Question 1

Suppose a perfectly competitive firm can increase its profits by increasing its output. Then it must be true that the firm's:

Accepted Answer

A)  marginal revenue is less than its marginal cost. 
B)  price exceeds its marginal revenue. 
C)  price exceeds its marginal cost. 
D)  marginal cost exceeds its marginal revenue. 
A)  marginal revenue is less than its marginal cost. 
B)  price exceeds its marginal revenue. 
C)  price exceeds its marginal cost. 
D)  marginal cost exceeds its marginal revenue.

Question 2

Refer to the graph shown. Suppose that the market price is $5. At this price, a perfectly competitive firm should:

Accepted Answer

A)  continue to produce in the short run but shut down in the long run. 
B)  continue to produce in both the short run and the long run. 
C)  shut down in the short run but continue production in the long run. 
D)  shut down immediately. 
A)  continue to produce in the short run but shut down in the long run. 
B)  continue to produce in both the short run and the long run. 
C)  shut down in the short run but continue production in the long run. 
D)  shut down immediately.

Question 3

Refer to the following graph.   The perfectly competitive firm depicted is currently:

Accepted Answer

A)  earning positive economic profit. 
B)  earning zero economic profit. 
C)  incurring a loss, but the loss is smaller than it would be if the firm shut down. 
D)  incurring a loss that is larger than total fixed cost, and so the firm should shut down. 
A)  earning positive economic profit. 
B)  earning zero economic profit. 
C)  incurring a loss, but the loss is smaller than it would be if the firm shut down. 
D)  incurring a loss that is larger than total fixed cost, and so the firm should shut down.

Question 4

The profit-maximizing output level minimizes average total cost.

Accepted Answer

A) True 
 B)False

Question 5

When the electronics retailer Circuit City closed its stores following the 2008 recession, the market supply of electronic goods:

Accepted Answer

A)  decreased, causing the market price to fall. 
B)  decreased, causing the market price to rise. 
C)  increased, causing the market price to fall. 
D)  increased, causing the market price to rise. 
A)  decreased, causing the market price to fall. 
B)  decreased, causing the market price to rise. 
C)  increased, causing the market price to fall. 
D)  increased, causing the market price to rise.

Question 6

Refer to the graph shown. Suppose the market price is $3. At this price, a perfectly competitive firm should:

Accepted Answer

A)  continue to produce in the short run but shut down in the long run. 
B)  continue to produce in both the short run and the long run. 
C)  shut down in the short run but continue production in the long run. 
D)  shut down immediately. 
A)  continue to produce in the short run but shut down in the long run. 
B)  continue to produce in both the short run and the long run. 
C)  shut down in the short run but continue production in the long run. 
D)  shut down immediately.

Question 7

Refer to the graph shown. The supply curve for the perfectly competitive firm is best represented by the segment:

Accepted Answer

A)  AB. 
B)  BD. 
C)  CE. 
D)  DE. 
A)  AB. 
B)  BD. 
C)  CE. 
D)  DE.

Question 8

Refer to the graph shown. Other things equal, an increase in the market price of this product will cause:

Accepted Answer

A)  an increase in total revenue and a decrease in the firm's profit-maximizing level of output. 
B)  an increase in total revenue and an increase in the firm's profit-maximizing level of output. 
C)  a decrease in total revenue and a decrease in the firm's profit-maximizing level of output. 
D)  a decrease in total revenue and an increase in the firm's profit-maximizing level of output. 
A)  an increase in total revenue and a decrease in the firm's profit-maximizing level of output. 
B)  an increase in total revenue and an increase in the firm's profit-maximizing level of output. 
C)  a decrease in total revenue and a decrease in the firm's profit-maximizing level of output. 
D)  a decrease in total revenue and an increase in the firm's profit-maximizing level of output.

Question 9

Long-run competitive equilibrium requires:

Accepted Answer

A)  average costs to be zero for all firms in the industry. 
B)  price to be zero for all firms in the industry. 
C)  economic profits to be zero for all firms in the industry. 
D)  accounting profits to be zero for all firms in the industry. 
A)  average costs to be zero for all firms in the industry. 
B)  price to be zero for all firms in the industry. 
C)  economic profits to be zero for all firms in the industry. 
D)  accounting profits to be zero for all firms in the industry.

Question 10

The profit-maximizing condition for a perfectly competitive firm is:

Accepted Answer

A)  MR = P. 
B)  MR = AVC. 
C)  P = MC. 
D)  P = AVC. 
A)  MR = P. 
B)  MR = AVC. 
C)  P = MC. 
D)  P = AVC.

Question 11

Suppose there are 200 firms in a perfectly competitive market and each maximizes profit at 120 units of output when market price is $5.00 per unit. One of the points on the market supply curve must be at:

Accepted Answer

A)  Price = $5 and Quantity supplied = 320. 
B)  Price = $5 and Quantity supplied = 24,000. 
C)  Price = $1,000 and Quantity supplied = 320. 
D)  Price = $1,000 and Quantity supplied = 24,000. 
A)  Price = $5 and Quantity supplied = 320. 
B)  Price = $5 and Quantity supplied = 24,000. 
C)  Price = $1,000 and Quantity supplied = 320. 
D)  Price = $1,000 and Quantity supplied = 24,000.

