Question 1

Exhibit 23-10
  
-Refer to Exhibit 23-10. Is it possible for this firm to produce "too much" output?

Accepted Answer

A)  Any quantity above 2 units is too much. 
B)  Any quantity above 4 units is too much. 
C)  Any quantity above 6 units is too much. 
D)  none of the above 
A)  Any quantity above 2 units is too much. 
B)  Any quantity above 4 units is too much. 
C)  Any quantity above 6 units is too much. 
D)  none of the above

Question 2

Does a real-world market have to meet all the assumptions of the theory of perfect competition before it is considered a perfectly competitive market?

Accepted Answer

A)  No, probably no real-world market meets all the assumptions of the theory of perfect competition. All that is necessary is that a real-world market behave as if it satisfies all the assumptions. 
B)  Yes, if a real-world market does not meet the assumptions, then it cannot be considered a perfectly competitive market. 
C)  Yes, unless it is a new market such as the computer market. New markets are not held to the same assumptions as old, more established markets. 
D)  No, but it does have to meet the assumption of producing and selling a homogeneous product. It does not have to fully meet the other assumptions. 
A)  No, probably no real-world market meets all the assumptions of the theory of perfect competition. All that is necessary is that a real-world market behave as if it satisfies all the assumptions. 
B)  Yes, if a real-world market does not meet the assumptions, then it cannot be considered a perfectly competitive market. 
C)  Yes, unless it is a new market such as the computer market. New markets are not held to the same assumptions as old, more established markets. 
D)  No, but it does have to meet the assumption of producing and selling a homogeneous product. It does not have to fully meet the other assumptions.

Question 3

Exhibit 23-4
  
-Refer to Exhibit 23-4.Where can you find the lowest price that will motivate the firm to produce Q1 in the short run?

Accepted Answer

A)  at the horizontal line running to "ATC" 
B)  at the horizontal line running to "AVC" 
C)  P1 
D)  $0 
A)  at the horizontal line running to "ATC" 
B)  at the horizontal line running to "AVC" 
C)  P1 
D)  $0

Question 4

The profit-maximization rule is as follows:

Accepted Answer

A)  Produce the quantity of output at which price equals average total cost (unit cost). 
B)  Produce as much output as can be sold. 
C)  Produce the quantity of output at which marginal revenue equals marginal cost. 
D)  Produce the quantity of output at which marginal revenue equals unit cost. 
E)  Produce the quantity of output at which total cost is minimized. 
A)  Produce the quantity of output at which price equals average total cost (unit cost). 
B)  Produce as much output as can be sold. 
C)  Produce the quantity of output at which marginal revenue equals marginal cost. 
D)  Produce the quantity of output at which marginal revenue equals unit cost. 
E)  Produce the quantity of output at which total cost is minimized.

Question 5

In the theory of perfect competition,

Accepted Answer

A)  sellers of the product are not influenced by other sellers and therefore have virtually complete control over the production and pricing of their product. 
B)  buyers of the product may have a preference as to whom they purchase from based on brand loyalty. 
C)  buyers and sellers of the product know everything that there is to know about the product. 
D)  it can be quite expensive for a firm to enter this type of market, but once the firm is established, it will be a profitable venture. 
A)  sellers of the product are not influenced by other sellers and therefore have virtually complete control over the production and pricing of their product. 
B)  buyers of the product may have a preference as to whom they purchase from based on brand loyalty. 
C)  buyers and sellers of the product know everything that there is to know about the product. 
D)  it can be quite expensive for a firm to enter this type of market, but once the firm is established, it will be a profitable venture.

Question 6

In order for a firm to continue producing,price must exceed __________ and total revenue must exceed __________.

Accepted Answer

A)  marginal cost, total cost 
B)  ATC; total cost 
C)  AFC; total fixed cost 
D)  AVC; total variable costs 
E)  price; total cost 
A)  marginal cost, total cost 
B)  ATC; total cost 
C)  AFC; total fixed cost 
D)  AVC; total variable costs 
E)  price; total cost

Question 7

If the firm is producing a quantity of output for which MC > MR,then the firm should increase production to increase its profits.

Accepted Answer

A) True 
 B)False

Question 8

For a price taker,market equilibrium price is $100.At 50 units,MR = MC,ATC = $80,and AVC = $70.This price taker will

Accepted Answer

A)  earn $100 profits if it produces 50 units of the good. 
B)  earn $1,000 profits if it produces 50 units. 
C)  shut down its operation and by doing this minimize its losses. 
D)  maximize its profits if it produces fewer than 50 units. 
E)  maximize its profits if it produces more than 50 units. 
A)  earn $100 profits if it produces 50 units of the good. 
B)  earn $1,000 profits if it produces 50 units. 
C)  shut down its operation and by doing this minimize its losses. 
D)  maximize its profits if it produces fewer than 50 units. 
E)  maximize its profits if it produces more than 50 units.

