Question 1

In perfect competition, if one firm raises its price,

Accepted Answer

A) others will follow 
B) that firm will increase its revenues 
C) that firm will lose revenues because other firms will not follow 
D) all consumers will be adversely affected 
E) the market demand curve will shift 
A) others will follow 
B) that firm will increase its revenues 
C) that firm will lose revenues because other firms will not follow 
D) all consumers will be adversely affected 
E) the market demand curve will shift

Question 2

At its present rate of output, 200 units, a perfectly competitive firm has variable costs of $10, 000 and marginal cost of $50, and accepts the market price of $40 per unit.To improve its profit/loss situation, 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 3

Claude's Copper Clappers sells clappers for $40 each in a perfectly competitive market.At its present rate of output, Claude's marginal cost is $39, average variable cost is $25, and average total cost is $45.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

Question 4

Which of the following is not characteristic of perfect competition?

Accepted Answer

A) many buyers and sellers 
B) brand name advertising 
C) standardized products 
D) fully informed buyers and sellers 
E) free entry and exit of firms 
A) many buyers and sellers 
B) brand name advertising 
C) standardized products 
D) fully informed buyers and sellers 
E) free entry and exit of firms

Question 5

The short-run industry supply curve in a perfectly competitive market is the horizontal sum of each firm's short-run supply curve.

Accepted Answer

A) True 
 B)False

Question 6

If average revenue equals average total cost,

Accepted Answer

A) total revenue is maximized 
B) average revenue is maximized 
C) average total cost is minimized 
D) economic profit is maximized 
E) economic profit is zero 
A) total revenue is maximized 
B) average revenue is maximized 
C) average total cost is minimized 
D) economic profit is maximized 
E) economic profit is zero

Question 7

Exhibit 8-5   Consider Exhibit 8-5.If the market price is $15, the minimum loss this perfectly competitive firm can incur is

Accepted Answer

A) $10 
B) $15 
C) $18 
D) $19 
E) $22 
A) $10 
B) $15 
C) $18 
D) $19 
E) $22

Question 8

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

Accepted Answer

A) $4, 400 
B) $4, 800 
C) $5, 600 
D) $2, 400 
E) $5, 200 
A) $4, 400 
B) $4, 800 
C) $5, 600 
D) $2, 400 
E) $5, 200

Question 9

Which of the following is not a condition of long-run equilibrium for perfectly competitive firms?

Accepted Answer

A) price is equal to marginal cost 
B) price is equal to minimum short-run average total cost 
C) price is equal to minimum long-run average cost 
D) price is equal to marginal revenue 
E) economic profit is positive 
A) price is equal to marginal cost 
B) price is equal to minimum short-run average total cost 
C) price is equal to minimum long-run average cost 
D) price is equal to marginal revenue 
E) economic profit is positive

Question 10

Suppose a price-taking firm produces 400 units at its optimal output level.At that output rate marginal cost is $200, average total cost is $240, and average variable cost is $170.What can you determine about the market price that would force the firm to shut down in the short run?

Accepted Answer

A) It equals $200. 
B) It is between $170 and $240. 
C) It is less than $170. 
D) It is between $170 and $200. 
E) It equals $240. 
A) It equals $200. 
B) It is between $170 and $240. 
C) It is less than $170. 
D) It is between $170 and $200. 
E) It equals $240.

Question 11

A constant-cost industry is distinguished by the fact that

Accepted Answer

A) firms' long-run average cost curves are horizontal 
B) firms' short-run marginal cost curves are horizontal 
C) firms' short-run average total costs are horizontal 
D) the short-run industry supply curve is perfectly elastic 
E) the long-run industry supply curve is perfectly elastic 
A) firms' long-run average cost curves are horizontal 
B) firms' short-run marginal cost curves are horizontal 
C) firms' short-run average total costs are horizontal 
D) the short-run industry supply curve is perfectly elastic 
E) the long-run industry supply curve is perfectly elastic

Question 12

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

Accepted Answer

A) 0cda 
B) 0jka 
C) 0efa 
D) cefd 
E) ejkf 
A) 0cda 
B) 0jka 
C) 0efa 
D) cefd 
E) ejkf

Question 13

If a perfectly competitive firm shuts down in the short run, its total cost equals zero.

Accepted Answer

A) True 
 B)False

Question 14

Exhibit 8-7   For the profit maximizing perfectly competitive firm represented in Exhibit 8-7, which of the following is true?

Accepted Answer

A) the firm will sell its output for $10 per unit and its profit will be zero 
B) the firm will shut down 
C) the firm will sell its output for $8 per unit and its profit will be negative 
D) the firm will sell its output for $8 per unit and its profit will be positive 
E) the firm will sell its output for $8 per unit and break even 
A) the firm will sell its output for $10 per unit and its profit will be zero 
B) the firm will shut down 
C) the firm will sell its output for $8 per unit and its profit will be negative 
D) the firm will sell its output for $8 per unit and its profit will be positive 
E) the firm will sell its output for $8 per unit and break even

Question 15

Exhibit 8-19 A Single Firm in a Perfectly Competitive Market   Consider Exhibit 8-19.When the market price is P2, which of the following most acurately reflects the firms short-run situation?

Accepted Answer

A) The firm will choose to produce quantity Q4 and earn exactly 0 profit 
B) The firm will choose to produce quantity Q4 and earn a profit 
C) The firm will choose to produce quantity Q4 and suffer a loss 
D) The firm will choose to produce quantity Q5 and earn a profit > 0 
E) The firm will choose to produce quantity Q5 and earn exactly 0 profit 
A) The firm will choose to produce quantity Q4 and earn exactly 0 profit 
B) The firm will choose to produce quantity Q4 and earn a profit 
C) The firm will choose to produce quantity Q4 and suffer a loss 
D) The firm will choose to produce quantity Q5 and earn a profit > 0 
E) The firm will choose to produce quantity Q5 and earn exactly 0 profit

Question 16

Exhibit 8-12   If the market price rises, the profit maximizing level of output in Exhibit 8-12 will

Accepted Answer

A) decrease 
B) stay the same 
C) increase 
D) either stay the same or increase 
E) either stay the same or decrease 
A) decrease 
B) stay the same 
C) increase 
D) either stay the same or increase 
E) either stay the same or decrease

Question 17

In the long run in perfect competition, no firm can earn a normal profit.

Accepted Answer

A) True 
 B)False

Question 18

Commodity products are

Accepted Answer

A) rare and expensive 
B) patented and licensed 
C) highly differentiated 
D) uniform or standardized 
E) ones without impurities 
A) rare and expensive 
B) patented and licensed 
C) highly differentiated 
D) uniform or standardized 
E) ones without impurities

Question 19

Suppose the equilibrium price in a perfectly competitive industry is $100 and a firm in the industry charges $112.Which of the following will happen?

Accepted Answer

A) The firm will not sell any of its output. 
B) The firm will sell more output than its competitors. 
C) The firm's profits will increase. 
D) The firm's revenue will increase. 
E) The firm will gradually take over the entire industry. 
A) The firm will not sell any of its output. 
B) The firm will sell more output than its competitors. 
C) The firm's profits will increase. 
D) The firm's revenue will increase. 
E) The firm will gradually take over the entire industry.

Question 20

Which of the following is not necessarily a characteristic of perfect competition?

Accepted Answer

A) low prices 
B) a large number of buyers and sellers 
C) a homogeneous product 
D) perfect information 
E) easy entry and exit in the long run 
A) low prices 
B) a large number of buyers and sellers 
C) a homogeneous product 
D) perfect information 
E) easy entry and exit in the long run

Exam 8: A--Perfect Competition

In perfect competition, if one firm raises its price,

At its present rate of output, 200 units, a perfectly competitive firm has variable costs of $10, 000 and marginal cost of $50, and accepts the market price of $40 per unit.To improve its profit/loss situation, this firm should

Claude's Copper Clappers sells clappers for $40 each in a perfectly competitive market.At its present rate of output, Claude's marginal cost is $39, average variable cost is $25, and average total cost is $45.To improve his profit/loss situation, Claude should

Which of the following is not characteristic of perfect competition?

The short-run industry supply curve in a perfectly competitive market is the horizontal sum of each firm's short-run supply curve.

If average revenue equals average total cost,

Exhibit 8-5 Consider Exhibit 8-5.If the market price is $15, the minimum loss this perfectly competitive firm can incur is

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

Which of the following is not a condition of long-run equilibrium for perfectly competitive firms?

Suppose a price-taking firm produces 400 units at its optimal output level.At that output rate marginal cost is $200, average total cost is $240, and average variable cost is $170.What can you determine about the market price that would force the firm to shut down in the short run?

A constant-cost industry is distinguished by the fact that

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

If a perfectly competitive firm shuts down in the short run, its total cost equals zero.

Exhibit 8-7 For the profit maximizing perfectly competitive firm represented in Exhibit 8-7, which of the following is true?

Exhibit 8-19 A Single Firm in a Perfectly Competitive Market Consider Exhibit 8-19.When the market price is P2, which of the following most acurately reflects the firms short-run situation?

Exhibit 8-12 If the market price rises, the profit maximizing level of output in Exhibit 8-12 will

In the long run in perfect competition, no firm can earn a normal profit.

Commodity products are

Suppose the equilibrium price in a perfectly competitive industry is $100 and a firm in the industry charges $112.Which of the following will happen?

Which of the following is not necessarily a characteristic of perfect competition?

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

Exhibit 8-19 A Single Firm in a Perfectly Competitive Market Consider Exhibit 8-19.When the market price is P₂, which of the following most acurately reflects the firms short-run situation?