Question 1

Which one of the following need not be satisfied to achieve allocative efficiency?

Accepted Answer

A) Marginal social cost equals marginal social benefit. 
B) The sum of consumer surplus and producer surplus is maximized. 
C) Price equals marginal social benefit. 
D) Price equals marginal social cost. 
E) Only high-quality goods are produced. 
A) Marginal social cost equals marginal social benefit. 
B) The sum of consumer surplus and producer surplus is maximized. 
C) Price equals marginal social benefit. 
D) Price equals marginal social cost. 
E) Only high-quality goods are produced.

Question 2

Use the figure below to answer the following questions.   Figure 11.4.2
-Refer to Figure 11.4.2,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

Accepted Answer

A) demand will increase. 
B) demand will decrease. 
C) supply will increase. 
D) supply will decrease. 
E) supply and market demand will decrease. 
A) demand will increase. 
B) demand will decrease. 
C) supply will increase. 
D) supply will decrease. 
E) supply and market demand will decrease.

Question 3

Use the figure below to answer the following question.   Figure 11.3.5
-Refer to Figure 11.3.5,which shows the cost curves and the marginal revenue curve for a perfectly competitive firm.To maximize profit,the firm produces ________ units of output and the price is ________ a unit.

Accepted Answer

A) 30;$40 
B) 30;$30 
C) 20;$40 
D) 20;$30 
E) 30;$32.50 
A) 30;$40 
B) 30;$30 
C) 20;$40 
D) 20;$30 
E) 30;$32.50

Question 4

Use the table below to answer the following questions.
Table 11.2.1  
-Refer to Table 11.2.1,which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.Economic profit is maximized when the firm produces ________ units of output.

Accepted Answer

A) zero 
B) 7 
C) 3 
D) 6 
E) 5 
A) zero 
B) 7 
C) 3 
D) 6 
E) 5

Question 5

In a perfectly competitive market,the market demand curve is illustrated by

Accepted Answer

A) a downward-sloping curve. 
B) a line that is vertical at the market output. 
C) an upward-sloping curve. 
D) a line that is horizontal at the market price. 
E) a curve that is bowed towards the origin. 
A) a downward-sloping curve. 
B) a line that is vertical at the market output. 
C) an upward-sloping curve. 
D) a line that is horizontal at the market price. 
E) a curve that is bowed towards the origin.

Question 6

Perfect competition occurs in a market where there are many firms,each selling

Accepted Answer

A) an identical product. 
B) a similar product. 
C) a unique product. 
D) a capital-intensive product. 
E) a competitive product. 
A) an identical product. 
B) a similar product. 
C) a unique product. 
D) a capital-intensive product. 
E) a competitive product.

Question 7

An example of a perfectly competitive industry is the

Accepted Answer

A) airline industry. 
B) beer industry. 
C) running shoe industry. 
D) fast food industry. 
E) wheat industry. 
A) airline industry. 
B) beer industry. 
C) running shoe industry. 
D) fast food industry. 
E) wheat industry.

Question 8

In a perfectly competitive market,a technological advance brings ________ economic profit for producers and ________ lower prices for consumers.

Accepted Answer

A) temporary;temporary 
B) permanent;permanent 
C) permanent;temporary 
D) temporary;permanent 
E) negative;permanent 
A) temporary;temporary 
B) permanent;permanent 
C) permanent;temporary 
D) temporary;permanent 
E) negative;permanent

Question 9

Use the figure below to answer the following questions.   Figure 11.4.3
-Refer to Figure 11.4.3,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,

Accepted Answer

A) firms that remain in the market will expand production. 
B) market demand will increase. 
C) firms will adopt labour-saving technology. 
D) industry output will remain constant. 
E) firms will enter the market. 
A) firms that remain in the market will expand production. 
B) market demand will increase. 
C) firms will adopt labour-saving technology. 
D) industry output will remain constant. 
E) firms will enter the market.

