Question 1

Ultimately,market supply curves are upward sloping because of

Accepted Answer

A)  the law of diminishing marginal returns. 
B)  economies of scale. 
C)  average fixed cost falling continually as more output is produced. 
D)  the law of the short run marginal cost curve. 
E)  specialization. 
A)  the law of diminishing marginal returns. 
B)  economies of scale. 
C)  average fixed cost falling continually as more output is produced. 
D)  the law of the short run marginal cost curve. 
E)  specialization.

Question 2

Exhibit 23-10
  
-Refer to Exhibit 23-10. What is the marginal revenue and marginal cost,respectively,of the 7th unit of output?

Accepted Answer

A)  $25 and $25 
B)  $30 and $20 
C)  $25 and $15 
D)  $25 and $30 
E)  There is not enough information to answer this question. 
A)  $25 and $25 
B)  $30 and $20 
C)  $25 and $15 
D)  $25 and $30 
E)  There is not enough information to answer this question.

Question 3

The theory of perfect competition generally assumes that

Accepted Answer

A)  sellers act independently of other sellers, but buyers do not act independently of other buyers. 
B)  buyers act independently of other buyers, but sellers do not act independently of other sellers. 
C)  buyers and sellers act independently of other buyers and sellers. 
D)  neither buyers nor sellers act independently of other buyers and sellers. 
A)  sellers act independently of other sellers, but buyers do not act independently of other buyers. 
B)  buyers act independently of other buyers, but sellers do not act independently of other sellers. 
C)  buyers and sellers act independently of other buyers and sellers. 
D)  neither buyers nor sellers act independently of other buyers and sellers.

Question 4

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

Accepted Answer

A)  $1 and $12. 
B)  $12 and $12. 
C)  $8.42 and $8.50. 
D)  $12 and $6. 
A)  $1 and $12. 
B)  $12 and $12. 
C)  $8.42 and $8.50. 
D)  $12 and $6.

Question 5

Exhibit 23-8
  
-Refer to Exhibit 23-8.What is the total cost for Firm A at the profit-maximizing level of production?

Accepted Answer

A)  $300 
B)  $700 
C)  $1,000 
D)  $400 
A)  $300 
B)  $700 
C)  $1,000 
D)  $400

Question 6

In the short-run,if P < ATC,a perfectly competitive firm should

Accepted Answer

A)  increase production to the output level at which P = ATC. 
B)  continue producing at a loss. 
C)  shut down. 
D)  continue producing at a profit. 
E)  There is not enough information to answer the question. 
A)  increase production to the output level at which P = ATC. 
B)  continue producing at a loss. 
C)  shut down. 
D)  continue producing at a profit. 
E)  There is not enough information to answer the question.

Question 7

In long-run equilibrium,the perfectly competitive firm earns __________ economic profits.

Accepted Answer

A)  positive 
B)  zero 
C)  negative 
D)  any of the above 
A)  positive 
B)  zero 
C)  negative 
D)  any of the above

Question 8

Is it possible for a perfectly competitive firm to be maximizing profits,but not achieving resource allocative efficiency?

Accepted Answer

A)  Definitely yes, because it is impossible to achieve both at the same time. 
B)  Yes, it is possible, but it is not possible to minimize losses without also achieving resource allocative efficiency. 
C)  No, it is not possible, because the output at which MR = MC is also the output at which P = MC. 
D)  There is not enough information to answer this question. 
A)  Definitely yes, because it is impossible to achieve both at the same time. 
B)  Yes, it is possible, but it is not possible to minimize losses without also achieving resource allocative efficiency. 
C)  No, it is not possible, because the output at which MR = MC is also the output at which P = MC. 
D)  There is not enough information to answer this question.

Question 9

The U.S.Postal Service earns a __________________ profit per unit on its commemorative stamps than it does on its standard stamps because the ________________ cost is lower on the commemorative stamps.

