Question 1

A perfectly competitive industry is in a state of long-run equilibrium.Which expression must be TRUE?

Accepted Answer

A) P = MR = MC > ATC. 
B) P = MR = MC  MR = MC = AVC. 
A) P = MR = MC > ATC. 
B) P = MR = MC  MR = MC = AVC.

Question 2

If the price is less than the average variable cost at the quantity of output where MR = MC,in the short run a perfectly competitive firm will:

Accepted Answer

A) produce at a loss. 
B) produce at a profit. 
C) shut down production. 
D) produce more than the profit-maximizing quantity. 
A) produce at a loss. 
B) produce at a profit. 
C) shut down production. 
D) produce more than the profit-maximizing quantity.

Question 3

In the long run,all of the firms in a perfectly competitive industry will:

Accepted Answer

A) produce at an output level at which average total cost equals marginal cost. 
B) earn an economic profit greater than zero. 
C) exit the industry if price is greater than average total cost. 
D) produce an output level at which price is greater than average total cost. 
A) produce at an output level at which average total cost equals marginal cost. 
B) earn an economic profit greater than zero. 
C) exit the industry if price is greater than average total cost. 
D) produce an output level at which price is greater than average total cost.

Question 4

The marginal revenue received by a firm in a perfectly competitive market:

Accepted Answer

A) is unrelated to the market price. 
B) is less than the market price. 
C) is greater than the market price. 
D) is the change in total revenue divided by the change in output. 
A) is unrelated to the market price. 
B) is less than the market price. 
C) is greater than the market price. 
D) is the change in total revenue divided by the change in output.

Question 5

When a perfectly competitive industry is in long-run equilibrium,its firms:

Accepted Answer

A) earn more than zero economic profits. 
B) combine their variable and fixed resources inefficiently. 
C) are not in short-run equilibrium. 
D) allocate all of their resources efficiently. 
A) earn more than zero economic profits. 
B) combine their variable and fixed resources inefficiently. 
C) are not in short-run equilibrium. 
D) allocate all of their resources efficiently.

Question 6

Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium.Subsequently,an increase in population increases the demand for haircuts.In the short run,the typical firm is likely to:

Accepted Answer

A) earn an economic profit. 
B) incur an economic loss. 
C) have no change in its economic profit. 
D) have neither an economic profit nor an economic loss. 
A) earn an economic profit. 
B) incur an economic loss. 
C) have no change in its economic profit. 
D) have neither an economic profit nor an economic loss.

Question 7

Individuals in a market who must take the market price as given are:

Accepted Answer

A) quantity minimizers. 
B) quantity takers. 
C) price takers. 
D) price searchers. 
A) quantity minimizers. 
B) quantity takers. 
C) price takers. 
D) price searchers.

Question 8

Microsoft's Windows operating system is a standardized product,since everyone who buys a particular version of the product gets exactly the same thing.This means that Microsoft is a perfectly competitive firm.

Accepted Answer

A) True 
 B)False

Question 9

A perfectly competitive firm will produce:

Accepted Answer

A) whenever it can. 
B) mostly in the long run and only if price is greater than AFC. 
C) with a loss in the short run if its price is greater than AVC but less than ATC. 
D) only when it earns profits in the short run. 
A) whenever it can. 
B) mostly in the long run and only if price is greater than AFC. 
C) with a loss in the short run if its price is greater than AVC but less than ATC. 
D) only when it earns profits in the short run.

Question 10

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

Accepted Answer

A) $13.00 
B) $13.50 
C) $14.00 
D) $14.50 
A) $13.00 
B) $13.50 
C) $14.00 
D) $14.50

Question 11

Use the following to answer question:  
-(Table: Total Cost and Output)Use Table: Total Cost and Output,which describes Sergei's total costs for his perfectly competitive all-natural ice cream firm.What is the minimum price that Sergei needs to receive for a tub of ice cream to stay in business in the long run?

Accepted Answer

A) $10.00 
B) $20.00 
C) $33.33 
D) $36.67 
A) $10.00 
B) $20.00 
C) $33.33 
D) $36.67

Question 12

The addition to the total revenue from selling one more unit of the good is:

Accepted Answer

A) less than the market price. 
B) average profit. 
C) marginal cost. 
D) marginal revenue. 
A) less than the market price. 
B) average profit. 
C) marginal cost. 
D) marginal revenue.

Question 13

Use the following to answer question:  
-(Figure: Revenues,Costs,and Profits for Tomato Producers III)Use Figure: Revenues,Costs,and Profits for Tomato Producers III.The market for tomatoes is perfectly competitive.If the market price of a bushel of tomatoes is $12,in the short run this farm will:

Accepted Answer

A) minimize its losses by shutting down. 
B) minimize its losses by continuing to produce. 
C) break even. 
D) earn an economic profit. 
A) minimize its losses by shutting down. 
B) minimize its losses by continuing to produce. 
C) break even. 
D) earn an economic profit.

Question 14

If firms are taking economic losses in the short run,then in the long run,firms will leave the industry,industry output will _____,and economic losses will _____.