Question 10

The market for maple syrup is perfectly competitive.Suppose that the market is in long-run equilibrium when the market demand for maple syrup increases.All of the following occur except

Accepted Answer

A) in the long run,firms make an economic profit. 
B) the price rises in the short run. 
C) the equilibrium quantity increases. 
D) in the short run,existing firms make an economic profit. 
E) the number of firms in the long run is greater than the number of firms in the short run. 
A) in the long run,firms make an economic profit. 
B) the price rises in the short run. 
C) the equilibrium quantity increases. 
D) in the short run,existing firms make an economic profit. 
E) the number of firms in the long run is greater than the number of firms in the short run.

Question 11

Use the figure below to answer the following questions.   Figure 11.4.1
-Refer to Figure 11.4.1,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

Accepted Answer

A) demand will increase. 
B) demand will decrease. 
C) supply will increase. 
D) supply will decrease. 
E) supply and market demand will decrease. 
A) demand will increase. 
B) demand will decrease. 
C) supply will increase. 
D) supply will decrease. 
E) supply and market demand will decrease.

Question 12

If a perfectly competitive firm is producing an output at which price is equal to minimum average total cost,the firm

Accepted Answer

A) should shut down. 
B) is breaking even. 
C) is making an economic profit. 
D) is incurring an economic loss. 
E) is not producing its profit-maximizing quantity. 
A) should shut down. 
B) is breaking even. 
C) is making an economic profit. 
D) is incurring an economic loss. 
E) is not producing its profit-maximizing quantity.

Question 13

Use the figure below to answer the following questions.   Figure 11.4.2
-Refer to Figure 11.4.2,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,

Accepted Answer

A) firms that remain in the market will expand production. 
B) market demand will increase. 
C) market supply will decrease. 
D) firms will exit the market. 
E) firms that remain in the market will decrease production. 
A) firms that remain in the market will expand production. 
B) market demand will increase. 
C) market supply will decrease. 
D) firms will exit the market. 
E) firms that remain in the market will decrease production.

Question 14

Use the figure below to answer the following question.   Figure 11.3.4
-Refer to Figure 11.3.4,which shows the cost curves of Paul's Picture Frames Inc.The picture frame market is perfectly competitive and the market price is $12 a frame.Paul produces ________ frames each day and makes daily total revenue of ________.

Accepted Answer

A) 20;$240 
B) 20;$96 
C) zero;zero 
D) 30;$360 
E) 30;zero 
A) 20;$240 
B) 20;$96 
C) zero;zero 
D) 30;$360 
E) 30;zero

Question 15

A firm shuts down if price is

Accepted Answer

A) above minimum average variable cost. 
B) below minimum average variable cost. 
C) above minimum average fixed cost. 
D) less than marginal cost. 
E) below average total cost. 
A) above minimum average variable cost. 
B) below minimum average variable cost. 
C) above minimum average fixed cost. 
D) less than marginal cost. 
E) below average total cost.

Question 16

In a perfectly competitive market,each firm maximizes its profit by choosing only the quantity to produce.Regardless of whether the firm makes an economic profit or incurs an economic loss,the short-run equilibrium is efficient.This statement is

Accepted Answer

A) false.The market is efficient only in the long run because it is only in the long run that economic profit equals zero. 
B) false.The firm chooses both the price and the quantity to produce in a perfectly competitive market. 
C) true.The firm is a price taker so it chooses only the quantity to produce.The market is efficient because at the short-run equilibrium,marginal social benefit equals marginal social cost. 
D) true.The firm is a price taker so it chooses only the quantity to produce.A competitive market is efficient in the short run but it is inefficient in the long run. 
E) false.In a perfectly competitive market,each firm chooses the price that maximizes its economic profit. 
A) false.The market is efficient only in the long run because it is only in the long run that economic profit equals zero. 
B) false.The firm chooses both the price and the quantity to produce in a perfectly competitive market. 
C) true.The firm is a price taker so it chooses only the quantity to produce.The market is efficient because at the short-run equilibrium,marginal social benefit equals marginal social cost. 
D) true.The firm is a price taker so it chooses only the quantity to produce.A competitive market is efficient in the short run but it is inefficient in the long run. 
E) false.In a perfectly competitive market,each firm chooses the price that maximizes its economic profit.

