Question 1

A perfectly competitive firm maximizes its profit by producing the level of output so that its average total cost equals the market price.

Accepted Answer

A) True 
 B)False

Question 2

If perfectly competitive firms exit a market, the

Accepted Answer

A)  market supply curve shifts leftward. 
B)  price of the good or service falls. 
C)  profits of the remaining firms decrease. 
D)  output of the industry increases. 
A)  market supply curve shifts leftward. 
B)  price of the good or service falls. 
C)  profits of the remaining firms decrease. 
D)  output of the industry increases.

Question 3

-For a perfectly competitive firm, curve A in the above figure is the firm's

Accepted Answer

A)  total fixed cost curve. 
B)  average fixed cost curve. 
C)  average variable cost curve. 
D)  total revenue curve. 
A)  total fixed cost curve. 
B)  average fixed cost curve. 
C)  average variable cost curve. 
D)  total revenue curve.

Question 4

Entry by competitive firms decreases the market price, while exit by competitive firms increases the market price. Explain why firms enter or exit an industry and why these price changes occur.

Accepted Answer

Competitive firms will enter an industry

Question 5

A perfectly competitive firm's marginal revenue exceeds its marginal cost at its current output. To increase its profit, the firm will

Accepted Answer

A)  lower its price. 
B)  raise its price. 
C)  decrease its output. 
D)  increase its output. 
A)  lower its price. 
B)  raise its price. 
C)  decrease its output. 
D)  increase its output.

Question 6

-Brennan's Farm produces and sells milk. The market for milk is perfectly competitive. The market price of milk is $2.50 per gallon. The relationship between the farm's output and total costs is shown in the table above.
a) Draw Brennan's average variable, average total, and marginal cost curves.
b) Use your graphs to find Brennan's profit-maximizing output.
c) If Brennan maximizes his profit, how much profit does he make?
d) Should Brennan stay in business? Will other farms with costs the same as Brennan's enter the milk market? Explain.

Accepted Answer

@#IMG-DLM& @#IMG-DLM& a) Brennan's cost schedules are shown

Question 7

Which of the following is true regarding a perfectly competitive firm?

Accepted Answer

A)  The firm can charge a lower price than its competitors and thereby sell more output and increase its profits. 
B)  The firm always earns a normal profit. 
C)  The firm's marginal revenue continually decreases. 
D)  The firm's minimum efficient scale is small relative to the market demand. 
A)  The firm can charge a lower price than its competitors and thereby sell more output and increase its profits. 
B)  The firm always earns a normal profit. 
C)  The firm's marginal revenue continually decreases. 
D)  The firm's minimum efficient scale is small relative to the market demand.

Question 8

What is one reason why would corn production, which takes place in a perfectly competitive market, achieve an efficient use of resources?

Accepted Answer

A)  Because a perfectly competitive firm produces at the lowest possible long run average total cost 
B)  Because a perfectly competitive firm produces where marginal revenue exceeds marginal cost 
C)  Because a perfectly competitive firm is a price maker 
D)  Because the goal of a perfectly competitive firm is to profit maximize 
A)  Because a perfectly competitive firm produces at the lowest possible long run average total cost 
B)  Because a perfectly competitive firm produces where marginal revenue exceeds marginal cost 
C)  Because a perfectly competitive firm is a price maker 
D)  Because the goal of a perfectly competitive firm is to profit maximize

Question 9

What must be the case if a perfectly competitive firm's economic loss is less by shutting down rather than by producing and selling some output?

Accepted Answer

If a firm's economic loss is greater whe

Question 10

"A perfectly competitive firm will shut down if the price falls below its average total cost." Do you agree? Explain.

Accepted Answer

A perfectly competitive firm will not sh

Question 11

In the long run, for a perfectly competitive market, if economic profit is

Accepted Answer

A)  less than zero, then some firms will exit the market and the market supply curve will shift leftward. 
B)  greater than zero, then some firms will enter the market and the market supply curve will shift rightward. 
C)  equal to zero, then there is no entry or exit of firms into or out of the market. 
D)  All of the above answers are correct. 
A)  less than zero, then some firms will exit the market and the market supply curve will shift leftward. 
B)  greater than zero, then some firms will enter the market and the market supply curve will shift rightward. 
C)  equal to zero, then there is no entry or exit of firms into or out of the market. 
D)  All of the above answers are correct.

