Question 1

Which statement is TRUE?

Accepted Answer

A) If the price falls below the average total cost,the firm will earn economic profits. 
B) Price and marginal revenue are the same in perfect competition. 
C) Economic profit per unit is found by subtracting AVC from the price. 
D) Economic profit is always positive in the short run. 
A) If the price falls below the average total cost,the firm will earn economic profits. 
B) Price and marginal revenue are the same in perfect competition. 
C) Economic profit per unit is found by subtracting AVC from the price. 
D) Economic profit is always positive in the short run.

Question 2

Mikail's perfectly competitive camera memory card-producing factory is making positive economic profits.If the price of memory cards is $9,Mikail's output is 3,000 cards a month,and his monthly average total cost is $7,what are his monthly profits?

Accepted Answer

A) $6,000 
B) $27,000 
C) $21,000 
D) $2 
A) $6,000 
B) $27,000 
C) $21,000 
D) $2

Question 3

Use the following to answer question:  
-(Table: Soybean Cost)Use Table: Soybean Cost.What is the shut-down price for this farmer?

Accepted Answer

A) $10 
B) $11 
C) $12 
D) $13 
A) $10 
B) $11 
C) $12 
D) $13

Question 4

Lilly is the price-taking owner of an apple orchard.The price of apples is high enough that Lilly is earning positive economic profits.In the long run,Lilly should expect _____ apple prices due to the _____ firms.

Accepted Answer

A) lower;entry of new 
B) higher;exit of existing 
C) lower;exit of existing 
D) higher;entry of new 
A) lower;entry of new 
B) higher;exit of existing 
C) lower;exit of existing 
D) higher;entry of new

Question 5

The break-even price for a perfectly competitive firm is equal to the:

Accepted Answer

A) minimum value of average variable cost. 
B) marginal revenue,provided that marginal revenue is equal to marginal cost. 
C) average fixed cost at the given output level. 
D) minimum value of average total cost. 
A) minimum value of average variable cost. 
B) marginal revenue,provided that marginal revenue is equal to marginal cost. 
C) average fixed cost at the given output level. 
D) minimum value of average total cost.

Question 6

Use the following to answer question:  
-(Table: Variable Costs for Lawns)Use Table: Variable Costs for Lawns.During the summer,Alex runs a lawn-mowing service,and lawn-mowing is a perfectly competitive industry with 100 firms.Assume that costs are constant in each interval;so,for example,the marginal cost of mowing each of the lawns from 1 through 10 is $10.Also assume that he can only mow the quantities of lawn given in the table (and not numbers in between).His only fixed cost is $1,000 for the mower.His variable costs include fuel,his time,and mower parts.Which point falls on the industry short-run supply curve?

Accepted Answer

A) P = $5,Q = 100 
B) P = $8,Q = 1,000 
C) P = $40,Q = 1,100 
D) P = $70,Q = 5,000 
A) P = $5,Q = 100 
B) P = $8,Q = 1,000 
C) P = $40,Q = 1,100 
D) P = $70,Q = 5,000

Question 7

Suppose that the market for candy canes operates under conditions of perfect competition,that it is initially in long-run equilibrium,that the price of each candy cane is $0.10,and that the market demand curve is downward sloping.The price of sugar rises,increasing the marginal and average total cost of producing candy canes by $0.05;there are no other changes in production costs.In the long run,we will observe:

Accepted Answer

A) firms leaving the industry. 
B) firms entering the industry. 
C) some firms entering and some firms leaving. 
D) neither entry to nor exit from the industry. 
A) firms leaving the industry. 
B) firms entering the industry. 
C) some firms entering and some firms leaving. 
D) neither entry to nor exit from the industry.

Question 8

The competitive model of markets does NOT assume:

Accepted Answer

A) a large number of buyers. 
B) easy entry into and exit from the market. 
C) a standardized product. 
D) patents and copyrights that serve as barriers to entry into the industry. 
A) a large number of buyers. 
B) easy entry into and exit from the market. 
C) a standardized product. 
D) patents and copyrights that serve as barriers to entry into the industry.

Question 9

In the short run,if AVC < P < ATC,a perfectly competitive firm:

Accepted Answer

A) produces output and earns an economic profit. 
B) produces output and incurs an economic loss. 
C) does not produce output and earns an economic profit. 
D) does not produce output and earns zero economic profit. 
A) produces output and earns an economic profit. 
B) produces output and incurs an economic loss. 
C) does not produce output and earns an economic profit. 
D) does not produce output and earns zero economic profit.

