Question 1

In the short run, a perfectly competitive firm

Accepted Answer

A)  might not make an economic profit greater than zero. 
B)  will always make an economic profit greater than zero. 
C)  chooses its optimal plant size. 
D)  is in equilibrium only when its economic profit is positive. 
A)  might not make an economic profit greater than zero. 
B)  will always make an economic profit greater than zero. 
C)  chooses its optimal plant size. 
D)  is in equilibrium only when its economic profit is positive.

Question 2

-Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy's cost curves. If the market price is 4 cents per page, what is Fast Copy's profit maximizing level of output?

Accepted Answer

A)  16 pages per hour 
B)  32 pages per hour 
C)  48 pages per hour 
D)  64 pages per hour 
A)  16 pages per hour 
B)  32 pages per hour 
C)  48 pages per hour 
D)  64 pages per hour

Question 3

The assumption that a perfectly competitive industry has many sellers, each selling an identical product, leads to the conclusion that

Accepted Answer

A)  consumers get to see a variety of outputs. 
B)  there are many buyers. 
C)  the economic profit will be positive in the long run. 
D)  firms are price takers. 
A)  consumers get to see a variety of outputs. 
B)  there are many buyers. 
C)  the economic profit will be positive in the long run. 
D)  firms are price takers.

Question 4

Marginal revenue is defined as

Accepted Answer

A)  the value of a firm's sales. 
B)  the total revenue from the total amount the firm sells. 
C)  the change in total revenue that results from a one-unit increase in the quantity sold. 
D)  total revenue divided by the total quantity sold. 
A)  the value of a firm's sales. 
B)  the total revenue from the total amount the firm sells. 
C)  the change in total revenue that results from a one-unit increase in the quantity sold. 
D)  total revenue divided by the total quantity sold.

Question 5

In the short run, the firm makes zero economic profit when the price is ________ minimum average total cost, makes an economic profit when the price is ________ minimum average total cost, and incurs an economic loss when the price is ________ minimum average total cost.

Accepted Answer

A)  equal to; higher than; lower than 
B)  equal to; lower than; higher than 
C)  higher than; equal to; lower than 
D)  lower than; equal to; higher than 
A)  equal to; higher than; lower than 
B)  equal to; lower than; higher than 
C)  higher than; equal to; lower than 
D)  lower than; equal to; higher than

Question 6

-Based on the table above which shows Chip's costs, if rice sells for $600 a ton, Chip will

Accepted Answer

A)  shut down because he incurs an economic loss. 
B)  shut down because the price is below his minimum average variable cost. 
C)  stay open because he makes an economic profit. 
D)  stay open because the price is above his minimum average variable cost. 
A)  shut down because he incurs an economic loss. 
B)  shut down because the price is below his minimum average variable cost. 
C)  stay open because he makes an economic profit. 
D)  stay open because the price is above his minimum average variable cost.

Question 7

-Based on the table above which shows Chip's costs, if rice sells for $600 a ton, Chip's profit-maximizing output is

Accepted Answer

A)  less than one ton. 
B)  between two and three tons. 
C)  between three and four tons. 
D)  between one and two tons. 
A)  less than one ton. 
B)  between two and three tons. 
C)  between three and four tons. 
D)  between one and two tons.

Question 8

Which of the following is always true for a perfectly competitive firm?

Accepted Answer

A)  P = MR 
B)  P = ATC 
C)  MR = ATC 
D)  P = AVC 
A)  P = MR 
B)  P = ATC 
C)  MR = ATC 
D)  P = AVC

Question 9

-In the above figure, below what minimum price will a perfectly competitive firm shut down rather than produce?

Accepted Answer

A)  for any price less than $16 per unit 
B)  for any price less than $12 per unit 
C)  for any price less than $8 per unit 
D)  for any price less than $4 per unit 
A)  for any price less than $16 per unit 
B)  for any price less than $12 per unit 
C)  for any price less than $8 per unit 
D)  for any price less than $4 per unit

Question 10

Which of the following is true regarding perfect competition? I. The firms are price takers.
II) Marginal revenue equals the price of the product.
III) Established firms have no advantage over new firms.

Accepted Answer

A)  I and II 
B)  II and III 
C)  I, II and III 
D)  I only 
A)  I and II 
B)  II and III 
C)  I, II and III 
D)  I only

Question 11

A firm will expand the amount of output it produces as long as its

Accepted Answer

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

Question 12

Perfect competition arises if the ________ efficient scale of a single producer is ________ relative to the demand for the good or service.

Accepted Answer

A)  minimum; small 
B)  minimum; large 
C)  maximum; small 
D)  maximum; large 
A)  minimum; small 
B)  minimum; large 
C)  maximum; small 
D)  maximum; large

Question 13

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $20, how much economic profit does the firm make?

Accepted Answer

A)  $0 
B)  $12 
C)  -$20 
D)  -$10 
A)  $0 
B)  $12 
C)  -$20 
D)  -$10

Question 14

Initially, a perfectly competitive industry that has 1,000 firms is in long-run equilibrium. Then 100 firms in the industry adopt a new technology that reduces the average cost of producing the good. In the short run, the price ________, firms with the new technology make ________ economic profit, and firms with the old technology ________.

Accepted Answer

A)  remains the same; zero; incur economic losses 
B)  falls; positive; incur economic losses 
C)  remains the same; positive; make normal profit 
D)  remains the same; positive; incur economic losses 
A)  remains the same; zero; incur economic losses 
B)  falls; positive; incur economic losses 
C)  remains the same; positive; make normal profit 
D)  remains the same; positive; incur economic losses

Question 15

-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. If Evan's sells the 5th sandwich, the marginal cost is ________ the marginal revenue, so the firm's profit ________.

Accepted Answer

A)  greater than; decreases 
B)  greater than; increases 
C)  less than; increases 
D)  less than; decreases 
A)  greater than; decreases 
B)  greater than; increases 
C)  less than; increases 
D)  less than; decreases

Question 16

If there is a permanent decrease in demand in a perfectly competitive market, then there is an initial ________ in price and existing firms ________.

Accepted Answer

A)  rise; make an economic profit 
B)  rise; incur an economic loss 
C)  fall; make an economic profit 
D)  fall; incur an economic loss 
A)  rise; make an economic profit 
B)  rise; incur an economic loss 
C)  fall; make an economic profit 
D)  fall; incur an economic loss

Question 17

In the short run a perfectly competitive firm will

Accepted Answer

A)  never shut down. 
B)  shut down if P  AFC. 
A)  never shut down. 
B)  shut down if P  AFC.

Question 18

-Using the above figure, of the prices below, which price enables a perfectly competitive firm to earn the maximum economic profit?

Accepted Answer

A)  $4 per unit. 
B)  $10 per unit. 
C)  $12 per unit. 
D)  $16 per unit. 
A)  $4 per unit. 
B)  $10 per unit. 
C)  $12 per unit. 
D)  $16 per unit.

Question 19

A perfectly competitive market is in long-run equilibrium. Then demand decreases. The decrease in demand leads to

Accepted Answer

A)  a rise in the price in the short run. 
B)  the firms' incurring an economic loss in the short run. 
C)  firms entering the market in the long run. 
D)  none of the above 
A)  a rise in the price in the short run. 
B)  the firms' incurring an economic loss in the short run. 
C)  firms entering the market in the long run. 
D)  none of the above

Question 20

The economic profit of a perfectly competitive firm

Accepted Answer

A)  is less than its total revenue. 
B)  equals its total revenue. 
C)  is greater than its total revenue. 
D)  is less than its total revenue if its supply curve is inelastic and is greater than its total revenue if its supply curve is elastic. 
A)  is less than its total revenue. 
B)  equals its total revenue. 
C)  is greater than its total revenue. 
D)  is less than its total revenue if its supply curve is inelastic and is greater than its total revenue if its supply curve is elastic.

Exam 12: Perfect Competition

In the short run, a perfectly competitive firm

-Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy's cost curves. If the market price is 4 cents per page, what is Fast Copy's profit maximizing level of output?

The assumption that a perfectly competitive industry has many sellers, each selling an identical product, leads to the conclusion that

Marginal revenue is defined as

In the short run, the firm makes zero economic profit when the price is ________ minimum average total cost, makes an economic profit when the price is ________ minimum average total cost, and incurs an economic loss when the price is ________ minimum average total cost.

-Based on the table above which shows Chip's costs, if rice sells for $600 a ton, Chip will

-Based on the table above which shows Chip's costs, if rice sells for $600 a ton, Chip's profit-maximizing output is

Which of the following is always true for a perfectly competitive firm?

-In the above figure, below what minimum price will a perfectly competitive firm shut down rather than produce?

Which of the following is true regarding perfect competition? I. The firms are price takers. II) Marginal revenue equals the price of the product. III) Established firms have no advantage over new firms.

A firm will expand the amount of output it produces as long as its

Perfect competition arises if the ________ efficient scale of a single producer is ________ relative to the demand for the good or service.

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $20, how much economic profit does the firm make?

If there is a permanent decrease in demand in a perfectly competitive market, then there is an initial ________ in price and existing firms ________.

In the short run a perfectly competitive firm will

-Using the above figure, of the prices below, which price enables a perfectly competitive firm to earn the maximum economic profit?

A perfectly competitive market is in long-run equilibrium. Then demand decreases. The decrease in demand leads to

The economic profit of a perfectly competitive firm

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 short run, the firm makes zero economic profit when the price is minimum average total cost, makes an economic profit when the price is minimum average total cost, and incurs an economic loss when the price is minimum average total cost.

Perfect competition arises if the efficient scale of a single producer is relative to the demand for the good or service.

If there is a permanent decrease in demand in a perfectly competitive market, then there is an initial in price and existing firms .