Accepted Answer

A)  higher; average variable 
B)  lower; average variable 
C)  higher; average fixed 
D)  lower; average fixed 
A)  higher; average variable 
B)  lower; average variable 
C)  higher; average fixed 
D)  lower; average fixed

Question 10

Exhibit 23-1
  
-Refer to Exhibit 23-1.The marginal revenue curve represented by the information in this table is

Accepted Answer

A)  downward-sloping. 
B)  upward-sloping. 
C)  horizontal. 
D)  vertical. 
A)  downward-sloping. 
B)  upward-sloping. 
C)  horizontal. 
D)  vertical.

Question 11

In long-run competitive equilibrium SRATC = LRATC,because if SRATC > LRATC (at the quantity of output at which MR = MC)firms would

Accepted Answer

A)  have an incentive to change their plant size to produce their current output. 
B)  not be covering their total fixed costs. 
C)  not be covering their total variable costs. 
D)  a and b 
E)  b and c 
A)  have an incentive to change their plant size to produce their current output. 
B)  not be covering their total fixed costs. 
C)  not be covering their total variable costs. 
D)  a and b 
E)  b and c

Question 12

Exhibit 23-4
  
-Refer to Exhibit 23-4.Equilibrium price is P1,and the firm produces Q1.At this level of output,average variable cost and average total cost are indicated by the dots.Given this situation,the firm is

Accepted Answer

A)  receiving a profit equal to area 3. 
B)  taking a loss equal to areas 2 + 3. 
C)  earning total revenue equal to areas 1 + 2. 
D)  receiving a profit equal to area 2. 
E)  none of the above 
A)  receiving a profit equal to area 3. 
B)  taking a loss equal to areas 2 + 3. 
C)  earning total revenue equal to areas 1 + 2. 
D)  receiving a profit equal to area 2. 
E)  none of the above

Question 13

In a perfectly competitive market,firms face no barriers to entry or exit.

Accepted Answer

A) True 
 B)False

Question 14

Exhibit 23-8
  
-Refer to Exhibit 23-8.What is the total cost of Firm B at the profit-maximizing level of production?

Accepted Answer

A)  $11 
B)  $750 
C)  $1,650 
D)  $400 
A)  $11 
B)  $750 
C)  $1,650 
D)  $400

Question 15

If an industry advertises,then it

Accepted Answer

A)  is definitely not a perfectly competitive industry. 
B)  must be a perfectly competitive industry. 
C)  may or may not be a perfectly competitive industry. 
D)  is not using its resources wisely. 
E)  will surely be able to increase its sales. 
A)  is definitely not a perfectly competitive industry. 
B)  must be a perfectly competitive industry. 
C)  may or may not be a perfectly competitive industry. 
D)  is not using its resources wisely. 
E)  will surely be able to increase its sales.

Question 16

A seller is a price taker.This means that the seller sells his product at the price

Accepted Answer

A)  he chooses. 
B)  determined in the market. 
C)  determined by the biggest firm in the market. 
D)  determined by the largest consumer in the market. 
E)  none of the above 
A)  he chooses. 
B)  determined in the market. 
C)  determined by the biggest firm in the market. 
D)  determined by the largest consumer in the market. 
E)  none of the above

Question 17

If,for a perfectly competitive firm,price is greater than average variable cost,then it follows that

Accepted Answer

A)  total revenue is greater than total cost. 
B)  total revenue is greater than total variable cost. 
C)  the firm will lose more or earn less by shutting down in the short run than by continuing to produce. 
D)  b and c 
E)  There is not enough information to answer the question. 
A)  total revenue is greater than total cost. 
B)  total revenue is greater than total variable cost. 
C)  the firm will lose more or earn less by shutting down in the short run than by continuing to produce. 
D)  b and c 
E)  There is not enough information to answer the question.

Question 18

An increasing-cost industry is characterized by

Accepted Answer

A)  an upward-sloping long-run supply curve. 
B)  a downward-sloping long-run supply curve. 
C)  a perfectly elastic long-run supply curve. 
D)  perfectly elastic short-run and long-run supply curves. 
E)  a perfectly elastic short-run supply curve and an upward-sloping long-run supply curve. 
A)  an upward-sloping long-run supply curve. 
B)  a downward-sloping long-run supply curve. 
C)  a perfectly elastic long-run supply curve. 
D)  perfectly elastic short-run and long-run supply curves. 
E)  a perfectly elastic short-run supply curve and an upward-sloping long-run supply curve.