Question 12

-The figure above shows a perfectly competitive firm. When the firm maximizes its profit, its economic profit

Accepted Answer

A)  is more than $300. 
B)  is $300. 
C)  is less than $300. 
D)  The premise of the question is wrong because the firm is incurring an economic loss. 
A)  is more than $300. 
B)  is $300. 
C)  is less than $300. 
D)  The premise of the question is wrong because the firm is incurring an economic loss.

Question 13

Describe the different possible profit outcomes for a perfectly competitive firm in the short run versus the long run. Explain why they occur.

Accepted Answer

In the short run, a perfectly competitiv

Question 14

Perfectly competitive firms will sometimes operate even though they incur an economic loss in the short run.

Accepted Answer

A) True 
 B)False

Question 15

Will a perfectly competitive firm ever produce in the short run even though it is incurring an economic loss?

Accepted Answer

Yes, a perfectly competitive firm will c

Question 16

Because the demand for a perfectly competitive firm's product is perfectly elastic, marginal revenue is equal to

Accepted Answer

A)  one. 
B)  zero. 
C)  the price of the product. 
D)  negative one. 
A)  one. 
B)  zero. 
C)  the price of the product. 
D)  negative one.

Question 17

-In the above figure, the vertical distance between the ATC and AVC curves is

Accepted Answer

A)  the marginal cost. 
B)  the total cost. 
C)  the average fixed costs. 
D)  None of the above answers is correct. 
A)  the marginal cost. 
B)  the total cost. 
C)  the average fixed costs. 
D)  None of the above answers is correct.

Question 18

-In the above table, the marginal revenue from the fourth unit of output is

Accepted Answer

A)  $30. 
B)  $147. 
C)  $150. 
D)  $180. 
A)  $30. 
B)  $147. 
C)  $150. 
D)  $180.

Question 19

An example of a perfectly competitive industry is

Accepted Answer

A)  a big city police department. 
B)  the market for corn in the United States. 
C)  the market for French impressionists' paintings. 
D)  the National Football League. 
A)  a big city police department. 
B)  the market for corn in the United States. 
C)  the market for French impressionists' paintings. 
D)  the National Football League.

Question 20

As long as it does not shut down, a perfectly competitive firm earns the maximum profit as long as it operates so that

Accepted Answer

A)  its price exceeds its average total cost. 
B)  market demand is inelastic. 
C)  its price exceeds its marginal revenue. 
D)  its marginal revenue equals its marginal cost. 
A)  its price exceeds its average total cost. 
B)  market demand is inelastic. 
C)  its price exceeds its marginal revenue. 
D)  its marginal revenue equals its marginal cost.

Exam 12: Perfect Competition

A perfectly competitive firm maximizes its profit by producing the level of output so that its average total cost equals the market price.

If perfectly competitive firms exit a market, the

-For a perfectly competitive firm, curve A in the above figure is the firm's

Entry by competitive firms decreases the market price, while exit by competitive firms increases the market price. Explain why firms enter or exit an industry and why these price changes occur.

A perfectly competitive firm's marginal revenue exceeds its marginal cost at its current output. To increase its profit, the firm will

Which of the following is true regarding a perfectly competitive firm?

What is one reason why would corn production, which takes place in a perfectly competitive market, achieve an efficient use of resources?

What must be the case if a perfectly competitive firm's economic loss is less by shutting down rather than by producing and selling some output?

"A perfectly competitive firm will shut down if the price falls below its average total cost." Do you agree? Explain.

In the long run, for a perfectly competitive market, if economic profit is

-The figure above shows a perfectly competitive firm. When the firm maximizes its profit, its economic profit

Describe the different possible profit outcomes for a perfectly competitive firm in the short run versus the long run. Explain why they occur.

Perfectly competitive firms will sometimes operate even though they incur an economic loss in the short run.

Will a perfectly competitive firm ever produce in the short run even though it is incurring an economic loss?

Because the demand for a perfectly competitive firm's product is perfectly elastic, marginal revenue is equal to

-In the above figure, the vertical distance between the ATC and AVC curves is

-In the above table, the marginal revenue from the fourth unit of output is

An example of a perfectly competitive industry is

As long as it does not shut down, a perfectly competitive firm earns the maximum profit as long as it operates so that

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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