Question 1

In the short run, a perfectly competitive ball bearing manufacturer will continue to produce at a loss if

Accepted Answer

A) it is covering all of its fixed cost 
B) it is covering all of its variable cost plus part of its fixed cost 
C) variable cost is less than fixed cost 
D) fixed cost is zero 
E) fixed cost is minimized 
A) it is covering all of its fixed cost 
B) it is covering all of its variable cost plus part of its fixed cost 
C) variable cost is less than fixed cost 
D) fixed cost is zero 
E) fixed cost is minimized

Question 2

The long-run market supply curve for an increasing-cost, perfectly competitive industry

Accepted Answer

A) is horizontal 
B) slopes upward 
C) is the portion of its marginal cost curve above the minimum point on its average variable cost curve 
D) is the portion of its marginal cost curve above the minimum point on its average total cost curve 
E) is vertical 
A) is horizontal 
B) slopes upward 
C) is the portion of its marginal cost curve above the minimum point on its average variable cost curve 
D) is the portion of its marginal cost curve above the minimum point on its average total cost curve 
E) is vertical

Question 3

A firm in perfectly competitive industry is maximizing profit at Q = 3, 000.Then its fixed cost increases.The profit-maximizing output is now

Accepted Answer

A) greater than 3, 000 and profit decreases 
B) less than 3, 000 and profit decreases 
C) greater than 3, 000 and profit is unchanged 
D) equal to 3, 000 and profit decreases 
E) equal to 3, 000 and profit increases 
A) greater than 3, 000 and profit decreases 
B) less than 3, 000 and profit decreases 
C) greater than 3, 000 and profit is unchanged 
D) equal to 3, 000 and profit decreases 
E) equal to 3, 000 and profit increases

Question 4

For perfectly competitive firms, what is the relationship among market price (P), average revenue (AR), and marginal revenue (MR)?

Accepted Answer

A) P = AR = MR B) P > AR = MR C) P = AR > MR D) P = AR < MR E) P < AR = MR A) P = AR = MR B) P > AR = MR C) P = AR > MR D) P = AR < MR E) P < AR = MR

Question 5

For a perfectly competitive firm operating at the profit-maximizing output level in the short run,

Accepted Answer

A) MR = TR 
B) MC = price 
C) MC = ATC 
D) MC = AVC 
E) AFC = price 
A) MR = TR 
B) MC = price 
C) MC = ATC 
D) MC = AVC 
E) AFC = price

Question 6

Which of the following is true at each output level for a perfectly competitive firm?

Accepted Answer

A) MC = AVC = ATC 
B) MR = MC 
C) P > AVC 
D) AR = MR = P 
E) MR = AR = MC 
A) MC = AVC = ATC 
B) MR = MC 
C) P > AVC 
D) AR = MR = P 
E) MR = AR = MC

Question 7

If a market is such that, at the market equilibrium quantity, the benefit of the last unit produced just equals its marginal cost

Accepted Answer

A) it has earned a positive economic profit 
B) it has achieved productive efficiency 
C) it has achieved allocative efficiency 
D) it has achieved economies of scale 
E) there are further trades than can increase producer surplus 
A) it has earned a positive economic profit 
B) it has achieved productive efficiency 
C) it has achieved allocative efficiency 
D) it has achieved economies of scale 
E) there are further trades than can increase producer surplus

Question 8

Profit maximization depends upon demand conditions, as well as upon productivity and costs.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following does not characterize a perfectly competitive firm that has shut down in the short run?

Accepted Answer

A) total revenue equals zero 
B) variable costs equal zero 
C) the firm suffers a loss 
D) fixed cost is positive 
E) fixed cost is zero 
A) total revenue equals zero 
B) variable costs equal zero 
C) the firm suffers a loss 
D) fixed cost is positive 
E) fixed cost is zero

Question 10

Production of Hollywood movies is an increasing cost industry.Which of the following contributes the most to this condition?

Accepted Answer

A) The demand for carpenters to build sets 
B) The demand for painters to paint the theaters 
C) The demand for printers to print tickets 
D) The cost of advertising for the shows 
E) The cost of hiring known box-office superstars 
A) The demand for carpenters to build sets 
B) The demand for painters to paint the theaters 
C) The demand for printers to print tickets 
D) The cost of advertising for the shows 
E) The cost of hiring known box-office superstars

Question 11

Firms in perfect competition have no control over

Accepted Answer

A) all of the following 
B) where to operate on their average total cost curves 
C) what price to charge 
D) how many inputs to use 
E) how much to produce 
A) all of the following 
B) where to operate on their average total cost curves 
C) what price to charge 
D) how many inputs to use 
E) how much to produce

Question 12

Exhibit 8-11   At the profit-maximizing output level, the firm represented in Exhibit 8-11 experiences

Accepted Answer

A) a loss of giw0 
B) a profit of abfm 
C) a profit of cdy0 
D) zero profit or loss 
E) a loss of mfkc 
A) a loss of giw0 
B) a profit of abfm 
C) a profit of cdy0 
D) zero profit or loss 
E) a loss of mfkc

Question 13

Suppose that an increase in population increases demand in New Haven County's perfectly competitive market for auto repair.Which of the following is true in the short run?

Accepted Answer

A) Auto repair centers may be able to earn economic profit. 
B) Normal profits increase. 
C) The market supply curve of auto repair services shifts to the left. 
D) Either price or output is likely to increase, but it's impossible to say which. 
E) After firms have had time to adjust to the new equilibrium, the price of auto repair services will exceed the marginal cost. 
A) Auto repair centers may be able to earn economic profit. 
B) Normal profits increase. 
C) The market supply curve of auto repair services shifts to the left. 
D) Either price or output is likely to increase, but it's impossible to say which. 
E) After firms have had time to adjust to the new equilibrium, the price of auto repair services will exceed the marginal cost.

