Question 1

In a perfectly competitive market, the demand curve faced by an individual firm is:

Accepted Answer

A)  perfectly inelastic. 
B)  relatively inelastic. 
C)  perfectly elastic. 
D)  relatively elastic. 
A)  perfectly inelastic. 
B)  relatively inelastic. 
C)  perfectly elastic. 
D)  relatively elastic. C

Question 2

In a perfectly competitive market, economic forces are controlled by government policy makers.

Accepted Answer

A) True 
 B)False  False

Question 3

Based on the information shown, a perfectly competitive profit-maximizing firm would produce: $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \text { Total Cost } & \text { Tatal Revenue } \
\hline 10 & \$ 25 & 50 \
\hline 20 & 60 & 100 \
\hline 30 & 105 & 150 \
\hline 40 & 160 & 200 \
\hline
\end{array}$$

Accepted Answer

A)  10 units of output. 
B)  20 units of output. 
C)  30 units of output. 
D)  40 units of output. 
A)  10 units of output. 
B)  20 units of output. 
C)  30 units of output. 
D)  40 units of output. C

Question 4

The existence of positive economic profits induces firms to:

Accepted Answer

A)  enter an industry, which shifts the market supply curve to the left and decreases market price. 
B)  enter an industry, which shifts the market supply curve to the right and increases market price. 
C)  exit an industry, which shifts the market supply curve to the right and decreases market price. 
D)  enter an industry, which shifts the market supply curve to the right and decreases market price. 
A)  enter an industry, which shifts the market supply curve to the left and decreases market price. 
B)  enter an industry, which shifts the market supply curve to the right and increases market price. 
C)  exit an industry, which shifts the market supply curve to the right and decreases market price. 
D)  enter an industry, which shifts the market supply curve to the right and decreases market price.

Question 5

Assume the smart watch industry is a perfectly competitive industry that uses a specialized input. If this industry experiences an increase in demand, we might expect that in the long run:

Accepted Answer

A)  both input and output prices will increase. 
B)  only input prices will increase. 
C)  only output prices will increase. 
D)  neither input nor output prices will increase. 
A)  both input and output prices will increase. 
B)  only input prices will increase. 
C)  only output prices will increase. 
D)  neither input nor output prices will increase.

Question 6

Refer to the graph shown. If the market price is P2, the firm will produce:

Accepted Answer

A)  Q2 and incur a loss. 
B)  Q3 and earn a profit. 
C)  Q3 and break even. 
D)  Q4 and incur a loss. 
A)  Q2 and incur a loss. 
B)  Q3 and earn a profit. 
C)  Q3 and break even. 
D)  Q4 and incur a loss.

Question 7

Refer to the graph shown. If the firm is producing 250 units of output, profit is equal to:

Accepted Answer

A)  $38. 
B)  -$38. 
C)  $0. 
D)  $30. 
A)  $38. 
B)  -$38. 
C)  $0. 
D)  $30.

Question 8

The supply curve of a perfectly competitive firm is:

Accepted Answer

A)  the marginal cost curve only if price exceeds average variable cost. 
B)  the marginal cost curve only if price exceeds average total cost. 
C)  the average total cost curve only if price exceeds average variable cost. 
D)  nonexistent. 
A)  the marginal cost curve only if price exceeds average variable cost. 
B)  the marginal cost curve only if price exceeds average total cost. 
C)  the average total cost curve only if price exceeds average variable cost. 
D)  nonexistent.

Question 9

Refer to the graph shown. If the firm increases output from 30 to 40, total revenue will increase:

Accepted Answer

A)  more than total cost, and so profit will increase. 
B)  more than total cost, and so profit will decrease. 
C)  less than total cost, and so profit will increase. 
D)  less than total cost, and so profit will decrease. 
A)  more than total cost, and so profit will increase. 
B)  more than total cost, and so profit will decrease. 
C)  less than total cost, and so profit will increase. 
D)  less than total cost, and so profit will decrease.

Question 10

Refer to the graph shown. If market price is currently $3.00 per unit, this perfectly competitive firm will maximize profit by producing:

Accepted Answer

A)  450 units of output. 
B)  650 units of output. 
C)  850 units of output. 
D)  between 550 and 650 units of output. 
A)  450 units of output. 
B)  650 units of output. 
C)  850 units of output. 
D)  between 550 and 650 units of output.

Question 11

Refer to the graph shown. The marginal cost of producing the 60th unit is:

Accepted Answer

A)  $6.50. 
B)  $5.00. 
C)  $3.00. 
D)  $3.50. 
A)  $6.50. 
B)  $5.00. 
C)  $3.00. 
D)  $3.50.

Question 12

Refer to the graph shown, which depicts a perfectly competitive firm. When maximizing profit, the firm represented will earn per-unit profit roughly equal to:

Accepted Answer

A)  $2.00. 
B)  $5. 
C)  $7.50 
D)  $10. 
A)  $2.00. 
B)  $5. 
C)  $7.50 
D)  $10.

Question 13

A perfectly competitive firm will be profitable if price at the profit-maximizing quantity is above:

Accepted Answer

A)  MC. 
B)  AVC. 
C)  ATC. 
D)  AFC. 
A)  MC. 
B)  AVC. 
C)  ATC. 
D)  AFC.

Question 14

Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand decreases from D0 to D1, the firm will:

Accepted Answer

A)  raise the price it charges. 
B)  earn negative economic profit in the short run. 
C)  earn positive economic profit in the short run. 
D)  earn positive economic profit in the long run. 
A)  raise the price it charges. 
B)  earn negative economic profit in the short run. 
C)  earn positive economic profit in the short run. 
D)  earn positive economic profit in the long run.

Question 15

Refer to the graph shown. Assuming that the industry operates under conditions of perfect competition and that the cost curves do not shift, the price of construction in a long-run competitive equilibrium will be:

Accepted Answer

A)  $60 per square foot. 
B)  $55 per square foot. 
C)  $50 per square foot. 
D)  In the long run no construction will be supplied at any price. 
A)  $60 per square foot. 
B)  $55 per square foot. 
C)  $50 per square foot. 
D)  In the long run no construction will be supplied at any price.

Question 16

If a perfectly competitive firm finds that price is less than average variable cost, it should:

Accepted Answer

A)  not adjust output if marginal cost equals price. 
B)  shut down immediately. 
C)  increase output until price equals marginal cost. 
D)  decrease output until price equals marginal cost. 
A)  not adjust output if marginal cost equals price. 
B)  shut down immediately. 
C)  increase output until price equals marginal cost. 
D)  decrease output until price equals marginal cost.

Question 17

Refer to the graph shown. If the firm is producing 525 units of output, profit is equal to:

Accepted Answer

A)  $38. 
B)  −$38. 
C)  $0. 
D)  $30. 
A)  $38. 
B)  −$38. 
C)  $0. 
D)  $30.

Question 18

Refer to the graph shown. Assuming that the industry operates under conditions of perfect competition and that the firms seek to maximize profits, this firm will:

Accepted Answer

A)  produce 800 square feet of construction per month in the short run. 
B)  produce 1,000 square feet of construction per month in the short run. 
C)  produce 1,200 square feet of construction in the short run. 
D)  incur economic losses in the short run. 
A)  produce 800 square feet of construction per month in the short run. 
B)  produce 1,000 square feet of construction per month in the short run. 
C)  produce 1,200 square feet of construction in the short run. 
D)  incur economic losses in the short run.

Question 19

Long-run competitive equilibrium in an industry implies that no firm:

Accepted Answer

A)  is earning a normal profit. 
B)  is producing at the output level where price equals long-run average total cost. 
C)  has an incentive to enter or exit the industry. 
D)  is earning accounting profits. 
A)  is earning a normal profit. 
B)  is producing at the output level where price equals long-run average total cost. 
C)  has an incentive to enter or exit the industry. 
D)  is earning accounting profits.

Question 20

Refer to the graph shown, which depicts a perfectly competitive firm. If the price of the product is $8 and the firm maximizes profit:

Accepted Answer

A)  the firm will earn economic profits of more than $330 per day. 
B)  average cost of the product will be at the minimum possible level. 
C)  output will be 100 units per day. 
D)  the industry will be in long-run equilibrium. 
A)  the firm will earn economic profits of more than $330 per day. 
B)  average cost of the product will be at the minimum possible level. 
C)  output will be 100 units per day. 
D)  the industry will be in long-run equilibrium.

Exam 13: Perfect Competition

In a perfectly competitive market, the demand curve faced by an individual firm is:

In a perfectly competitive market, economic forces are controlled by government policy makers.

Based on the information shown, a perfectly competitive profit-maximizing firm would produce: Quantity Total Cost Tatal Revenue 10 \ 25 50 20 60 100 30 105 150 40 160 200

The existence of positive economic profits induces firms to:

Assume the smart watch industry is a perfectly competitive industry that uses a specialized input. If this industry experiences an increase in demand, we might expect that in the long run:

Refer to the graph shown. If the market price is P2, the firm will produce:

Refer to the graph shown. If the firm is producing 250 units of output, profit is equal to:

The supply curve of a perfectly competitive firm is:

Refer to the graph shown. If the firm increases output from 30 to 40, total revenue will increase:

Refer to the graph shown. If market price is currently $3.00 per unit, this perfectly competitive firm will maximize profit by producing:

Refer to the graph shown. The marginal cost of producing the 60th unit is:

Refer to the graph shown, which depicts a perfectly competitive firm. When maximizing profit, the firm represented will earn per-unit profit roughly equal to:

A perfectly competitive firm will be profitable if price at the profit-maximizing quantity is above:

Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand decreases from D0 to D1, the firm will:

Refer to the graph shown. Assuming that the industry operates under conditions of perfect competition and that the cost curves do not shift, the price of construction in a long-run competitive equilibrium will be:

If a perfectly competitive firm finds that price is less than average variable cost, it should:

Refer to the graph shown. If the firm is producing 525 units of output, profit is equal to:

Refer to the graph shown. Assuming that the industry operates under conditions of perfect competition and that the firms seek to maximize profits, this firm will:

Long-run competitive equilibrium in an industry implies that no firm:

Refer to the graph shown, which depicts a perfectly competitive firm. If the price of the product is $8 and the firm maximizes profit:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Filters

Refer to the graph shown. If the market price is P₂, the firm will produce:

Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand decreases from D₀ to D₁, the firm will: