Question 1

-In the above figure, the firm is incurring an economic loss at

Accepted Answer

A)  point a. 
B)  point c. 
C)  points b and d. 
D)  points a, b, and d. 
A)  point a. 
B)  point c. 
C)  points b and d. 
D)  points a, b, and d.

Question 2

An example of a perfectly competitive firm is

Accepted Answer

A)  an oat farmer in the United States. 
B)  the local cable TV company. 
C)  a U.S. automobile producer. 
D)  a big city newspaper. 
A)  an oat farmer in the United States. 
B)  the local cable TV company. 
C)  a U.S. automobile producer. 
D)  a big city newspaper.

Question 3

-The figure above shows the costs for the typical grower in the perfectly competitive turnip market. Currently, the price is $1,000 for a ton of turnips. In the long run, the market supply of turnips will ________.

Accepted Answer

A)  decrease and the price of a ton of turnips will fall to $600 
B)  increase and the turnip grower's economic profit will increase 
C)  increase and the turnip grower's economic profit will decrease 
D)  decrease and the price of a ton of turnips will rise to $1,200 
A)  decrease and the price of a ton of turnips will fall to $600 
B)  increase and the turnip grower's economic profit will increase 
C)  increase and the turnip grower's economic profit will decrease 
D)  decrease and the price of a ton of turnips will rise to $1,200

Question 4

Which of the following four firms would most likely be part of a perfectly competitive market?

Accepted Answer

A)  Village Pizza sells NY style pizza and hard-to-find microbrews in a college town. 
B)  The WaveHouse is the only place in San Diego where you can ride an indoor 10 foot wave. 
C)  Mark sells the tomatoes he grew in his backyard at the local farmers market. 
D)  Amara Massage specializes in pre- and post-natal massage. 
A)  Village Pizza sells NY style pizza and hard-to-find microbrews in a college town. 
B)  The WaveHouse is the only place in San Diego where you can ride an indoor 10 foot wave. 
C)  Mark sells the tomatoes he grew in his backyard at the local farmers market. 
D)  Amara Massage specializes in pre- and post-natal massage.

Question 5

If the market for maple syrup is perfectly competitive, then in the long-run equilibrium, firms are

Accepted Answer

A)  entering the market. 
B)  exiting the market. 
C)  making zero economic profit. 
D)  temporarily shutting down. 
A)  entering the market. 
B)  exiting the market. 
C)  making zero economic profit. 
D)  temporarily shutting down.

Question 6

All along the beach in San Diego, California are shops which rent boogie boards by the hour. Tourists perceive that all rental boogie boards are identical, all prices are clearly listed on signs in front of the shops, and there are no restrictions on entry and exit in the boogie board market. Suppose Surf's Up is a boogie board rental shop. What is the shape of Surf's Up's demand curve as compared to the market demand curve?

Accepted Answer

A)  Surf's Up's demand curve is vertical and the market demand curve is downward sloping. 
B)  Surf's Up's demand curve is horizontal and the market demand curve is upward sloping. 
C)  Surf's Up's demand curve is horizontal and the market demand curve is downward sloping. 
D)  Surf's Up's demand curve is vertical and the market demand curve is upward sloping. 
A)  Surf's Up's demand curve is vertical and the market demand curve is downward sloping. 
B)  Surf's Up's demand curve is horizontal and the market demand curve is upward sloping. 
C)  Surf's Up's demand curve is horizontal and the market demand curve is downward sloping. 
D)  Surf's Up's demand curve is vertical and the market demand curve is upward sloping.

Question 7

Suppose a perfectly competitive market is in long-run equilibrium. If there is a permanent increase in demand,

Accepted Answer

A)  at least in the short run, some firms will increase their output. 
B)  at least in the short run, the price will increase initially. 
C)  new firms will enter the market. 
D)  All of the above answers are correct. 
A)  at least in the short run, some firms will increase their output. 
B)  at least in the short run, the price will increase initially. 
C)  new firms will enter the market. 
D)  All of the above answers are correct.

Question 8

The break-even point is defined as occurring at an output rate at which

Accepted Answer

A)  total revenue equals total opportunity cost. 
B)  economic profit is maximized. 
C)  marginal revenue equals marginal cost. 
D)  total cost is minimized. 
A)  total revenue equals total opportunity cost. 
B)  economic profit is maximized. 
C)  marginal revenue equals marginal cost. 
D)  total cost is minimized.

Question 9

Perfectly competitive firms are price takers.

Accepted Answer

A) True 
 B)False

Question 10

-The figure above shows the marginal revenue and long-run cost curves for a perfectly competitive firm. Which of the following statements is true?

Accepted Answer

A)  The firm is producing at minimum long-run average cost. 
B)  Over time, this firm will leave this industry. 
C)  The firm is earning positive economic profit. 
D)  The firm will eventually decrease its production. 
A)  The firm is producing at minimum long-run average cost. 
B)  Over time, this firm will leave this industry. 
C)  The firm is earning positive economic profit. 
D)  The firm will eventually decrease its production.

Question 11

In perfect competition, an individual firm

Accepted Answer

A)  faces unitary elasticity of demand. 
B)  has a price elasticity of supply equal to one. 
C)  faces a perfectly elastic demand. 
D)  has perfectly elastic supply. 
A)  faces unitary elasticity of demand. 
B)  has a price elasticity of supply equal to one. 
C)  faces a perfectly elastic demand. 
D)  has perfectly elastic supply.

Question 12

A perfectly competitive firm initially is earning zero economic profit. Then, a decrease in demand for the firm's product occurs. Of the following, in the long run which action listed below is the firm most likely to take?

Accepted Answer

A)  Increase the quantity it produces. 
B)  Increase its advertising to increase the demand for its product. 
C)  Exit the market. 
D)  Increase the size of its plant. 
A)  Increase the quantity it produces. 
B)  Increase its advertising to increase the demand for its product. 
C)  Exit the market. 
D)  Increase the size of its plant.

Question 13

For prices above the 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. 
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.

Question 14

-Jimmy grows corn. His total revenue and total cost are in the above table. What quantity of corn maximizes his profit and what is his profit? What is the marginal revenue and marginal cost at this quantity?

Accepted Answer

Jimmy's profit is greatest if he grows e

Question 15

-In the above figure, the firm's total economic profit is equal to

Accepted Answer

A)  $60. 
B)  $200. 
C)  $150. 
D)  MR - MC. 
A)  $60. 
B)  $200. 
C)  $150. 
D)  MR - MC.

Question 16

In perfect competition, the marginal revenue of an individual firm

Accepted Answer

A)  is zero. 
B)  is positive but less than the price of the product. 
C)  equals the price of the product. 
D)  exceeds the price of the product. 
A)  is zero. 
B)  is positive but less than the price of the product. 
C)  equals the price of the product. 
D)  exceeds the price of the product.

Question 17

-In the above table, the firm

Accepted Answer

A)  must be in a perfectly competitive market because its marginal revenue is constant. 
B)  must be in a perfectly competitive market because its marginal cost curve eventually rises. 
C)  cannot be in a perfectly competitive market because its short-run economic profits are greater than zero. 
D)  cannot be in a perfectly competitive market because its long-run economic profits are greater than zero. 
A)  must be in a perfectly competitive market because its marginal revenue is constant. 
B)  must be in a perfectly competitive market because its marginal cost curve eventually rises. 
C)  cannot be in a perfectly competitive market because its short-run economic profits are greater than zero. 
D)  cannot be in a perfectly competitive market because its long-run economic profits are greater than zero.

Question 18

A perfectly competitive industry is in long-run equilibrium. Some firms in the industry adopt new technology that reduces the average total cost of producing the good. In the long run, the price is ________, firms with the new technology make ________ economic profit, and firms with the old technology ________.

Accepted Answer

A)  lower; zero; exit the industry 
B)  constant; a positive; make normal profit 
C)  lower; zero; switch to the new technology or exit the industry 
D)  constant; zero; exit the industry 
A)  lower; zero; exit the industry 
B)  constant; a positive; make normal profit 
C)  lower; zero; switch to the new technology or exit the industry 
D)  constant; zero; exit the industry

Question 19

A perfectly competitive firm that is producing a positive quantity of a good maximizes its economic profit if it produces so that

Accepted Answer

A)  total revenue = total cost. 
B)  marginal revenue = marginal cost. 
C)  average revenue = average total cost. 
D)  average total cost = average variable cost. 
A)  total revenue = total cost. 
B)  marginal revenue = marginal cost. 
C)  average revenue = average total cost. 
D)  average total cost = average variable cost.

Question 20

A firm's shutdown point is the output and price at which the firm's total revenue just equals its total variable cost.

Accepted Answer

A) True 
 B)False

Exam 12: Perfect Competition

-In the above figure, the firm is incurring an economic loss at

An example of a perfectly competitive firm is

-The figure above shows the costs for the typical grower in the perfectly competitive turnip market. Currently, the price is $1,000 for a ton of turnips. In the long run, the market supply of turnips will ________.

Which of the following four firms would most likely be part of a perfectly competitive market?

If the market for maple syrup is perfectly competitive, then in the long-run equilibrium, firms are

Suppose a perfectly competitive market is in long-run equilibrium. If there is a permanent increase in demand,

The break-even point is defined as occurring at an output rate at which

Perfectly competitive firms are price takers.

-The figure above shows the marginal revenue and long-run cost curves for a perfectly competitive firm. Which of the following statements is true?

In perfect competition, an individual firm

A perfectly competitive firm initially is earning zero economic profit. Then, a decrease in demand for the firm's product occurs. Of the following, in the long run which action listed below is the firm most likely to take?

For prices above the minimum average variable cost, a perfectly competitive firm's supply curve is

-Jimmy grows corn. His total revenue and total cost are in the above table. What quantity of corn maximizes his profit and what is his profit? What is the marginal revenue and marginal cost at this quantity?

-In the above figure, the firm's total economic profit is equal to

In perfect competition, the marginal revenue of an individual firm

-In the above table, the firm

A perfectly competitive firm that is producing a positive quantity of a good maximizes its economic profit if it produces so that

A firm's shutdown point is the output and price at which the firm's total revenue just equals its total variable cost.

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

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

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