Question 1

A perfectly competitive firm is producing more than the profit-maximizing amount of its product. You can conclude that its

Accepted Answer

A)  total cost exceeds its total revenue. 
B)  average total cost exceeds the price of the product. 
C)  marginal revenue is less than the price of the product. 
D)  marginal cost exceeds the price of the product. 
A)  total cost exceeds its total revenue. 
B)  average total cost exceeds the price of the product. 
C)  marginal revenue is less than the price of the product. 
D)  marginal cost exceeds the price of the product.

Question 2

-In the above table, if the firm sells 5 units of output, its total revenue is

Accepted Answer

A)  $15. 
B)  $30. 
C)  $75. 
D)  $90. 
A)  $15. 
B)  $30. 
C)  $75. 
D)  $90.

Question 3

In the long-run equilibrium in a perfectly competitive market, the economic profit of the firms is

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  increasing. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  increasing.

Question 4

In a perfectly competitive market, which of the following determines the market price?

Accepted Answer

A)  market demand and a firm's supply 
B)  market supply and a firm's demand 
C)  a firm's demand and its supply 
D)  market demand and market supply 
A)  market demand and a firm's supply 
B)  market supply and a firm's demand 
C)  a firm's demand and its supply 
D)  market demand and market supply

Question 5

In a perfectly competitive market, technological advances bring ________ economic profits for producers and ________ lower prices for consumers.

Accepted Answer

A)  permanent; permanently 
B)  permanent; temporarily 
C)  temporary; permanently 
D)  temporary; temporarily 
A)  permanent; permanently 
B)  permanent; temporarily 
C)  temporary; permanently 
D)  temporary; temporarily

Question 6

Fresno County, California is the largest agricultural producing county in the country and almonds are an important crop with more than 99,000 acres harvested. Each acre produces about a ton of almonds and sold at a price of $4300 a ton. The Sagardia Brothers grew 600 acres of almonds . How many tons would the brothers sell if they priced the almonds at $4500 a ton?

Accepted Answer

A)  0 tons 
B)  600 tons 
C)  400 tons 
D)  200 tons 
A)  0 tons 
B)  600 tons 
C)  400 tons 
D)  200 tons

Question 7

Define the shutdown point. Explain why the firm shuts down in the short run if the price falls below this point.

Accepted Answer

The shutdown point is the point at which

Question 8

What is the relationship between the price, P, and the average total cost, ATC, for a firm in perfect competition that earns an economic profit? That earns a normal profit? That incurs an economic loss?

Accepted Answer

If the price is greater than the average

Question 9

-In the above figure, if the price is P1, the firm will produce

Accepted Answer

A)  nothing. 
B)  where MC equals ATC. 
C)  where MC equals P1. 
D)  where ATC equals P1. 
A)  nothing. 
B)  where MC equals ATC. 
C)  where MC equals P1. 
D)  where ATC equals P1.

Question 10

A firm that shuts down and produces no output incurs a loss equal to its

Accepted Answer

A)  total fixed costs. 
B)  total variable costs. 
C)  marginal costs. 
D)  marginal revenue. 
A)  total fixed costs. 
B)  total variable costs. 
C)  marginal costs. 
D)  marginal revenue.

Question 11

If the minimum efficient scale of a firm is small relative to the demand for the good, then

Accepted Answer

A)  many small firms can compete in the market. 
B)  several large firms will enter the market thereby reducing competition. 
C)  there will be no economic profits for any small firms, so no new firms will ever enter the market. 
D)  the firms already in the market have lower average total cost than any new firm entering the market. 
A)  many small firms can compete in the market. 
B)  several large firms will enter the market thereby reducing competition. 
C)  there will be no economic profits for any small firms, so no new firms will ever enter the market. 
D)  the firms already in the market have lower average total cost than any new firm entering the market.

Question 12

-The figure above shows a firm in a perfectly competitive market. The firm will shut down if price falls below

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  P4.

Question 13

-The donut market is perfectly competitive. The figure shows the costs of a typical donut producer. In the short run, the donut producer's supply curve is the curve running from point ________ to point E.

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 14

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

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 15

In the long run, which of the following is present in a perfectly competitive market?

Accepted Answer

A)  barriers to entry 
B)  many firms in the market 
C)  firms incurring an economic loss in the long run 
D)  firms making an economic profit in the long run 
A)  barriers to entry 
B)  many firms in the market 
C)  firms incurring an economic loss in the long run 
D)  firms making an economic profit in the long run

Question 16

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

Accepted Answer

A)  makes an economic profit and should stay open in the short run. 
B)  makes an economic profit, but should shut down in the short run. 
C)  incurs an economic loss, but should stay open in the short run. 
D)  incurs an economic loss and should shut down in the short run. 
A)  makes an economic profit and should stay open in the short run. 
B)  makes an economic profit, but should shut down in the short run. 
C)  incurs an economic loss, but should stay open in the short run. 
D)  incurs an economic loss and should shut down in the short run.

Question 17

If firms in a competitive market are ________ then there is ________ for firms to ________ the industry.

Accepted Answer

A)  incurring economic losses; an incentive; exit 
B)  incurring economic losses; no incentive; exit 
C)  making economic profits; no incentive; enter 
D)  making zero economic profit; an incentive; exit 
A)  incurring economic losses; an incentive; exit 
B)  incurring economic losses; no incentive; exit 
C)  making economic profits; no incentive; enter 
D)  making zero economic profit; an incentive; exit

Question 18

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

Accepted Answer

A)  $1,200. 
B)  $900. 
C)  $600. 
D)  unable to be determined without more information. 
A)  $1,200. 
B)  $900. 
C)  $600. 
D)  unable to be determined without more information.

Question 19

The short-run market supply curve for a perfectly competitive market is obtained by summing the part of each firm's

Accepted Answer

A)  AVC curve that lies above its MC curve. 
B)  MC curve that lies above its AVC curve. 
C)  AVC curve that lies below the MC curve. 
D)  MC curve that lies below the AVC curve. 
A)  AVC curve that lies above its MC curve. 
B)  MC curve that lies above its AVC curve. 
C)  AVC curve that lies below the MC curve. 
D)  MC curve that lies below the AVC curve.

Question 20

In the short run, a firm will

Accepted Answer

A)  not produce if its total revenue does not cover its total cost. 
B)  produce and incur an economic loss if its total revenue covers its total variable cost but not its total cost. 
C)  produce and break even if its total revenue covers its total fixed cost but not its total variable cost. 
D)  produce and earn an economic profit if its total revenue is equal to its total cost. 
A)  not produce if its total revenue does not cover its total cost. 
B)  produce and incur an economic loss if its total revenue covers its total variable cost but not its total cost. 
C)  produce and break even if its total revenue covers its total fixed cost but not its total variable cost. 
D)  produce and earn an economic profit if its total revenue is equal to its total cost.

Exam 12: Perfect Competition

A perfectly competitive firm is producing more than the profit-maximizing amount of its product. You can conclude that its

-In the above table, if the firm sells 5 units of output, its total revenue is

In the long-run equilibrium in a perfectly competitive market, the economic profit of the firms is

In a perfectly competitive market, which of the following determines the market price?

In a perfectly competitive market, technological advances bring ________ economic profits for producers and ________ lower prices for consumers.

Define the shutdown point. Explain why the firm shuts down in the short run if the price falls below this point.

What is the relationship between the price, P, and the average total cost, ATC, for a firm in perfect competition that earns an economic profit? That earns a normal profit? That incurs an economic loss?

-In the above figure, if the price is P1, the firm will produce

A firm that shuts down and produces no output incurs a loss equal to its

If the minimum efficient scale of a firm is small relative to the demand for the good, then

-The figure above shows a firm in a perfectly competitive market. The firm will shut down if price falls below

-The donut market is perfectly competitive. The figure shows the costs of a typical donut producer. In the short run, the donut producer's supply curve is the curve running from point ________ to point E.

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

In the long run, which of the following is present in a perfectly competitive market?

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

If firms in a competitive market are ________ then there is ________ for firms to ________ the industry.

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

The short-run market supply curve for a perfectly competitive market is obtained by summing the part of each firm's

In the short run, a firm will

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 a perfectly competitive market, technological advances bring economic profits for producers and lower prices for consumers.

-In the above figure, if the price is P₁, the firm will produce

-In the above figure, if the price is P₁and the firm produced Q₃, the firm's economic profit is than if it produced Q₁ and than if it produced Q₂.

If firms in a competitive market are then there is for firms to the industry.