bushels

Question 17

Exhibit 8-15   The maximum economic profit (or minimum economic loss)for the firm in Exhibit 8-15 is a

Accepted Answer

A) loss of $540 
B) loss of $480 
C) profit of $60 
D) loss of $490 
E) loss of $108 
A) loss of $540 
B) loss of $480 
C) profit of $60 
D) loss of $490 
E) loss of $108

Question 18

If every firm is a price taker, then which of the following characteristics does their industry have?

Accepted Answer

A) large number of sellers 
B) many versions of the product 
C) limited resource mobility 
D) few consumers 
E) market power 
A) large number of sellers 
B) many versions of the product 
C) limited resource mobility 
D) few consumers 
E) market power

Question 19

Average revenue minus average total cost equals

Accepted Answer

A) total economic profit 
B) total accounting profit 
C) a normal profit 
D) economic profit per unit of output 
E) marginal cost 
A) total economic profit 
B) total accounting profit 
C) a normal profit 
D) economic profit per unit of output 
E) marginal cost

Question 20

Claude's Copper Clappers sells clappers for $60 each in a perfectly competitive market.At its present rate of output, Claude's marginal cost is $65, average variable cost is $25, and average total cost is $62.To improve his profit/loss situation, Claude should

Accepted Answer

A) increase output 
B) reduce output but not to zero 
C) maintain the present rate of output 
D) shut down 
E) raise the price 
A) increase output 
B) reduce output but not to zero 
C) maintain the present rate of output 
D) shut down 
E) raise the price

Exam 8: A--Perfect Competition

For a perfectly competitive firm,

Economic theory assumes that the goal of firms is to maximize

Which of the following markets best approximates the perfectly competitive market structure?

At its present rate of output, 200 units, a perfectly competitive firm has total cost of $10, 000, marginal cost of $38, and fixed cost of $2, 000, and it charges the market price of $38 per unit.To maximize profit or minimize loss, this firm should

Exhibit 8-14 In Exhibit 8-14, what area represents total cost at the loss-minimizing output?

Peg's Kegs sells kegs in a perfectly competitive market.Because low demand forced price below average variable cost, Peg has made the short-run decision to shut down.Her current loss is

Individual firms in a perfectly competitive market can

If the loss-minimizing output for a perfectly competitive firm is zero, then, at all other output levels,

Suppose a perfectly competitive constant-cost industry is in long-run equilibrium when market demand suddenly falls.What happens to the industry in the long run?

Exhibit 8-10 In Exhibit 8-10, price equals

A perfectly competitive firm finds that: Average total cost is $25; Average variable cost is $15; Marginal cost is $20 and increasing; Price of the product is $22. This firm should

Firms in a perfectly competitive market achieve both allocative and productive efficiency in the short run

Claude's Copper Clappers sells clappers for $65 each in a perfectly competitive market.At its present rate of output, Claude's marginal cost is $65, average variable cost is $45, and average total cost is $67.To maximize his profit or minimize his loss, Claude should

Exhibit 8-9 In Exhibit 8-9, total revenue at the profit-maximizing output equals

Firm A and B are producers in the same perfectly competitive industry.If Firm A earns a marginal revenue of $17,

Exhibit 8-19 A Single Firm in a Perfectly Competitive Market Exhibit 8-19 shows the demand and cost situation facing a single perfectly competitive firm.If P5 represents the equilibrium market price.What is the profit-maximizing quantity for the firm?

Exhibit 8-15 The maximum economic profit (or minimum economic loss)for the firm in Exhibit 8-15 is a

If every firm is a price taker, then which of the following characteristics does their industry have?

Average revenue minus average total cost equals

Claude's Copper Clappers sells clappers for $60 each in a perfectly competitive market.At its present rate of output, Claude's marginal cost is $65, average variable cost is $25, and average total cost is $62.To improve his profit/loss situation, Claude should

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

B--Perfect Competition

A--Monopoly

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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Exhibit 8-19 A Single Firm in a Perfectly Competitive Market Exhibit 8-19 shows the demand and cost situation facing a single perfectly competitive firm.If P₅represents the equilibrium market price.What is the profit-maximizing quantity for the firm?