Question 1

The perfectly competitive firm's short-run supply curve is the same as the

Accepted Answer

A) supply curve of all other firms in the industry 
B) upward-sloping portion of its marginal cost curve 
C) upward-sloping portion of its marginal cost curve at or above minimum average variable cost 
D) upward-sloping portion of its average variable cost curve 
E) market demand curve 
A) supply curve of all other firms in the industry 
B) upward-sloping portion of its marginal cost curve 
C) upward-sloping portion of its marginal cost curve at or above minimum average variable cost 
D) upward-sloping portion of its average variable cost curve 
E) market demand curve

Question 2

If a perfectly competitive firm charges the market price of $14 per unit,

Accepted Answer

A) its marginal revenue is $14, and its average revenue is less than $14 per unit 
B) it will sell no output 
C) its average revenue is $14, and its marginal revenue is less than $14 per unit 
D) its average revenue is $14, and its marginal revenue is $14 
E) its average and marginal revenue are $14 only for the first unit sold 
A) its marginal revenue is $14, and its average revenue is less than $14 per unit 
B) it will sell no output 
C) its average revenue is $14, and its marginal revenue is less than $14 per unit 
D) its average revenue is $14, and its marginal revenue is $14 
E) its average and marginal revenue are $14 only for the first unit sold

Question 3

Suppose, as a result of a long-run adjustment in a perfectly competitive industry to a change in demand, price and output both fell.Therefore, demand must have __________ in this __________ industry.

Accepted Answer

A) fallen; increasing cost 
B) fallen; decreasing cost 
C) increased; increasing cost 
D) increased; decreasing costs 
E) decreased; constant cost 
A) fallen; increasing cost 
B) fallen; decreasing cost 
C) increased; increasing cost 
D) increased; decreasing costs 
E) decreased; constant cost

Question 4

We say that equilibrium in a perfectly competitive market is allocatively efficient because

Accepted Answer

A) the sum of consumer and producer surplus is maximized 
B) the sum of consumer and producer surplus is minimized 
C) the sum of consumer and producer surplus is zero 
D) consumer surplus is maximized 
E) producer surplus is zero 
A) the sum of consumer and producer surplus is maximized 
B) the sum of consumer and producer surplus is minimized 
C) the sum of consumer and producer surplus is zero 
D) consumer surplus is maximized 
E) producer surplus is zero

Question 5

In the short run, if a firm shuts down, its total revenue is

Accepted Answer

A) $0 
B) equal to its fixed costs 
C) greater than its variable costs 
D) greater than its fixed costs 
E) less than its variable costs 
A) $0 
B) equal to its fixed costs 
C) greater than its variable costs 
D) greater than its fixed costs 
E) less than its variable costs

Question 6

The entry of new firms into a competitive industry in the long run has the effect of

Accepted Answer

A) driving up long-run equilibrium price 
B) eliminating economic profits 
C) reducing equilibrium quantity 
D) making the demand curve facing each firm more inelastic 
E) shifting the cost curves for each firm by an amount equal to total cost divided by the number of firms 
A) driving up long-run equilibrium price 
B) eliminating economic profits 
C) reducing equilibrium quantity 
D) making the demand curve facing each firm more inelastic 
E) shifting the cost curves for each firm by an amount equal to total cost divided by the number of firms

Question 7

If a perfectly competitive firm is producing at a quantity at which MC < AVC, it cannot be maximizing profit in the short run.

Accepted Answer

A) True 
 B)False

Question 8

Tim Tupper contracts with two other students to help him provide a term paper-typing service.In the last two weeks of the semester, he sees a tremendous increase in demand.His profit-maximizing response would be represented by

Accepted Answer

A) a rightward shift of the supply curve because it is possible to earn economic profits 
B) a rightward shift of the supply curve because the increase in demand is probably only temporary 
C) a reduction in supply to take full advantage of the increase in demand 
D) a movement up to the right along the supply curve because the increase in demand is probably only temporary 
E) an upward movement in horizontal demand curve he faces because now he can charge a lower price 
A) a rightward shift of the supply curve because it is possible to earn economic profits 
B) a rightward shift of the supply curve because the increase in demand is probably only temporary 
C) a reduction in supply to take full advantage of the increase in demand 
D) a movement up to the right along the supply curve because the increase in demand is probably only temporary 
E) an upward movement in horizontal demand curve he faces because now he can charge a lower price

Question 9

Producer surplus is usually less than profit

Accepted Answer

A) True 
 B)False

Question 10

In an increasing-cost industry, the entry of new firms

Accepted Answer

A) decreases equilibrium price 
B) increases average cost at each level of output 
C) shifts the industry demand curve to the left 
D) increases economic profits in the industry 
E) shifts the long-run industry supply curve to the right 
A) decreases equilibrium price 
B) increases average cost at each level of output 
C) shifts the industry demand curve to the left 
D) increases economic profits in the industry 
E) shifts the long-run industry supply curve to the right

Question 11

What is always true at the quantity at which average total cost equals average revenue?