Question 19

Consider the following data: equilibrium price = $9,quantity of output produced = 1,000 units,average total cost = $7,and average variable cost $5.Given this,total revenue is __________,total cost is __________,and total fixed cost is __________.

Accepted Answer

A)  $6,000; $8,000; $1,000 
B)  $9,000; $7,000; $5,000 
C)  $10,000; $8,000; $3,000 
D)  $9,000; $7,000; $2,000 
E)  none of the above 
A)  $6,000; $8,000; $1,000 
B)  $9,000; $7,000; $5,000 
C)  $10,000; $8,000; $3,000 
D)  $9,000; $7,000; $2,000 
E)  none of the above

Question 20

Equilibrium price is $10 in a perfectly competitive market.For a perfectly competitive firm,MR = MC at 1,200 units of output.At 1,200 units,ATC is $23,and AVC is $18.The best policy for this firm is to __________ in the short run.Also,this firm earns __________ of __________ if it produces and sells 1,200 units.

Accepted Answer

A)  shut down; losses; $15,600 
B)  shut down; losses; $9,600 
C)  continue to produce; losses; $15,600 
D)  continue to produce; profits; $15,600 
A)  shut down; losses; $15,600 
B)  shut down; losses; $9,600 
C)  continue to produce; losses; $15,600 
D)  continue to produce; profits; $15,600

Exam 23: Perfect Competition

Ultimately,market supply curves are upward sloping because of

Exhibit 23-10 -Refer to Exhibit 23-10. What is the marginal revenue and marginal cost,respectively,of the 7th unit of output?

The theory of perfect competition generally assumes that

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

Exhibit 23-8 -Refer to Exhibit 23-8.What is the total cost for Firm A at the profit-maximizing level of production?

In the short-run,if P < ATC,a perfectly competitive firm should

In long-run equilibrium,the perfectly competitive firm earns __________ economic profits.

Is it possible for a perfectly competitive firm to be maximizing profits,but not achieving resource allocative efficiency?

The U.S.Postal Service earns a __________________ profit per unit on its commemorative stamps than it does on its standard stamps because the ________________ cost is lower on the commemorative stamps.

Exhibit 23-1 -Refer to Exhibit 23-1.The marginal revenue curve represented by the information in this table is

In long-run competitive equilibrium SRATC = LRATC,because if SRATC > LRATC (at the quantity of output at which MR = MC)firms would

Exhibit 23-4 -Refer to Exhibit 23-4.Equilibrium price is P1,and the firm produces Q1.At this level of output,average variable cost and average total cost are indicated by the dots.Given this situation,the firm is

In a perfectly competitive market,firms face no barriers to entry or exit.

Exhibit 23-8 -Refer to Exhibit 23-8.What is the total cost of Firm B at the profit-maximizing level of production?

If an industry advertises,then it

A seller is a price taker.This means that the seller sells his product at the price

If,for a perfectly competitive firm,price is greater than average variable cost,then it follows that

An increasing-cost industry is characterized by

Consider the following data: equilibrium price = $9,quantity of output produced = 1,000 units,average total cost = $7,and average variable cost $5.Given this,total revenue is __________,total cost is __________,and total fixed cost is __________.

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

The U.S.Postal Service earns a __ profit per unit on its commemorative stamps than it does on its standard stamps because the cost is lower on the commemorative stamps.

Exhibit 23-4 -Refer to Exhibit 23-4.Equilibrium price is P₁,and the firm produces Q₁.At this level of output,average variable cost and average total cost are indicated by the dots.Given this situation,the firm is

Consider the following data: equilibrium price = $9,quantity of output produced = 1,000 units,average total cost = $7,and average variable cost $5.Given this,total revenue is ,total cost is ,and total fixed cost is __.