Question 10

Use the following to answer question:  
-(Table: Variable Costs for Lawns)Use Table: Variable Costs for Lawns.During the summer,Alex runs a lawn-mowing service,and lawn-mowing is a perfectly competitive industry.Assume that costs are constant in each interval;so,for example,the marginal cost of mowing each of the lawns from 1 through 10 is $10.Also assume that he can only mow the quantities of lawn given in the table (and not numbers in between).His only fixed cost is $1,000 for the mower.His variable costs include fuel,his time,and mower parts.If the price for mowing a lawn is $60,how much is Alex's profit per unit at the profit-maximizing output?

Accepted Answer

A) $7.50 
B) $32.50 
C) $20.00 
D) $60.00 
A) $7.50 
B) $32.50 
C) $20.00 
D) $60.00

Question 11

Use the following to answer question:  
-(Figure: The Profit-Maximizing Firm in the Short Run)Use Figure: The Profit-Maximizing Firm in the Short Run.Which statement is TRUE?

Accepted Answer

A) AFC is represented by the vertical distance between curve M and curve N at any level of output. 
B) AFC is represented by the vertical distance between curve N and curve O at any level of output. 
C) This figure illustrates the long run because all costs are variable. 
D) Quantity q2 is to the left of the shut-down point. 
A) AFC is represented by the vertical distance between curve M and curve N at any level of output. 
B) AFC is represented by the vertical distance between curve N and curve O at any level of output. 
C) This figure illustrates the long run because all costs are variable. 
D) Quantity q2 is to the left of the shut-down point.

Question 12

Use the following to answer question:  
-(Table: Variable Costs for Lots)Use Table: Variable Costs for Lots.During the winter,Alexa runs a snow-clearing service in a perfectly competitive industry.Assume that costs are constant in each interval;so,for example,the marginal cost of clearing each of the lots from 1 through 10 is $20.Also assume that she can only plow the quantities of the lots given in the table (and not numbers in between).Her only fixed cost is $1,000 for a snowplow.Her variable costs include fuel,her time,and hot coffee.If the price to clear a lot is $30,how many lots should Alexa clear?

Accepted Answer

A) 50 
B) 40 
C) 30 
D) 0 
A) 50 
B) 40 
C) 30 
D) 0

Question 13

If the price is consistently below the average variable cost,then in the short run a perfectly competitive firm should:

Accepted Answer

A) raise the price. 
B) sell more output. 
C) shut down. 
D) lower the price to sell more. 
A) raise the price. 
B) sell more output. 
C) shut down. 
D) lower the price to sell more.

Question 14

A curve that shows the quantity of a good or service supplied at various prices after all long-run adjustments to a price change have been completed is a long-run _____ curve.

Accepted Answer

A) marginal revenue 
B) marginal cost 
C) industry supply 
D) production 
A) marginal revenue 
B) marginal cost 
C) industry supply 
D) production

Question 15

In the model of perfect competition:

Accepted Answer

A) the consumer is at the mercy of powerful firms that can set prices wherever they prefer. 
B) individual firms can influence the price,but only slightly. 
C) no individual or firm has enough power to affect price. 
D) the price is determined by how many years are left in the product's patent. 
A) the consumer is at the mercy of powerful firms that can set prices wherever they prefer. 
B) individual firms can influence the price,but only slightly. 
C) no individual or firm has enough power to affect price. 
D) the price is determined by how many years are left in the product's patent.

Question 16

The demand curve faced by a single perfectly competitive firm is:

Accepted Answer

A) perfectly inelastic. 
B) perfectly elastic. 
C) downward sloping. 
D) relatively but not perfectly elastic. 
A) perfectly inelastic. 
B) perfectly elastic. 
C) downward sloping. 
D) relatively but not perfectly elastic.

Question 17

Use the following to answer question:  
-(Table: Cherry Farm)Use Table: Cherry Farm.If Hank and Helen have one of 100 farms in the perfectly competitive cherry industry and if the price is $5,in the short run the industry will supply _____ pounds.

Accepted Answer

A) 100 
B) 200 
C) 400 
D) 500 
A) 100 
B) 200 
C) 400 
D) 500

Question 18

Price in a perfectly competitive industry:

Accepted Answer

A) is determined by each firm,depending on its costs of production. 
B) is always equal to marginal revenue for the firm. 
C) must be greater than average total cost or the firm will shut down in the short run. 
D) is indeterminate in the short run. 
A) is determined by each firm,depending on its costs of production. 
B) is always equal to marginal revenue for the firm. 
C) must be greater than average total cost or the firm will shut down in the short run. 
D) is indeterminate in the short run.

