Question 1

If firms in a perfectly competitive market are making an economic profit,new firms will enter.This entry shifts the market

Accepted Answer

A) demand curve leftward,and the market price falls. 
B) demand curve rightward,and the market price rises. 
C) supply curve leftward,and the market price rises. 
D) supply curve rightward,and the market price falls. 
E) supply curve rightward and the market demand curve leftward. 
A) demand curve leftward,and the market price falls. 
B) demand curve rightward,and the market price rises. 
C) supply curve leftward,and the market price rises. 
D) supply curve rightward,and the market price falls. 
E) supply curve rightward and the market demand curve leftward.

Question 2

If firms exit an market,the

Accepted Answer

A) market supply curve shifts leftward. 
B) price of the good falls. 
C) economic profit of the remaining firms decrease. 
D) total market output increases. 
E) economic profit of the remaining firms stay the same. 
A) market supply curve shifts leftward. 
B) price of the good falls. 
C) economic profit of the remaining firms decrease. 
D) total market output increases. 
E) economic profit of the remaining firms stay the same.

Question 3

When a firm is a "price taker," the firm

Accepted Answer

A) can charge any price that it wants to charge,that is,"take" any price it chooses. 
B) pays a fixed price for all of its fixed inputs. 
C) will accept ("take")the lowest price that its customers offer. 
D) pays a fixed price for all of its variable inputs. 
E) cannot influence the market price of the good that it sells. 
A) can charge any price that it wants to charge,that is,"take" any price it chooses. 
B) pays a fixed price for all of its fixed inputs. 
C) will accept ("take")the lowest price that its customers offer. 
D) pays a fixed price for all of its variable inputs. 
E) cannot influence the market price of the good that it sells.

Question 4

Long-run equilibrium occurs in a competitive market when

Accepted Answer

A) economic profit and economic loss have been eliminated. 
B) no barriers to entry exist. 
C) all firms are operating at their shutdown points. 
D) price equals marginal cost. 
E) total revenue is maximized. 
A) economic profit and economic loss have been eliminated. 
B) no barriers to entry exist. 
C) all firms are operating at their shutdown points. 
D) price equals marginal cost. 
E) total revenue is maximized.

Question 5

Use the figure below to answer the following question.   Figure 11.3.2
-Refer to Figure 11.3.2,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry,The firm is

Accepted Answer

A) making an economic profit. 
B) incurring an economic loss. 
C) breaking even. 
D) not maximizing economic profit. 
E) going to close down temporarily. 
A) making an economic profit. 
B) incurring an economic loss. 
C) breaking even. 
D) not maximizing economic profit. 
E) going to close down temporarily.

Question 6

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.The short-run equilibrium price of one unit of the good is

Accepted Answer

A) $3. 
B) $10. 
C) $15. 
D) $25. 
E) $30. 
A) $3. 
B) $10. 
C) $15. 
D) $25. 
E) $30.

Question 7

A perfectly competitive market is in short-run equilibrium with price below average total cost.Which one of the following is not a prediction of the long-run consequences of such a situation?

Accepted Answer

A) Price will rise. 
B) Market output will increase. 
C) Firms will exit the market. 
D) The output of each existing firm will increase. 
E) Economic profit will be zero. 
A) Price will rise. 
B) Market output will increase. 
C) Firms will exit the market. 
D) The output of each existing firm will increase. 
E) Economic profit will be zero.

Question 8

Homer's Holesome Donuts has determined that its profit-maximizing quantity is 10,000 donuts per year.Homer's total revenue from the sale of donuts is $12,000 a year.Homer's costs are $16,000 in annual rental payments for its five-year lease on its store and $5,000 for ingredients.Should Homer's exit the market in the long run?

Accepted Answer

A) Yes,because Homer's is incurring an economic loss. 
B) Yes,because all costs are fixed in the long run. 
C) No,because Homer's is covering its variable costs. 
D) No,because Homer's is covering its fixed costs. 
E) No,because all costs are variable in the long run. 
A) Yes,because Homer's is incurring an economic loss. 
B) Yes,because all costs are fixed in the long run. 
C) No,because Homer's is covering its variable costs. 
D) No,because Homer's is covering its fixed costs. 
E) No,because all costs are variable in the long run.

Question 9

Consider a perfectly competitive market.In the short run,if demand increases due to a technological advance,the equilibrium price

Accepted Answer

A) remains constant and the equilibrium quantity increases. 
B) remains constant and the equilibrium quantity decreases. 
C) rises and the equilibrium quantity increases. 
D) falls and the equilibrium quantity decreases. 
E) rises and the equilibrium quantity remains the same. 
A) remains constant and the equilibrium quantity increases. 
B) remains constant and the equilibrium quantity decreases. 
C) rises and the equilibrium quantity increases. 
D) falls and the equilibrium quantity decreases. 
E) rises and the equilibrium quantity remains the same.

