Question 1

-The figure above shows depicts the marginal revenue and costs of a perfectly competitive firm. When 170 units are produced, the firm

Accepted Answer

A)  would definitely shut down. 
B)  would incur an economic loss. 
C)  would increase its price. 
D)  has total costs less than $2,720. 
A)  would definitely shut down. 
B)  would incur an economic loss. 
C)  would increase its price. 
D)  has total costs less than $2,720.

Question 2

A perfectly competitive firm's short-run shutdown point is the level of output at which

Accepted Answer

A)  price equals average total cost. 
B)  price equals average fixed cost. 
C)  price equals the minimum average variable cost. 
D)  price is above the minimum average total cost but below the minimum average fixed cost. 
A)  price equals average total cost. 
B)  price equals average fixed cost. 
C)  price equals the minimum average variable cost. 
D)  price is above the minimum average total cost but below the minimum average fixed cost.

Question 3

-In the above figure, if the price is P1 and the firm produced Q1, the firm's economic profit is ________ than if it produced Q2 and ________ than if it produced Q3.

Accepted Answer

A)  less; less 
B)  less; more 
C)  more; less 
D)  more; more 
A)  less; less 
B)  less; more 
C)  more; less 
D)  more; more

Question 4

In the short run, a perfectly competitive firm will shut down if at the profit maximizing quantity the

Accepted Answer

A)  P  ATC. 
D)  P > MC. 
A)  P  ATC. 
D)  P > MC.

Question 5

In the long run, fixed costs are

Accepted Answer

A)  zero and variable costs are zero. 
B)  zero and variable costs are positive. 
C)  positive and variable costs are zero. 
D)  positive and variable costs are positive. 
A)  zero and variable costs are zero. 
B)  zero and variable costs are positive. 
C)  positive and variable costs are zero. 
D)  positive and variable costs are positive.

Question 6

Which of the following is NOT a characteristic of a perfectly competitive industry?

Accepted Answer

A)  There are many firms. 
B)  There are no restrictions on entry into the market. 
C)  Each firm produces a slightly differentiated product. 
D)  Each firm takes price as given, determined by the equilibrium of industry supply and industry demand. 
A)  There are many firms. 
B)  There are no restrictions on entry into the market. 
C)  Each firm produces a slightly differentiated product. 
D)  Each firm takes price as given, determined by the equilibrium of industry supply and industry demand.

Question 7

Homer's Holesome Donuts has determined that its profit-maximizing quantity is 10,000 donuts per year. Homer's earns $12,000 in revenue from the sale of those donuts. Homer's has two costs. First he pays $16,000 in annual rental payments for its five-year lease on its store. Second Homer incurs an additional cost of $5,000 for ingredients. Homer's economic profit is equal to

Accepted Answer

A)  -$16,000, that is, an economic loss of $16,000. 
B)  -$9,000, that is, an economic loss of $9,000. 
C)  +$9,000. 
D)  +$12,000. 
A)  -$16,000, that is, an economic loss of $16,000. 
B)  -$9,000, that is, an economic loss of $9,000. 
C)  +$9,000. 
D)  +$12,000.

Question 8

-The table above shows output and costs of Evan's Subs, a typical perfectly competitive firm in a local market for sandwiches. Evan's fixed cost is $9 per hour. The current market price of a sandwich is $6. What quantity of sandwiches produced will maximize Evan's economic profit in the short run?

Accepted Answer

A)  2 sandwiches per hour 
B)  3 sandwiches per hour 
C)  4 sandwiches per hour 
D)  5 sandwiches per hour 
A)  2 sandwiches per hour 
B)  3 sandwiches per hour 
C)  4 sandwiches per hour 
D)  5 sandwiches per hour

Question 9

In the long run, a perfectly competitive firm can make an economic profit because its marginal cost equals its average total cost.

Accepted Answer

A) True 
 B)False

Question 10

Consumer surplus ________.

Accepted Answer

A)  equals total revenue minus marginal cost 
B)  is maximized when the market outcome is efficient 
C)  equals total revenue minus opportunity cost 
D)  plus producer surplus is maximized when resources are used efficiently 
A)  equals total revenue minus marginal cost 
B)  is maximized when the market outcome is efficient 
C)  equals total revenue minus opportunity cost 
D)  plus producer surplus is maximized when resources are used efficiently

Question 11

Which of the following four firms would most likely NOT be part of a perfectly competitive market?

Accepted Answer

A)  Mark sells his tomatoes at the local farmers market. 
B)  The WaveHouse is the only place in San Diego where you can ride an indoor 10 foot wave. 
C)  Village Pizza sells pizza in a college town. 
D)  Space Age Fuel is a gas station in Bend, Oregon. 
A)  Mark sells his tomatoes at the local farmers market. 
B)  The WaveHouse is the only place in San Diego where you can ride an indoor 10 foot wave. 
C)  Village Pizza sells pizza in a college town. 
D)  Space Age Fuel is a gas station in Bend, Oregon.

Question 12

In perfect competition, the market demand for the good ________ perfectly elastic and the demand for the output of one firm ________ perfectly elastic.

Accepted Answer

A)  is; is 
B)  is; is not 
C)  is not; is 
D)  is not; is not 
A)  is; is 
B)  is; is not 
C)  is not; is 
D)  is not; is not

Question 13

The marginal revenue curve for a perfectly competitive firm is

Accepted Answer

A)  an upward sloping curve. 
B)  a downward sloping curve. 
C)  a horizontal line. 
D)  None of the above answers is correct. 
A)  an upward sloping curve. 
B)  a downward sloping curve. 
C)  a horizontal line. 
D)  None of the above answers is correct.

Question 14

-Consider the perfectly competitive firm in the above figure. What will the firm choose to do in the short-run and why?

Accepted Answer

A)  shut down because the firm incurs an economic loss 
B)  stay in business because the firm is making an economic profit 
C)  stay in business because the firm's economic loss is less than fixed costs 
D)  stay in business because it is making zero economic profit 
A)  shut down because the firm incurs an economic loss 
B)  stay in business because the firm is making an economic profit 
C)  stay in business because the firm's economic loss is less than fixed costs 
D)  stay in business because it is making zero economic profit

Question 15

Which of the following is NOT an assumption of perfect competition?

Accepted Answer

A)  There are many firms, each selling an identical product. 
B)  There are many buyers. 
C)  The price each firm sets differs from the prices set by the other firms. 
D)  There are no restrictions on entry into the market. 
A)  There are many firms, each selling an identical product. 
B)  There are many buyers. 
C)  The price each firm sets differs from the prices set by the other firms. 
D)  There are no restrictions on entry into the market.

Question 16

-The above figure shows a firm's total revenue line. The firm must be in a market with

Accepted Answer

A)  perfect competition. 
B)  monopolistic competition. 
C)  monopoly. 
D)  oligopoly. 
A)  perfect competition. 
B)  monopolistic competition. 
C)  monopoly. 
D)  oligopoly.

Question 17

The short-run market supply curve is

Accepted Answer

A)  the sum of the quantities supplied by all the firms. 
B)  undefined because the number of firms is constant in the short run. 
C)  vertical at the total level of output being produced by all firms. 
D)  horizontal at the current market price. 
A)  the sum of the quantities supplied by all the firms. 
B)  undefined because the number of firms is constant in the short run. 
C)  vertical at the total level of output being produced by all firms. 
D)  horizontal at the current market price.

Question 18

A perfectly competitive firm maximizes its economic profit when it produces the quantity that sets

Accepted Answer

A)  MR = MC. 
B)  TR = TC. 
C)  MC =.AVC. 
D)  MC = ATC. 
A)  MR = MC. 
B)  TR = TC. 
C)  MC =.AVC. 
D)  MC = ATC.

Question 19

-The figure above shows the marginal revenue and costs of a perfectly competitive firm. When the firm produces 170 units,

Accepted Answer

A)  marginal cost is less than marginal revenue. 
B)  marginal revenue equals marginal cost. 
C)  total revenue is less than total cost. 
D)  total revenue equals total cost. 
A)  marginal cost is less than marginal revenue. 
B)  marginal revenue equals marginal cost. 
C)  total revenue is less than total cost. 
D)  total revenue equals total cost.

Question 20

"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect.

Accepted Answer

The statement is incorrect. Perfectly co

Exam 12: Perfect Competition

-The figure above shows depicts the marginal revenue and costs of a perfectly competitive firm. When 170 units are produced, the firm

A perfectly competitive firm's short-run shutdown point is the level of output at which

-In the above figure, if the price is P1 and the firm produced Q1, the firm's economic profit is ________ than if it produced Q2 and ________ than if it produced Q3.

In the short run, a perfectly competitive firm will shut down if at the profit maximizing quantity the

In the long run, fixed costs are

Which of the following is NOT a characteristic of a perfectly competitive industry?

-The table above shows output and costs of Evan's Subs, a typical perfectly competitive firm in a local market for sandwiches. Evan's fixed cost is $9 per hour. The current market price of a sandwich is $6. What quantity of sandwiches produced will maximize Evan's economic profit in the short run?

In the long run, a perfectly competitive firm can make an economic profit because its marginal cost equals its average total cost.

Consumer surplus ________.

Which of the following four firms would most likely NOT be part of a perfectly competitive market?

In perfect competition, the market demand for the good ________ perfectly elastic and the demand for the output of one firm ________ perfectly elastic.

The marginal revenue curve for a perfectly competitive firm is

-Consider the perfectly competitive firm in the above figure. What will the firm choose to do in the short-run and why?

Which of the following is NOT an assumption of perfect competition?

-The above figure shows a firm's total revenue line. The firm must be in a market with

The short-run market supply curve is

A perfectly competitive firm maximizes its economic profit when it produces the quantity that sets

-The figure above shows the marginal revenue and costs of a perfectly competitive firm. When the firm produces 170 units,

"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect.

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

Filters

-In the above figure, if the price is P₁ and the firm produced Q₁, the firm's economic profit is than if it produced Q₂ and than if it produced Q₃.

In perfect competition, the market demand for the good perfectly elastic and the demand for the output of one firm perfectly elastic.