Question 19

The assumptions of perfect competition imply that:

Accepted Answer

A) individuals in the market determine the market price. 
B) firms in the market accept the market price as given. 
C) there will be no new competition due to natural monopolies. 
D) the price will be decreasing yearly. 
A) individuals in the market determine the market price. 
B) firms in the market accept the market price as given. 
C) there will be no new competition due to natural monopolies. 
D) the price will be decreasing yearly.

Question 20

In the long run,firms will leave an industry if the market price is consistently less than their break-even price.

Accepted Answer

A) True 
 B)False

Which statement is TRUE?

Mikail's perfectly competitive camera memory card-producing factory is making positive economic profits.If the price of memory cards is $9,Mikail's output is 3,000 cards a month,and his monthly average total cost is $7,what are his monthly profits?

Use the following to answer question: -(Table: Soybean Cost)Use Table: Soybean Cost.What is the shut-down price for this farmer?

Lilly is the price-taking owner of an apple orchard.The price of apples is high enough that Lilly is earning positive economic profits.In the long run,Lilly should expect _ apple prices due to the _ firms.

The break-even price for a perfectly competitive firm is equal to the:

The competitive model of markets does NOT assume:

In the short run,if AVC < P < ATC,a perfectly competitive firm:

Use the following to answer question: -(Figure: The Profit-Maximizing Firm in the Short Run)Use Figure: The Profit-Maximizing Firm in the Short Run.Which statement is TRUE?

If the price is consistently below the average variable cost,then in the short run a perfectly competitive firm should:

A curve that shows the quantity of a good or service supplied at various prices after all long-run adjustments to a price change have been completed is a long-run _____ curve.

In the model of perfect competition:

The demand curve faced by a single perfectly competitive firm is:

Use the following to answer question: -(Table: Cherry Farm)Use Table: Cherry Farm.If Hank and Helen have one of 100 farms in the perfectly competitive cherry industry and if the price is $5,in the short run the industry will supply _____ pounds.

Price in a perfectly competitive industry:

The assumptions of perfect competition imply that:

In the long run,firms will leave an industry if the market price is consistently less than their break-even price.

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

Exam 12: Perfect Competition and the Supply Curve

Which statement is TRUE?

Mikail's perfectly competitive camera memory card-producing factory is making positive economic profits.If the price of memory cards is $9,Mikail's output is 3,000 cards a month,and his monthly average total cost is $7,what are his monthly profits?

Use the following to answer question: -(Table: Soybean Cost)Use Table: Soybean Cost.What is the shut-down price for this farmer?

Lilly is the price-taking owner of an apple orchard.The price of apples is high enough that Lilly is earning positive economic profits.In the long run,Lilly should expect _____ apple prices due to the _____ firms.

The break-even price for a perfectly competitive firm is equal to the:

The competitive model of markets does NOT assume:

In the short run,if AVC < P < ATC,a perfectly competitive firm:

Use the following to answer question: -(Figure: The Profit-Maximizing Firm in the Short Run)Use Figure: The Profit-Maximizing Firm in the Short Run.Which statement is TRUE?

If the price is consistently below the average variable cost,then in the short run a perfectly competitive firm should:

A curve that shows the quantity of a good or service supplied at various prices after all long-run adjustments to a price change have been completed is a long-run _____ curve.

In the model of perfect competition:

The demand curve faced by a single perfectly competitive firm is:

Use the following to answer question: -(Table: Cherry Farm)Use Table: Cherry Farm.If Hank and Helen have one of 100 farms in the perfectly competitive cherry industry and if the price is $5,in the short run the industry will supply _____ pounds.

Price in a perfectly competitive industry:

The assumptions of perfect competition imply that:

In the long run,firms will leave an industry if the market price is consistently less than their break-even price.

First Principles

Economic Models: Trade-Offs and Trade

Consumer and Producer Surplus

Supply and Demand

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Graphs in Economics

Consumer Preferences and Consumer Choice

Filters

Lilly is the price-taking owner of an apple orchard.The price of apples is high enough that Lilly is earning positive economic profits.In the long run,Lilly should expect _ apple prices due to the _ firms.