Question 17

In the short run,a firm in a perfectly competitive market

Accepted Answer

A) can make an economic profit,incur an economic loss,or break even. 
B) always makes an economic profit. 
C) chooses the price that maximizes its economic profit. 
D) chooses the price that minimizes its marginal cost. 
E) shuts down if it incurs an economic loss. 
A) can make an economic profit,incur an economic loss,or break even. 
B) always makes an economic profit. 
C) chooses the price that maximizes its economic profit. 
D) chooses the price that minimizes its marginal cost. 
E) shuts down if it incurs an economic loss.

Question 18

Use the table below to answer the following questions.
Table 11.2.5
  
-Refer to Table 11.2.5.Archibald's Tattoos is a perfectly competitive firm.The firm's total costs are shown in the table.If the price of a tattoo is $12.50,Archibald's economic profit is

Accepted Answer

A) -$10.00 an hour. 
B) zero. 
C) $12.50 an hour. 
D) $10.00 an hour. 
E) maximized. 
A) -$10.00 an hour. 
B) zero. 
C) $12.50 an hour. 
D) $10.00 an hour. 
E) maximized.

Question 19

Use the figure below to answer the following questions.   Figure 11.4.3
-Refer to Figure 11.4.3,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

Accepted Answer

A) demand will increase. 
B) demand will decrease. 
C) supply will increase. 
D) supply will decrease. 
E) demand and market supply will both increase. 
A) demand will increase. 
B) demand will decrease. 
C) supply will increase. 
D) supply will decrease. 
E) demand and market supply will both increase.

Question 20

Use the information below to answer the following questions.
Fact 11.4.1
Franklin is a fiddlehead farmer.He sold 10 bags of fiddleheads last month,with total fixed cost of $100 and total variable cost of $50.
-Refer to Fact 11.4.1.Suppose the price of fiddleheads is expected to stay at $10 per bag for the foreseeable future,and Franklin's production and cost figures are expected to stay the same.His total fixed cost consists entirely of rent on land,and his five-year lease on the land runs out at the end of the month.Should Franklin renew the lease?

Accepted Answer

A) Yes,because total revenue will still cover total fixed cost. 
B) Yes,because total revenue will still cover total variable cost and a portion of total fixed cost. 
C) No,because total revenue must cover all costs for factors of production to remain in fiddlehead farming in the long run. 
D) No,because in the long run,zero economic profit is a signal to move factors of production out of fiddlehead farming. 
E) Insufficient information to answer. 
A) Yes,because total revenue will still cover total fixed cost. 
B) Yes,because total revenue will still cover total variable cost and a portion of total fixed cost. 
C) No,because total revenue must cover all costs for factors of production to remain in fiddlehead farming in the long run. 
D) No,because in the long run,zero economic profit is a signal to move factors of production out of fiddlehead farming. 
E) Insufficient information to answer.

Which one of the following need not be satisfied to achieve allocative efficiency?

Use the figure below to answer the following questions. Figure 11.4.2 -Refer to Figure 11.4.2,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

Use the figure below to answer the following question. Figure 11.3.5 -Refer to Figure 11.3.5,which shows the cost curves and the marginal revenue curve for a perfectly competitive firm.To maximize profit,the firm produces units of output and the price is a unit.

Use the table below to answer the following questions. Table 11.2.1 -Refer to Table 11.2.1,which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.Economic profit is maximized when the firm produces ________ units of output.

In a perfectly competitive market,the market demand curve is illustrated by

Perfect competition occurs in a market where there are many firms,each selling

An example of a perfectly competitive industry is the

In a perfectly competitive market,a technological advance brings economic profit for producers and lower prices for consumers.