Question 10

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.The price at Archibald's shut-down point is

Accepted Answer

A) $10.00. 
B) $15.00. 
C) $12.50. 
D) $13.33. 
E) $17.00. 
A) $10.00. 
B) $15.00. 
C) $12.50. 
D) $13.33. 
E) $17.00.

Question 11

Use the figure below to answer the following questions.   Figure 11.1.1
-Refer to Figure 11.1.1.The firm competes in a perfectly competitive market.If price decreases,the total revenue curve

Accepted Answer

A) does not change,but the marginal revenue curve shifts downward. 
B) does not change,but the marginal revenue curve shifts upward. 
C) becomes steeper. 
D) rotates downward and becomes flatter. 
E) no longer passes through the origin. 
A) does not change,but the marginal revenue curve shifts downward. 
B) does not change,but the marginal revenue curve shifts upward. 
C) becomes steeper. 
D) rotates downward and becomes flatter. 
E) no longer passes through the origin.

Question 12

A price-taking firm faces a

Accepted Answer

A) perfectly inelastic demand. 
B) downward-sloping marginal revenue curve. 
C) downward-sloping supply curve. 
D) perfectly elastic demand. 
E) downward-sloping demand curve. 
A) perfectly inelastic demand. 
B) downward-sloping marginal revenue curve. 
C) downward-sloping supply curve. 
D) perfectly elastic demand. 
E) downward-sloping demand curve.

Question 13

Use the information below to answer the following questions.
Fact 11.1.1 Money in the Bank
Two gas stations stand on opposite sides of the road: Rutter's Farm Store and Sheetz gas station.Rutter's doesn't even have to look across the highway to know when Sheetz changes its price for gas.When Sheetz raises the price,Rutter's pumps are busy.When Sheetz lowers prices,there's not a car in sight.Both gas stations survive but each has no control over the price.
Source: The Mining Journal,May 24,2008
-Refer to Fact 11.1.1.Each of these gas stations has little control over the price of gasoline because

Accepted Answer

A) the price of gasoline is determined by head office. 
B) lowering the price will eliminate competition and the government mandates that gasoline stations must have competition. 
C) if it raises its price,the station will lose customers. 
D) the price of gasoline is set according to the price of oil. 
E) the demand for gasoline is perfectly inelastic. 
A) the price of gasoline is determined by head office. 
B) lowering the price will eliminate competition and the government mandates that gasoline stations must have competition. 
C) if it raises its price,the station will lose customers. 
D) the price of gasoline is set according to the price of oil. 
E) the demand for gasoline is perfectly inelastic.

Question 14

A perfectly competitive firm is maximizing profit or minimizing loss if it is producing the quantity at which

Accepted Answer

A) marginal cost equals price and price is not below minimum average variable cost. 
B) marginal cost equals price and price is not below minimum average fixed cost. 
C) total revenue is at a maximum. 
D) average variable cost is at a minimum. 
E) average total cost is at a minimum. 
A) marginal cost equals price and price is not below minimum average variable cost. 
B) marginal cost equals price and price is not below minimum average fixed cost. 
C) total revenue is at a maximum. 
D) average variable cost is at a minimum. 
E) average total cost is at a minimum.

Question 15

A firm in a perfectly competitive industry is maximizing its economic profit by producing 500 units of output.At 500 units of output,which one of the following must be false?

Accepted Answer

A) MC  ATC 
D) MR  AVC 
A) MC  ATC 
D) MR  AVC

Question 16

Use the table below to answer the following questions.
Table 11.2.3  
-Refer to Table 11.2.3 which gives the total cost schedule for Brenda's Balloon Shop,a perfectly competitive firm.The average variable cost of producing the 1st balloon is

Accepted Answer

A) $1.00. 
B) $4.00. 
C) $2.00. 
D) $4.80. 
E) $3.00. 
A) $1.00. 
B) $4.00. 
C) $2.00. 
D) $4.80. 
E) $3.00.

Question 17

In the price range above minimum average variable cost,a perfectly competitive firm's supply curve is

Accepted Answer

A) horizontal at the market price. 
B) vertical at zero output. 
C) the same as its marginal cost curve. 
D) the same as its average variable cost curve. 
E) the same as its total variable cost curve. 
A) horizontal at the market price. 
B) vertical at zero output. 
C) the same as its marginal cost curve. 
D) the same as its average variable cost curve. 
E) the same as its total variable cost curve.

Question 18

Lin's fortune cookies are identical to the fortune cookies made by dozens of other firms,and there is free entry in the fortune cookie market.Buyers and sellers are well informed about prices.The price of a fortune cookie is determined by ________.The marginal revenue of a fortune cookie equals ________.

