Question 1

-In the above figure, if the milk industry is perfectly competitive, then the firm's marginal revenue curve is represented by

Accepted Answer

A)  curve F. 
B)  curve G. 
C)  curve H. 
D)  curve I. 
A)  curve F. 
B)  curve G. 
C)  curve H. 
D)  curve I.

Question 2

-In the above figure, the firm is breaking even at points

Accepted Answer

A)  a and c. 
B)  b and d. 
C)  c and d. 
D)  a and d. 
A)  a and c. 
B)  b and d. 
C)  c and d. 
D)  a and d.

Question 3

What is a normal profit?

Accepted Answer

A normal profit is the return

Question 4

Perfect competition exists in a market if

Accepted Answer

A)  there are many firms producing an identical product. 
B)  there are many firms producing a similar product, each of which may have unique features. 
C)  the firm is protected by a barrier to entry. 
D)  the firm is always at the break-even point where it is earning only a normal profit. 
A)  there are many firms producing an identical product. 
B)  there are many firms producing a similar product, each of which may have unique features. 
C)  the firm is protected by a barrier to entry. 
D)  the firm is always at the break-even point where it is earning only a normal profit.

Question 5

A worldwide hops (a flower 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 hops farmers out business, which gradually helped hops prices recover. Suppose farming hops is a perfectly competitive market. How did farmers going out of business help hops prices recover?

Accepted Answer

A)  Fewer farmers cause the market supply curve to shift leftward, causing price to rise. 
B)  Fewer farmers cause an increase in market demand, causing price to rise. 
C)  Fewer farmers cause an increase in the surviving firms' costs, causing higher prices. 
D)  Fewer farmers cause the individual firms' supply curves to decrease, causing higher prices. 
A)  Fewer farmers cause the market supply curve to shift leftward, causing price to rise. 
B)  Fewer farmers cause an increase in market demand, causing price to rise. 
C)  Fewer farmers cause an increase in the surviving firms' costs, causing higher prices. 
D)  Fewer farmers cause the individual firms' supply curves to decrease, causing higher prices.

Question 6

-In the above figure, if the price is $16, a profit-maximizing perfectly competitive firm will

Accepted Answer

A)  produce 50 units. 
B)  produce 35 units. 
C)  produce 10 units. 
D)  choose not to produce. 
A)  produce 50 units. 
B)  produce 35 units. 
C)  produce 10 units. 
D)  choose not to produce.

Question 7

-In the above figure, the marginal cost of the last unit produced by the profit maximizing firm is

Accepted Answer

A)  $5. 
B)  $10. 
C)  $15. 
D)  $20. 
A)  $5. 
B)  $10. 
C)  $15. 
D)  $20.

Question 8

There is a technological advance in a perfectly market. Which of the following statements is NOT true?

Accepted Answer

A)  As more firms begin to use the new technology, the market supply increases and the price falls. 
B)  Technological change brings permanent gains to producers and temporary gains to consumers. 
C)  In the new long-run equilibrium, all the old-technology firms have exited. 
D)  In the long-run equilibrium, competition eliminates any short-run economic profit. 
A)  As more firms begin to use the new technology, the market supply increases and the price falls. 
B)  Technological change brings permanent gains to producers and temporary gains to consumers. 
C)  In the new long-run equilibrium, all the old-technology firms have exited. 
D)  In the long-run equilibrium, competition eliminates any short-run economic profit.

Question 9

For a firm in perfect competition, a diagram shows quantity on the horizontal axis and both the firm's marginal cost (MC) and its marginal revenue (MR) on the vertical axis. The firm's profit-maximizing quantity occurs at the point where the

Accepted Answer

A)  slope of the MC curve is zero. 
B)  MC and MR curves are parallel. 
C)  MC curve intersects the MR curve from below, going from left to right. 
D)  MC curve intersects the MR curve from above, going from left to right. 
A)  slope of the MC curve is zero. 
B)  MC and MR curves are parallel. 
C)  MC curve intersects the MR curve from below, going from left to right. 
D)  MC curve intersects the MR curve from above, going from left to right.

Question 10

The shutdown point occurs at the level of output for which the ________ is at its minimum.

Accepted Answer

A)  marginal cost 
B)  average variable cost 
C)  average fixed cost 
D)  total cost 
A)  marginal cost 
B)  average variable cost 
C)  average fixed cost 
D)  total cost

Question 11

When marginal revenue equals marginal cost, a perfectly competitive firm is

Accepted Answer

A)  determining the price it will set. 
B)  maximizing its revenues. 
C)  maximizing its profit. 
D)  establishing its shutdown point. 
A)  determining the price it will set. 
B)  maximizing its revenues. 
C)  maximizing its profit. 
D)  establishing its shutdown point.

Question 12

The difference between a firm's total revenue and its total opportunity cost is the firm's

Accepted Answer

A)  normal profit. 
B)  economic profit. 
C)  marginal profit. 
D)  marginal revenue. 
A)  normal profit. 
B)  economic profit. 
C)  marginal profit. 
D)  marginal revenue.

Question 13

A market is perfectly competitive if

Accepted Answer

A)  each firm in it can influence the price of its product. 
B)  there are many firms in it, each selling a slightly different product. 
C)  there are many firms in it, each selling an identical product. 
D)  there are few firms in the market. 
A)  each firm in it can influence the price of its product. 
B)  there are many firms in it, each selling a slightly different product. 
C)  there are many firms in it, each selling an identical product. 
D)  there are few firms in the market.

Question 14

In the short run, a perfectly competitive firm might

Accepted Answer

A)  set its price above marginal cost. 
B)  set its price above marginal revenue. 
C)  adjust the size of its fixed inputs. 
D)  operate even though it is incurring an economic loss. 
A)  set its price above marginal cost. 
B)  set its price above marginal revenue. 
C)  adjust the size of its fixed inputs. 
D)  operate even though it is incurring an economic loss.

Question 15

-The above figure illustrates a perfectly competitive wheat farmer.
a) What will be the firm's profit-maximizing price and output?
b) When the farmer produces 25,000 bushels of wheat, the difference between the firm's average total cost and the price is at its maximum. Explain why this amount of wheat either is or is not the profit-maximizing quantity.

Accepted Answer

a) The firm will maximize its profits by

Question 16

Which of the following is NOT present in a perfectly competitive market?

Accepted Answer

A)  profit maximizing firms 
B)  an economic profit in the long run 
C)  price taking behavior 
D)  identical products 
A)  profit maximizing firms 
B)  an economic profit in the long run 
C)  price taking behavior 
D)  identical products

Question 17

-Suppose the cost curves in the above figure apply to all firms in the market. Then, if the initial price is P1, in the long run the market

Accepted Answer

A)  demand will increase. 
B)  demand will decrease. 
C)  supply will increase. 
D)  supply will decrease. 
A)  demand will increase. 
B)  demand will decrease. 
C)  supply will increase. 
D)  supply will decrease.

Question 18

-Consider the perfectly competitive firm in the above figure. The profit maximizing level of output for the firm is equal to

Accepted Answer

A)  0 units. 
B)  14 units. 
C)  17 units. 
D)  19 units. 
A)  0 units. 
B)  14 units. 
C)  17 units. 
D)  19 units.

Question 19

-The figure above shows a perfectly competitive firm. The firm is operating; that is, the firm has not shut down. The firm is

Accepted Answer

A)  making an economic profit of $200. 
B)  incurring a economic loss of $200. 
C)  incurring an economic loss of $600. 
D)  making zero economic profit. 
A)  making an economic profit of $200. 
B)  incurring a economic loss of $200. 
C)  incurring an economic loss of $600. 
D)  making zero economic profit.

Question 20

A perfectly competitive firm's short-run supply curve is

Accepted Answer

A)  its marginal cost curve above the shutdown point. 
B)  its marginal revenue curve above the shutdown point. 
C)  its demand curve. 
D)  horizontal at the going price. 
A)  its marginal cost curve above the shutdown point. 
B)  its marginal revenue curve above the shutdown point. 
C)  its demand curve. 
D)  horizontal at the going price.

Exam 12: Perfect Competition

-In the above figure, if the milk industry is perfectly competitive, then the firm's marginal revenue curve is represented by

-In the above figure, the firm is breaking even at points

What is a normal profit?

Perfect competition exists in a market if

-In the above figure, if the price is $16, a profit-maximizing perfectly competitive firm will

-In the above figure, the marginal cost of the last unit produced by the profit maximizing firm is

There is a technological advance in a perfectly market. Which of the following statements is NOT true?

For a firm in perfect competition, a diagram shows quantity on the horizontal axis and both the firm's marginal cost (MC) and its marginal revenue (MR) on the vertical axis. The firm's profit-maximizing quantity occurs at the point where the

The shutdown point occurs at the level of output for which the ________ is at its minimum.

When marginal revenue equals marginal cost, a perfectly competitive firm is

The difference between a firm's total revenue and its total opportunity cost is the firm's

A market is perfectly competitive if

In the short run, a perfectly competitive firm might

Which of the following is NOT present in a perfectly competitive market?

-Suppose the cost curves in the above figure apply to all firms in the market. Then, if the initial price is P1, in the long run the market

-Consider the perfectly competitive firm in the above figure. The profit maximizing level of output for the firm is equal to

-The figure above shows a perfectly competitive firm. The firm is operating; that is, the firm has not shut down. The firm is

A perfectly competitive firm's short-run supply curve is

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

-Suppose the cost curves in the above figure apply to all firms in the market. Then, if the initial price is P₁, in the long run the market