Question 1

In a perfectly competitive market, an increase in market demand

Accepted Answer

A)  raises the price in the short run and attracts new firms in the long run. 
B)  raises the price in the short run and the long run. 
C)  lowers the price in the short run and in the long run. 
D)  has no effect on the price in either the short run or the long run because the firms are price takers. 
A)  raises the price in the short run and attracts new firms in the long run. 
B)  raises the price in the short run and the long run. 
C)  lowers the price in the short run and in the long run. 
D)  has no effect on the price in either the short run or the long run because the firms are price takers.

Question 2

Suppose firms in a perfectly competitive industry are making economic profits. As a result, I. new firms enter the industry.
II) the market price falls.
III) the economic profits of the existing firms decrease.

Accepted Answer

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

Question 3

Entry of new firms into a perfectly competitive market lowers the profits of the existing firms.

Accepted Answer

A) True 
 B)False

Question 4

-In the figure above, a firm is operating at point A on the graph. At point A, the firm's average cost curve

Accepted Answer

A)  has negative slope. 
B)  has positive slope. 
C)  is horizontal. 
D)  is vertical. 
A)  has negative slope. 
B)  has positive slope. 
C)  is horizontal. 
D)  is vertical.

Question 5

-The figure above shows depicts the marginal revenue and costs of a perfectly competitive firm. The price the firm charges is

Accepted Answer

A)  $4 per unit. 
B)  $8 per unit. 
C)  $16 per unit. 
D)  None of the above answers is correct. 
A)  $4 per unit. 
B)  $8 per unit. 
C)  $16 per unit. 
D)  None of the above answers is correct.

Question 6

A worldwide hops (a flowers used in brewing) shortage will make stouts, ales and other specialty microbrews more pricy in 2008. Gayle Goshie, a hops farmer, blames overproduction for hops' previously cheap place on the agricultural market. The glut pushed many hop farmers out business, which gradually helped hop prices recover. Suppose farming hops is a perfectly competitive market. Why would some hop farmers go out of business?

Accepted Answer

A)  Because the price of hops was below the minimum of average fixed cost 
B)  Because the price of hops was lower than the minimum of average variable cost 
C)  Because the price of hops was higher than the minimum of average variable cost 
D)  Because the price of hops was lower than the minimum of average total cost 
A)  Because the price of hops was below the minimum of average fixed cost 
B)  Because the price of hops was lower than the minimum of average variable cost 
C)  Because the price of hops was higher than the minimum of average variable cost 
D)  Because the price of hops was lower than the minimum of average total cost

Question 7

-Pete is a perfectly competitive rose grower. The above table gives quantities and the price for which Pete can sell his roses.
a) What is Pete's total revenue if he sells 1 dozen roses? 2 dozen roses? 3 dozen roses? 4 dozen roses?
b) What is the marginal revenue of the 2nd dozen roses sold? Of the 3rd dozen? Of the 4th dozen?

Accepted Answer

a) The total revenue when 1 dozen roses

Question 8

-Cory's is one of many ice cream stands in town. Cory's costs are shown in the table above.
a) If the market price of ice cream is $1.75 per cone, what is Cory's profit-maximizing quantity of cones?
b) If the market price of ice cream is $2.25 per cone, what is Cory's profit-maximizing quantity of coins?
c) If the market price of ice cream is $2.75 per cone, what is Cory's profit-maximizing quantity of coins?
d) Can you determine any points on Cory's supply curve?

Accepted Answer

@#IMG-DLM& a) Cory's profit is maximized when his

Question 9

In perfect competition, the elasticity of demand for the product of a single firm is

Accepted Answer

A)  0. 
B)  between 0 and 1. 
C)  1. 
D)  infinite. 
A)  0. 
B)  between 0 and 1. 
C)  1. 
D)  infinite.

Question 10

-Acme is a perfectly competitive firm. It has the total cost schedule given in the above table. Acme's product sells for $8.00 per unit. What amount of output is the most profitable and what is Acme's economic profit or economic loss?

Accepted Answer

Acme's profit-maximizing level of output

Question 11

A perfectly competitive firm produces so that its marginal cost equals the price.

Accepted Answer

A) True 
 B)False

Question 12

In the long run, perfectly competitive firms make zero economic profit, that is, their owners make a normal profit.

Accepted Answer

A) True 
 B)False

Question 13

The section of the marginal cost curve that lies above the average variable cost curve is

Accepted Answer

A)  a perfectly competitive firm's supply curve. 
B)  a perfectly competitive firm's average total cost curve. 
C)  a perfectly competitive firm's total fixed costs curve. 
D)  irrelevant to the firm because it never produces at any point along this curve. 
A)  a perfectly competitive firm's supply curve. 
B)  a perfectly competitive firm's average total cost curve. 
C)  a perfectly competitive firm's total fixed costs curve. 
D)  irrelevant to the firm because it never produces at any point along this curve.

Question 14

-The figure above shows a perfectly competitive firm. The firm will shut down in the short run if total fixed costs

Accepted Answer

A)  are between $201 and $400. 
B)  exceed $401. 
C)  are less than $200. 
D)  exceed total costs. 
A)  are between $201 and $400. 
B)  exceed $401. 
C)  are less than $200. 
D)  exceed total costs.

Question 15

-Carol's Candies is producing 150 boxes of candy a day. Carol's marginal revenue and marginal cost curves are shown in the figure above. To increase her profit, Carol should

Accepted Answer

A)  increase her output. 
B)  decrease her output. 
C)  maintain the current level of output because it gives her the maximum profit. 
D)  Not enough information is given to determine if Carol should increase, decrease, or not change her level of output. 
A)  increase her output. 
B)  decrease her output. 
C)  maintain the current level of output because it gives her the maximum profit. 
D)  Not enough information is given to determine if Carol should increase, decrease, or not change her level of output.

Question 16

In a perfectly competitive market, many firms sell an identical product.

Accepted Answer

A) True 
 B)False

Question 17

-The table above gives the total revenue and total cost for a perfectly competitive firm producing chocolate chip cookies. If the firm increases its output from 2 pounds of cookies to 3 pounds, the marginal revenue is ________ per pound of cookies.

Accepted Answer

A)  $11 
B)  $15 
C)  $30 
D)  $45 
A)  $11 
B)  $15 
C)  $30 
D)  $45

Question 18

-Petunia'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 Petunia's average variable, average total, and marginal cost curves.
b) Use your graphs to find Petunia's profit-maximizing output.
c) If Petunia maximizes her profit, how much profit does she make?
d) What is Petunia's shutdown point? What is her economic profit at the shut-down point?
e) Should Petunia shut down? Will farms with costs the same as Petunia's enter or exit the milk market? Explain.

Accepted Answer

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

Question 19

The short-run supply curve for a perfectly competitive firm is its marginal cost curve

Accepted Answer

A)  above the horizontal axis. 
B)  above its shutdown point. 
C)  below its shutdown point. 
D)  everywhere. 
A)  above the horizontal axis. 
B)  above its shutdown point. 
C)  below its shutdown point. 
D)  everywhere.

Question 20

A perfectly competitive firm maximizes its profits by producing the amount of output such that

Accepted Answer

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

Exam 12: Perfect Competition

In a perfectly competitive market, an increase in market demand

Suppose firms in a perfectly competitive industry are making economic profits. As a result, I. new firms enter the industry. II) the market price falls. III) the economic profits of the existing firms decrease.

Entry of new firms into a perfectly competitive market lowers the profits of the existing firms.

-In the figure above, a firm is operating at point A on the graph. At point A, the firm's average cost curve

-The figure above shows depicts the marginal revenue and costs of a perfectly competitive firm. The price the firm charges is

In perfect competition, the elasticity of demand for the product of a single firm is

-Acme is a perfectly competitive firm. It has the total cost schedule given in the above table. Acme's product sells for $8.00 per unit. What amount of output is the most profitable and what is Acme's economic profit or economic loss?

A perfectly competitive firm produces so that its marginal cost equals the price.

In the long run, perfectly competitive firms make zero economic profit, that is, their owners make a normal profit.

The section of the marginal cost curve that lies above the average variable cost curve is

-The figure above shows a perfectly competitive firm. The firm will shut down in the short run if total fixed costs

-Carol's Candies is producing 150 boxes of candy a day. Carol's marginal revenue and marginal cost curves are shown in the figure above. To increase her profit, Carol should

In a perfectly competitive market, many firms sell an identical product.

-The table above gives the total revenue and total cost for a perfectly competitive firm producing chocolate chip cookies. If the firm increases its output from 2 pounds of cookies to 3 pounds, the marginal revenue is ________ per pound of cookies.

The short-run supply curve for a perfectly competitive firm is its marginal cost curve

A perfectly competitive firm maximizes its profits by producing the amount of output such 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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