Accepted Answer

A) market demand and market supply;price 
B) the ingredients that Lin's uses to produce his fortune cookies;average total cost 
C) the number of cookies that Lin's produces;average variable cost 
D) the freshness of the fortune cookies;average fixed cost 
E) market demand and market supply;the price elasticity of demand 
A) market demand and market supply;price 
B) the ingredients that Lin's uses to produce his fortune cookies;average total cost 
C) the number of cookies that Lin's produces;average variable cost 
D) the freshness of the fortune cookies;average fixed cost 
E) market demand and market supply;the price elasticity of demand

Question 19

In which one of the following situations will a perfectly competitive firm incur an economic loss?

Accepted Answer

A) MR > AVC 
B) MR > ATC 
C) ATC  MR 
E) MC > AVC 
A) MR > AVC 
B) MR > ATC 
C) ATC  MR 
E) MC > AVC

Question 20

In a perfectly competitive market,the short-run market supply curve is

Accepted Answer

A) the horizontal sum of the supply curves of all the individual firms. 
B) the vertical sum of the supply curves of all the individual firms. 
C) vertical at the total level of output being produced by all firms. 
D) horizontal at the current market price. 
E) upward sloping with a constant slope. 
A) the horizontal sum of the supply curves of all the individual firms. 
B) the vertical sum of the supply curves of all the individual firms. 
C) vertical at the total level of output being produced by all firms. 
D) horizontal at the current market price. 
E) upward sloping with a constant slope.

If firms in a perfectly competitive market are making an economic profit,new firms will enter.This entry shifts the market

If firms exit an market,the

When a firm is a "price taker," the firm

Long-run equilibrium occurs in a competitive market when

Use the figure below to answer the following question. Figure 11.3.2 -Refer to Figure 11.3.2,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry,The firm is

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.The short-run equilibrium price of one unit of the good is

A perfectly competitive market is in short-run equilibrium with price below average total cost.Which one of the following is not a prediction of the long-run consequences of such a situation?

Consider a perfectly competitive market.In the short run,if demand increases due to a technological advance,the equilibrium price

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.The price at Archibald's shut-down point is

Use the figure below to answer the following questions. Figure 11.1.1 -Refer to Figure 11.1.1.The firm competes in a perfectly competitive market.If price decreases,the total revenue curve

A price-taking firm faces a

A perfectly competitive firm is maximizing profit or minimizing loss if it is producing the quantity at which

A firm in a perfectly competitive industry is maximizing its economic profit by producing 500 units of output.At 500 units of output,which one of the following must be false?

Use the table below to answer the following questions. Table 11.2.3 -Refer to Table 11.2.3 which gives the total cost schedule for Brenda's Balloon Shop,a perfectly competitive firm.The average variable cost of producing the 1st balloon is

In the price range above minimum average variable cost,a perfectly competitive firm's supply curve is

Lin's fortune cookies are identical to the fortune cookies made by dozens of other firms,and there is free entry in the fortune cookie market.Buyers and sellers are well informed about prices.The price of a fortune cookie is determined by .The marginal revenue of a fortune cookie equals .

In which one of the following situations will a perfectly competitive firm incur an economic loss?

In a perfectly competitive market,the short-run market supply curve is

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

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Exam 11: Perfect Competition

If firms in a perfectly competitive market are making an economic profit,new firms will enter.This entry shifts the market

If firms exit an market,the

When a firm is a "price taker," the firm

Long-run equilibrium occurs in a competitive market when

Use the figure below to answer the following question. Figure 11.3.2 -Refer to Figure 11.3.2,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry,The firm is

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.The short-run equilibrium price of one unit of the good is

A perfectly competitive market is in short-run equilibrium with price below average total cost.Which one of the following is not a prediction of the long-run consequences of such a situation?

Consider a perfectly competitive market.In the short run,if demand increases due to a technological advance,the equilibrium price

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.The price at Archibald's shut-down point is

Use the figure below to answer the following questions. Figure 11.1.1 -Refer to Figure 11.1.1.The firm competes in a perfectly competitive market.If price decreases,the total revenue curve

A price-taking firm faces a

A perfectly competitive firm is maximizing profit or minimizing loss if it is producing the quantity at which

A firm in a perfectly competitive industry is maximizing its economic profit by producing 500 units of output.At 500 units of output,which one of the following must be false?

Use the table below to answer the following questions. Table 11.2.3 -Refer to Table 11.2.3 which gives the total cost schedule for Brenda's Balloon Shop,a perfectly competitive firm.The average variable cost of producing the 1st balloon is

In the price range above minimum average variable cost,a perfectly competitive firm's supply curve is

In which one of the following situations will a perfectly competitive firm incur an economic loss?

In a perfectly competitive market,the short-run market supply curve is

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