Accepted Answer

A) economic profit is zero 
B) marginal cost equals marginal revenue 
C) economic profit is maximized 
D) revenue is maximized 
E) cost is minimized 
A) economic profit is zero 
B) marginal cost equals marginal revenue 
C) economic profit is maximized 
D) revenue is maximized 
E) cost is minimized

Question 12

Marginal revenue is

Accepted Answer

A) total revenue minus total cost 
B) total revenue divided by quantity of output 
C) the change in total revenue divided by the change in output 
D) the change in total revenue divided by the change in the quantity of an input used 
E) economic profit 
A) total revenue minus total cost 
B) total revenue divided by quantity of output 
C) the change in total revenue divided by the change in output 
D) the change in total revenue divided by the change in the quantity of an input used 
E) economic profit

Question 13

Exhibit 8-2   How much profit is the firm in Exhibit 8-2 earning (or how much of a loss is it suffering)?

Accepted Answer

A) -$17 
B) $10 
C) zero profit or loss 
D) -$10 
E) $30 
A) -$17 
B) $10 
C) zero profit or loss 
D) -$10 
E) $30

Question 14

Exhibit 8-3   The shape of the total cost curve between outputs a and b in Exhibit 8-3 reflects

Accepted Answer

A) fixed cost 
B) increasing profits 
C) diminishing marginal returns 
D) increasing marginal returns 
E) economies of scale 
A) fixed cost 
B) increasing profits 
C) diminishing marginal returns 
D) increasing marginal returns 
E) economies of scale

Question 15

To achieve allocative efficiency, firms

Accepted Answer

A) strive to minimize fixed costs 
B) strive to maximize profits 
C) produce at their minimum long-run average cost 
D) produce at their minimum long-run marginal cost 
E) produce the output consumers want most 
A) strive to minimize fixed costs 
B) strive to maximize profits 
C) produce at their minimum long-run average cost 
D) produce at their minimum long-run marginal cost 
E) produce the output consumers want most

Question 16

A perfectly competitive firm has no control over the

Accepted Answer

A) quantity of output produced 
B) quantities of inputs used 
C) price of the product 
D) type of good produced 
E) types of inputs used 
A) quantity of output produced 
B) quantities of inputs used 
C) price of the product 
D) type of good produced 
E) types of inputs used

Question 17

Allocative efficiency occurs in markets when

Accepted Answer

A) goods are produced using the least amount of society's scarce resources 
B) goods are produced at the lowest possible average total cost 
C) goods are produced at the lowest possible marginal cost 
D) the value to society of the last unit produced equals its marginal cost 
E) the value to society of the last unit produced is greater than its marginal cost 
A) goods are produced using the least amount of society's scarce resources 
B) goods are produced at the lowest possible average total cost 
C) goods are produced at the lowest possible marginal cost 
D) the value to society of the last unit produced equals its marginal cost 
E) the value to society of the last unit produced is greater than its marginal cost

Question 18

For a perfectly competitive firm that should continue to operate in the short run, loss is minimized where

Accepted Answer

A) MR is maximized 
B) MR = MC 
C) P  ATC 
A) MR is maximized 
B) MR = MC 
C) P  ATC

Question 19

The Hound Dog Bus Company contemplates expanding its Virginia operations by offering service from Fairfax to Arlington.The total cost of the trip would be $120, of which $50 is fixed cost, which it has already paid.The firm expects to earn $60 in revenue from the trip.The Hound Dog Bus Company 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

Market structure

Accepted Answer

A) has no influence on a firm's decision making 
B) applies only to industries regulated by the government 
C) is determined entirely by demand conditions in the industry 
D) influences the forms of competition among firms 
E) does not affect product price or quantity of output 
A) has no influence on a firm's decision making 
B) applies only to industries regulated by the government 
C) is determined entirely by demand conditions in the industry 
D) influences the forms of competition among firms 
E) does not affect product price or quantity of output

Exam 8: A--Perfect Competition

The perfectly competitive firm's short-run supply curve is the same as the

If a perfectly competitive firm charges the market price of $14 per unit,

Suppose, as a result of a long-run adjustment in a perfectly competitive industry to a change in demand, price and output both fell.Therefore, demand must have __________ in this __________ industry.

We say that equilibrium in a perfectly competitive market is allocatively efficient because

In the short run, if a firm shuts down, its total revenue is

The entry of new firms into a competitive industry in the long run has the effect of

If a perfectly competitive firm is producing at a quantity at which MC < AVC, it cannot be maximizing profit in the short run.

Tim Tupper contracts with two other students to help him provide a term paper-typing service.In the last two weeks of the semester, he sees a tremendous increase in demand.His profit-maximizing response would be represented by

Producer surplus is usually less than profit

In an increasing-cost industry, the entry of new firms

What is always true at the quantity at which average total cost equals average revenue?

Marginal revenue is

Exhibit 8-2 How much profit is the firm in Exhibit 8-2 earning (or how much of a loss is it suffering)?

Exhibit 8-3 The shape of the total cost curve between outputs a and b in Exhibit 8-3 reflects

To achieve allocative efficiency, firms

A perfectly competitive firm has no control over the

Allocative efficiency occurs in markets when

For a perfectly competitive firm that should continue to operate in the short run, loss is minimized where

Market structure

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

Filters

Suppose, as a result of a long-run adjustment in a perfectly competitive industry to a change in demand, price and output both fell.Therefore, demand must have in this industry.