Question 9

Exhibit 23-8
  
-Refer to Exhibit 23-8.What is the profit (loss)of Firm A at the profit-maximizing (or loss-minimizing)level of production?

Accepted Answer

A)  $300 
B)  $270 
C)  $600 
D)  $400 
E)  -$300 
A)  $300 
B)  $270 
C)  $600 
D)  $400 
E)  -$300

Question 10

A perfectly competitive market is initially in long-run competitive equilibrium.Then,market demand increases.This causes existing firms in the market to __________ and __________.As a result of the latter,the market supply curve shifts __________.

Accepted Answer

A)  produce more output; some existing firms to exit the market; leftward 
B)  produce less output; new firms to enter the market; rightward 
C)  produce more output; new firms to enter the market; rightward 
D)  expand their plant size; some existing firms to exit the market; leftward 
E)  none of the above 
A)  produce more output; some existing firms to exit the market; leftward 
B)  produce less output; new firms to enter the market; rightward 
C)  produce more output; new firms to enter the market; rightward 
D)  expand their plant size; some existing firms to exit the market; leftward 
E)  none of the above

Question 11

A perfectly competitive firm will always maximize short-run profits by producing the level of output where average total cost is minimized.

Accepted Answer

A) True 
 B)False

Question 12

In long-run competitive equilibrium P = SRATC,because if P > SRATC

Accepted Answer

A)  losses in the industry would cause some existing firms to exit the industry. 
B)  positive economic profit would attract firms to the industry in order to obtain the profits. 
C)  firms would not be producing the quantity of output at which MR = MC. 
D)  firms would not be covering total fixed costs. 
E)  none of the above 
A)  losses in the industry would cause some existing firms to exit the industry. 
B)  positive economic profit would attract firms to the industry in order to obtain the profits. 
C)  firms would not be producing the quantity of output at which MR = MC. 
D)  firms would not be covering total fixed costs. 
E)  none of the above

Question 13

If,for the last unit of a good produced by a perfectly competitive firm,MR > MC,then in producing that unit the firm

Accepted Answer

A)  added more to total costs than it added to total revenue. 
B)  added more to total revenue than it added to total costs. 
C)  added an equal amount to both total revenue and total costs. 
D)  maximized profits or minimized losses. 
A)  added more to total costs than it added to total revenue. 
B)  added more to total revenue than it added to total costs. 
C)  added an equal amount to both total revenue and total costs. 
D)  maximized profits or minimized losses.

Question 14

Which of the following is not a characteristic of perfect competition?

Accepted Answer

A)  buyers and sellers having no influence on price 
B)  no barriers to entry and exit 
C)  a heterogeneous product 
D)  buyers and sellers having all relevant information 
E)  none of the above 
A)  buyers and sellers having no influence on price 
B)  no barriers to entry and exit 
C)  a heterogeneous product 
D)  buyers and sellers having all relevant information 
E)  none of the above

Question 15

If a market comes close to meeting (but does not perfectly meet)all the assumptions of the theory of perfect competition,it follows that

Accepted Answer

A)  the market is not perfectly competitive. 
B)  the theory of perfect competition still may be able to predict behavior in the market. 
C)  firms in the market cannot be price takers. 
D)  firms in the market do not try to maximize profit. 
E)  a and c 
A)  the market is not perfectly competitive. 
B)  the theory of perfect competition still may be able to predict behavior in the market. 
C)  firms in the market cannot be price takers. 
D)  firms in the market do not try to maximize profit. 
E)  a and c

Question 16

In long-run competitive equilibrium,the market equilibrium price equals

Accepted Answer

A)  marginal cost. 
B)  short-run average total cost. 
C)  long-run average total cost. 
D)  a and c 
E)  a, b, and c 
A)  marginal cost. 
B)  short-run average total cost. 
C)  long-run average total cost. 
D)  a and c 
E)  a, b, and c

Question 17

Exhibit 23-1
  
-Refer to Exhibit 23-1.The data in this table are relevant to a perfectly competitive firm because

Accepted Answer

A)  its total revenue is different at different levels of quantities sold. 
B)  its total revenue is the same at all levels of quantities sold. 
C)  it doesn't have to lower price to sell additional units of the product. 
D)  marginal revenue is greater than price. 
A)  its total revenue is different at different levels of quantities sold. 
B)  its total revenue is the same at all levels of quantities sold. 
C)  it doesn't have to lower price to sell additional units of the product. 
D)  marginal revenue is greater than price.

Question 18

Exhibit 23-1
  
-Refer to Exhibit 23-1.The dollar amounts that go in blanks (C)and (D)are,respectively,

Accepted Answer

A)  $1 and $12. 
B)  $12 and $12. 
C)  $8.58 and $8.67. 
D)  $4 and $3. 
A)  $1 and $12. 
B)  $12 and $12. 
C)  $8.58 and $8.67. 
D)  $4 and $3.

Question 19

Describe how profit serves as both an incentive for individuals to produce and as a signal.

Accepted Answer

Profit is an incentive because it motiva

Question 20

Which of the following is false?

Accepted Answer

A)  If a perfectly competitive firm produces the quantity of output at which MR = MC, it follows that the firm may or may not be earning a profit. 
B)  The firm's supply curve is that portion of its AVC curve that lies above its MC curve. 
C)  If price is above ATC at the quantity of output at which MR = MC, the firm will be earning a profit. 
D)  In long-run competitive equilibrium, price is equal to marginal cost. 
A)  If a perfectly competitive firm produces the quantity of output at which MR = MC, it follows that the firm may or may not be earning a profit. 
B)  The firm's supply curve is that portion of its AVC curve that lies above its MC curve. 
C)  If price is above ATC at the quantity of output at which MR = MC, the firm will be earning a profit. 
D)  In long-run competitive equilibrium, price is equal to marginal cost.

Exam 23: Perfect Competition

Exhibit 23-10 -Refer to Exhibit 23-10. Is it possible for this firm to produce "too much" output?

Does a real-world market have to meet all the assumptions of the theory of perfect competition before it is considered a perfectly competitive market?

Exhibit 23-4 -Refer to Exhibit 23-4.Where can you find the lowest price that will motivate the firm to produce Q1 in the short run?

The profit-maximization rule is as follows:

In the theory of perfect competition,

In order for a firm to continue producing,price must exceed __________ and total revenue must exceed __________.

If the firm is producing a quantity of output for which MC > MR,then the firm should increase production to increase its profits.

For a price taker,market equilibrium price is $100.At 50 units,MR = MC,ATC = $80,and AVC = $70.This price taker will

Exhibit 23-8 -Refer to Exhibit 23-8.What is the profit (loss)of Firm A at the profit-maximizing (or loss-minimizing)level of production?

A perfectly competitive market is initially in long-run competitive equilibrium.Then,market demand increases.This causes existing firms in the market to __________ and __________.As a result of the latter,the market supply curve shifts __________.

A perfectly competitive firm will always maximize short-run profits by producing the level of output where average total cost is minimized.

In long-run competitive equilibrium P = SRATC,because if P > SRATC

If,for the last unit of a good produced by a perfectly competitive firm,MR > MC,then in producing that unit the firm

Which of the following is not a characteristic of perfect competition?

If a market comes close to meeting (but does not perfectly meet)all the assumptions of the theory of perfect competition,it follows that

In long-run competitive equilibrium,the market equilibrium price equals

Exhibit 23-1 -Refer to Exhibit 23-1.The data in this table are relevant to a perfectly competitive firm because

Exhibit 23-1 -Refer to Exhibit 23-1.The dollar amounts that go in blanks (C)and (D)are,respectively,

Describe how profit serves as both an incentive for individuals to produce and as a signal.

Which of the following is false?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand: Theory

Prices: Free, Controlled, and Relative

Supply, Demand, and Price: Applications

Macroeconomic Measurements: Prices and Unemployment

Macroeconomic Measurements: GDP and Real GDP

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability: A Critique of the Self-Regulating Economy

Fiscal Policy and the Federal Budget

Money, Banking,and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth: Resources, Technology, Ideas, and Institutions

The Financial Crisis of 2007-2009

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice: Maximizing Utility and Behavioral Economics

Production and Costs

Monopoly

Monopolistic Competition, Oligopoly, and Game Theory

Government and Product Markets: Antitrust and Regulation

Factor Markets: With Emphasis on the Labor Market

Wages,Unions,and Labor

The Distribution of Income and Poverty

Interest, Rent, and Profit

Market Failure: Externalities, Public Goods, and Asymmetric Information

Public Choice and Special-Interest-Group Politics

Building Theories to Explain Everyday Life: From Observations to Questions to Theories to Predictions

International Trade

International Finance

Globalization and International Impacts on the Economy

The Economic Case For and Against Government: Five Topics Considered

Stocks, Bonds, Futures, and Options

Agriculture: Problems, Policies, and Unintended Effects

Filters

Exhibit 23-4 -Refer to Exhibit 23-4.Where can you find the lowest price that will motivate the firm to produce Q₁ in the short run?

In order for a firm to continue producing,price must exceed and total revenue must exceed .

A perfectly competitive market is initially in long-run competitive equilibrium.Then,market demand increases.This causes existing firms in the market to and .As a result of the latter,the market supply curve shifts __.