Question 14

A perfectly competitive firm will produce at an economic loss (negative profit)in the short run rather than discontinue production if there is a rate of output at which price

Accepted Answer

A) exceeds average variable cost 
B) exceeds average fixed cost 
C) exceeds average total cost 
D) exceeds marginal revenue 
E) equals marginal cost 
A) exceeds average variable cost 
B) exceeds average fixed cost 
C) exceeds average total cost 
D) exceeds marginal revenue 
E) equals marginal cost

Question 15

The price that represents the shutdown point for a perfectly competitive firm is the

Accepted Answer

A) highest point on the marginal cost curve 
B) lowest point on the marginal cost curve 
C) highest point on the average variable cost curve 
D) lowest point on the average variable cost curve 
E) lowest point on the average total cost curve 
A) highest point on the marginal cost curve 
B) lowest point on the marginal cost curve 
C) highest point on the average variable cost curve 
D) lowest point on the average variable cost curve 
E) lowest point on the average total cost curve

Question 16

If a perfectly competitive firm's marginal revenue is $35,

Accepted Answer

A) the next unit sold will earn the firm less than $35 in revenue 
B) the next unit sold will earn the firm more than $35 in revenue 
C) the next unit sold will earn no more revenue 
D) its average revenue is $35 
E) its demand curve will shift if more units are sold 
A) the next unit sold will earn the firm less than $35 in revenue 
B) the next unit sold will earn the firm more than $35 in revenue 
C) the next unit sold will earn no more revenue 
D) its average revenue is $35 
E) its demand curve will shift if more units are sold

Question 17

An industry consists of all firms that supply output to a particular market.

Accepted Answer

A) True 
 B)False

Question 18

If price is less than its minimum average variable cost, a perfectly competitive firm that continues to produce in the short run

Accepted Answer

A) cannot cover any of its variable cost 
B) incurs a loss greater than its fixed cost 
C) can cover all of its fixed cost and some of its variable cost 
D) can cover all of its variable cost and some of its fixed cost 
E) can cover both its fixed costs and its variable cost 
A) cannot cover any of its variable cost 
B) incurs a loss greater than its fixed cost 
C) can cover all of its fixed cost and some of its variable cost 
D) can cover all of its variable cost and some of its fixed cost 
E) can cover both its fixed costs and its variable cost

Question 19

The Hound Dog Bus Company contemplates expanding its New Mexico operations by offering service from Raton to Milk-of-Magnesia.The total cost of the trip would be $400, of which $150 is fixed cost, which it has already paid.The firm expects to earn $275 in revenue from the trip.The Hound Dog Bus Co.should

Accepted Answer

A) offer this service because it will earn a positive economic profit 
B) not offer this service because the marginal revenue is less than the marginal cost 
C) offer this service because the revenue exceeds fixed cost 
D) not offer this service because the total cost exceeds the total revenue 
E) offer this service because the added revenue exceeds the added cost of this service 
A) offer this service because it will earn a positive economic profit 
B) not offer this service because the marginal revenue is less than the marginal cost 
C) offer this service because the revenue exceeds fixed cost 
D) not offer this service because the total cost exceeds the total revenue 
E) offer this service because the added revenue exceeds the added cost of this service

Question 20

Tim Tupper's term paper-typing business is a perfectly competitive firm in long-run equilibrium.Which of the following does not describes the firm's situation?

Accepted Answer

A) It will be minimizing average total cost. 
B) It will be charging a price equal to marginal cost. 
C) It will be charging a price equal to average total cost. 
D) It will be earning a normal profit. 
E) Entrepreneurs outside the industry will be eager to enter. 
A) It will be minimizing average total cost. 
B) It will be charging a price equal to marginal cost. 
C) It will be charging a price equal to average total cost. 
D) It will be earning a normal profit. 
E) Entrepreneurs outside the industry will be eager to enter.

Exam 8: A--Perfect Competition

In the short run, a perfectly competitive ball bearing manufacturer will continue to produce at a loss if

The long-run market supply curve for an increasing-cost, perfectly competitive industry

A firm in perfectly competitive industry is maximizing profit at Q = 3, 000.Then its fixed cost increases.The profit-maximizing output is now

For perfectly competitive firms, what is the relationship among market price (P), average revenue (AR), and marginal revenue (MR)?

For a perfectly competitive firm operating at the profit-maximizing output level in the short run,

Which of the following is true at each output level for a perfectly competitive firm?

If a market is such that, at the market equilibrium quantity, the benefit of the last unit produced just equals its marginal cost

Profit maximization depends upon demand conditions, as well as upon productivity and costs.

Which of the following does not characterize a perfectly competitive firm that has shut down in the short run?

Production of Hollywood movies is an increasing cost industry.Which of the following contributes the most to this condition?

Firms in perfect competition have no control over

Exhibit 8-11 At the profit-maximizing output level, the firm represented in Exhibit 8-11 experiences

Suppose that an increase in population increases demand in New Haven County's perfectly competitive market for auto repair.Which of the following is true in the short run?

A perfectly competitive firm will produce at an economic loss (negative profit)in the short run rather than discontinue production if there is a rate of output at which price

The price that represents the shutdown point for a perfectly competitive firm is the

If a perfectly competitive firm's marginal revenue is $35,

An industry consists of all firms that supply output to a particular market.

If price is less than its minimum average variable cost, a perfectly competitive firm that continues to produce in the short run

Tim Tupper's term paper-typing business is a perfectly competitive firm in long-run equilibrium.Which of the following does not describes the firm's situation?

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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