Use the figure below to answer the following questions. Figure 11.4.3 -Refer to Figure 11.4.3,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,

The market for maple syrup is perfectly competitive.Suppose that the market is in long-run equilibrium when the market demand for maple syrup increases.All of the following occur except

Use the figure below to answer the following questions. Figure 11.4.1 -Refer to Figure 11.4.1,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

If a perfectly competitive firm is producing an output at which price is equal to minimum average total cost,the firm

Use the figure below to answer the following questions. Figure 11.4.2 -Refer to Figure 11.4.2,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,

Use the figure below to answer the following question. Figure 11.3.4 -Refer to Figure 11.3.4,which shows the cost curves of Paul's Picture Frames Inc.The picture frame market is perfectly competitive and the market price is $12 a frame.Paul produces frames each day and makes daily total revenue of .

A firm shuts down if price is

In a perfectly competitive market,each firm maximizes its profit by choosing only the quantity to produce.Regardless of whether the firm makes an economic profit or incurs an economic loss,the short-run equilibrium is efficient.This statement is

In the short run,a firm in a perfectly competitive market

Use the table below to answer the following questions. Table 11.2.5 -Refer to Table 11.2.5.Archibald's Tattoos is a perfectly competitive firm.The firm's total costs are shown in the table.If the price of a tattoo is $12.50,Archibald's economic profit is

Use the figure below to answer the following questions. Figure 11.4.3 -Refer to Figure 11.4.3,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, preferences, and Choices

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters

Exam 11: Perfect Competition

Which one of the following need not be satisfied to achieve allocative efficiency?

Use the figure below to answer the following questions. Figure 11.4.2 -Refer to Figure 11.4.2,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

Use the figure below to answer the following question. Figure 11.3.5 -Refer to Figure 11.3.5,which shows the cost curves and the marginal revenue curve for a perfectly competitive firm.To maximize profit,the firm produces ________ units of output and the price is ________ a unit.

Use the table below to answer the following questions. Table 11.2.1 -Refer to Table 11.2.1,which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.Economic profit is maximized when the firm produces ________ units of output.

In a perfectly competitive market,the market demand curve is illustrated by

Perfect competition occurs in a market where there are many firms,each selling

An example of a perfectly competitive industry is the

In a perfectly competitive market,a technological advance brings ________ economic profit for producers and ________ lower prices for consumers.

Use the figure below to answer the following questions. Figure 11.4.3 -Refer to Figure 11.4.3,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,

The market for maple syrup is perfectly competitive.Suppose that the market is in long-run equilibrium when the market demand for maple syrup increases.All of the following occur except

Use the figure below to answer the following questions. Figure 11.4.1 -Refer to Figure 11.4.1,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

If a perfectly competitive firm is producing an output at which price is equal to minimum average total cost,the firm

Use the figure below to answer the following questions. Figure 11.4.2 -Refer to Figure 11.4.2,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,

A firm shuts down if price is

In a perfectly competitive market,each firm maximizes its profit by choosing only the quantity to produce.Regardless of whether the firm makes an economic profit or incurs an economic loss,the short-run equilibrium is efficient.This statement is

In the short run,a firm in a perfectly competitive market

Use the table below to answer the following questions. Table 11.2.5 -Refer to Table 11.2.5.Archibald's Tattoos is a perfectly competitive firm.The firm's total costs are shown in the table.If the price of a tattoo is $12.50,Archibald's economic profit is

Use the figure below to answer the following questions. Figure 11.4.3 -Refer to Figure 11.4.3,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, preferences, and Choices

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters

Use the figure below to answer the following question. Figure 11.3.5 -Refer to Figure 11.3.5,which shows the cost curves and the marginal revenue curve for a perfectly competitive firm.To maximize profit,the firm produces units of output and the price is a unit.

In a perfectly competitive market,a technological advance brings economic profit for producers and lower prices for consumers.