Accepted Answer

A) fall;decrease 
B) rise;decrease 
C) rise;increase 
D) fall;increase 
A) fall;decrease 
B) rise;decrease 
C) rise;increase 
D) fall;increase

Question 15

In perfect competition,a change in fixed cost will:

Accepted Answer

A) cause a change in the price in the short run. 
B) cause a change in output in the short run. 
C) encourage entry or exit in the long run such that price will change enough to leave firms earning zero profits. 
D) cause a change in variable cost. 
A) cause a change in the price in the short run. 
B) cause a change in output in the short run. 
C) encourage entry or exit in the long run such that price will change enough to leave firms earning zero profits. 
D) cause a change in variable cost.

Question 16

In the short run,a firm will produce as long as the price is GREATER than its:

Accepted Answer

A) ATC. 
B) MC. 
C) MR. 
D) AVC. 
A) ATC. 
B) MC. 
C) MR. 
D) AVC.

Question 17

The short-run industry supply curve is the sum of the individual supply curves of all of the firms in the industry,given a fixed number of firms.

Accepted Answer

A) True 
 B)False

Question 18

Use the following to answer question:  
-(Figure: The Perfectly Competitive Firm II)Use Figure: The Perfectly Competitive Firm II.If this firm's MR curve is MR2,then this firm's optimal output is _____ units of output and its economic profit will be _____.

Accepted Answer

A) Q1;positive 
B) Q2;negative 
C) Q3;positive 
D) Q4;negative 
A) Q1;positive 
B) Q2;negative 
C) Q3;positive 
D) Q4;negative

Question 19

The equilibrium price of a guidebook is $35 in the perfectly competitive guidebook industry.Our firm produces 10,000 guidebooks for an average total cost of $38,marginal cost of $30,and average variable cost of $30.Our firm,in the short run,should:

Accepted Answer

A) raise the price of guidebooks because the firm is losing money. 
B) keep output the same because the firm is producing at minimum average variable cost. 
C) produce more guidebooks because the next guidebook produced will increase profit by $5. 
D) shut down because the firm is losing money. 
A) raise the price of guidebooks because the firm is losing money. 
B) keep output the same because the firm is producing at minimum average variable cost. 
C) produce more guidebooks because the next guidebook produced will increase profit by $5. 
D) shut down because the firm is losing money.

Question 20

In the long run,each firm in a perfectly competitive industry will:

Accepted Answer

A) earn only enough to cover the opportunity costs of all resources used in production. 
B) produce where MR is greater than MC. 
C) differentiate its goods. 
D) increase its price. 
A) earn only enough to cover the opportunity costs of all resources used in production. 
B) produce where MR is greater than MC. 
C) differentiate its goods. 
D) increase its price.

Exam 12: Perfect Competition and the Supply Curve

A perfectly competitive industry is in a state of long-run equilibrium.Which expression must be TRUE?

If the price is less than the average variable cost at the quantity of output where MR = MC,in the short run a perfectly competitive firm will:

In the long run,all of the firms in a perfectly competitive industry will:

The marginal revenue received by a firm in a perfectly competitive market:

When a perfectly competitive industry is in long-run equilibrium,its firms:

Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium.Subsequently,an increase in population increases the demand for haircuts.In the short run,the typical firm is likely to:

Individuals in a market who must take the market price as given are:

Microsoft's Windows operating system is a standardized product,since everyone who buys a particular version of the product gets exactly the same thing.This means that Microsoft is a perfectly competitive firm.

A perfectly competitive firm will produce:

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

The addition to the total revenue from selling one more unit of the good is:

Use the following to answer question: -(Figure: Revenues,Costs,and Profits for Tomato Producers III)Use Figure: Revenues,Costs,and Profits for Tomato Producers III.The market for tomatoes is perfectly competitive.If the market price of a bushel of tomatoes is $12,in the short run this farm will:

If firms are taking economic losses in the short run,then in the long run,firms will leave the industry,industry output will _____,and economic losses will _____.

In perfect competition,a change in fixed cost will:

In the short run,a firm will produce as long as the price is GREATER than its:

The short-run industry supply curve is the sum of the individual supply curves of all of the firms in the industry,given a fixed number of firms.

Use the following to answer question: -(Figure: The Perfectly Competitive Firm II)Use Figure: The Perfectly Competitive Firm II.If this firm's MR curve is MR2,then this firm's optimal output is _____ units of output and its economic profit will be _____.

The equilibrium price of a guidebook is $35 in the perfectly competitive guidebook industry.Our firm produces 10,000 guidebooks for an average total cost of $38,marginal cost of $30,and average variable cost of $30.Our firm,in the short run,should:

In the long run,each firm in a perfectly competitive industry will:

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

If firms are taking economic losses in the short run,then in the long run,firms will leave the industry,industry output will _,and economic losses will _.

Use the following to answer question: -(Figure: The Perfectly Competitive Firm II)Use Figure: The Perfectly Competitive Firm II.If this firm's MR curve is MR₂,then this firm's optimal output is _ units of output and its economic profit will be _.