Question 12

To maximize profits, a perfectly competitive firm should produce until:

Accepted Answer

A)  price is greater than average total cost. 
B)  marginal cost is equal to price. 
C)  average total cost is minimized. 
D)  per unit profits are maximized. 
A)  price is greater than average total cost. 
B)  marginal cost is equal to price. 
C)  average total cost is minimized. 
D)  per unit profits are maximized.

Question 13

Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand is D0:

Accepted Answer

A)  this market is in long-run equilibrium because the firm is earning positive economic profit. 
B)  this market is in long-run equilibrium because the firm is earning zero economic profit. 
C)  this market is in short-run equilibrium but not long-run equilibrium. 
D)  the firm will raise the price above P0 to increase profit. 
A)  this market is in long-run equilibrium because the firm is earning positive economic profit. 
B)  this market is in long-run equilibrium because the firm is earning zero economic profit. 
C)  this market is in short-run equilibrium but not long-run equilibrium. 
D)  the firm will raise the price above P0 to increase profit.

Question 14

Refer to the following graph.   The perfectly competitive firm depicted is currently:

Accepted Answer

A)  earning positive economic profit. 
B)  earning zero economic profit. 
C)  incurring a loss, but the loss is smaller than the firm's total fixed cost. 
D)  incurring a loss that is larger than total fixed cost, and so the firm should shut down. 
A)  earning positive economic profit. 
B)  earning zero economic profit. 
C)  incurring a loss, but the loss is smaller than the firm's total fixed cost. 
D)  incurring a loss that is larger than total fixed cost, and so the firm should shut down.

Question 15

Refer to the graph shown. To maximize profit, this perfectly competitive firm should produce:

Accepted Answer

A)  30 units of output. 
B)  40 units of output. 
C)  50 units of output. 
D)  60 units of output. 
A)  30 units of output. 
B)  40 units of output. 
C)  50 units of output. 
D)  60 units of output.

Question 16

Refer to the following graphs.   Which graph depicts a perfectly competitive firm that will minimize short-run losses by producing zero output?

Accepted Answer

A)  Graph I 
B)  Graph II 
C)  Graph III 
D)  Graph IV 
A)  Graph I 
B)  Graph II 
C)  Graph III 
D)  Graph IV

Question 17

Refer to the graph shown, which depicts a perfectly competitive firm. When it is maximizing profit, the total profit earned by the firm represented is:

Accepted Answer

A)  $220. 
B)  $275. 
C)  $330. 
D)  $605. 
A)  $220. 
B)  $275. 
C)  $330. 
D)  $605.

Suppose a perfectly competitive firm can increase its profits by increasing its output. Then it must be true that the firm's:

Refer to the graph shown. Suppose that the market price is $5. At this price, a perfectly competitive firm should:

Refer to the following graph. The perfectly competitive firm depicted is currently:

The profit-maximizing output level minimizes average total cost.

When the electronics retailer Circuit City closed its stores following the 2008 recession, the market supply of electronic goods:

Refer to the graph shown. Suppose the market price is $3. At this price, a perfectly competitive firm should:

Refer to the graph shown. The supply curve for the perfectly competitive firm is best represented by the segment:

Refer to the graph shown. Other things equal, an increase in the market price of this product will cause:

Long-run competitive equilibrium requires:

The profit-maximizing condition for a perfectly competitive firm is:

Suppose there are 200 firms in a perfectly competitive market and each maximizes profit at 120 units of output when market price is $5.00 per unit. One of the points on the market supply curve must be at:

To maximize profits, a perfectly competitive firm should produce until:

Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand is D₀:

Refer to the following graph. The perfectly competitive firm depicted is currently:

Refer to the graph shown. To maximize profit, this perfectly competitive firm should produce:

Refer to the following graphs. Which graph depicts a perfectly competitive firm that will minimize short-run losses by producing zero output?

Refer to the graph shown, which depicts a perfectly competitive firm. When it is maximizing profit, the total profit earned by the firm represented is:

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

Exam 13: Perfect Competition

Suppose a perfectly competitive firm can increase its profits by increasing its output. Then it must be true that the firm's:

Refer to the graph shown. Suppose that the market price is $5. At this price, a perfectly competitive firm should:

Refer to the following graph. The perfectly competitive firm depicted is currently:

The profit-maximizing output level minimizes average total cost.

When the electronics retailer Circuit City closed its stores following the 2008 recession, the market supply of electronic goods:

Refer to the graph shown. Suppose the market price is $3. At this price, a perfectly competitive firm should:

Refer to the graph shown. The supply curve for the perfectly competitive firm is best represented by the segment:

Refer to the graph shown. Other things equal, an increase in the market price of this product will cause:

Long-run competitive equilibrium requires:

The profit-maximizing condition for a perfectly competitive firm is:

Suppose there are 200 firms in a perfectly competitive market and each maximizes profit at 120 units of output when market price is $5.00 per unit. One of the points on the market supply curve must be at:

To maximize profits, a perfectly competitive firm should produce until:

Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand is D0:

Refer to the following graph. The perfectly competitive firm depicted is currently:

Refer to the graph shown. To maximize profit, this perfectly competitive firm should produce:

Refer to the following graphs. Which graph depicts a perfectly competitive firm that will minimize short-run losses by producing zero output?

Refer to the graph shown, which depicts a perfectly competitive firm. When it is maximizing profit, the total profit earned by the firm represented is:

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 graphs shown, which depict a perfectly competitive market and firm. If market demand is D₀: