Question 1

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 2

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 3

A perfectly competitive firm in the long run earns:

Accepted Answer

A) positive economic profits but zero normal profits. 
B) positive normal profits but zero economic profits. 
C) positive economic profits and positive normal profits. 
D) zero economic profits and zero normal profits. 
A) positive economic profits but zero normal profits. 
B) positive normal profits but zero economic profits. 
C) positive economic profits and positive normal profits. 
D) zero economic profits and zero normal profits.

Question 4

A perfectly competitive firm in the long run:

Accepted Answer

A) can earn positive or negative economic profits. 
B) can earn negative accounting profits as long as economic profits are positive. 
C) makes zero economic profits. 
D) makes zero accounting profits. 
A) can earn positive or negative economic profits. 
B) can earn negative accounting profits as long as economic profits are positive. 
C) makes zero economic profits. 
D) makes zero accounting profits.

Question 5

Suppose there are 50 firms in a perfectly competitive market and each maximizes profit at 50 units of output when market price is $15.00 per unit. One of the points on the market supply curve must be at:

Accepted Answer

A) Price = $15 and Quantity supplied = 2,500. 
B) Price = $15 and Quantity supplied = 25,000. 
C) Price = $3.33 and Quantity supplied = 2,500. 
D) Price = $3.33 and Quantity supplied = 25,000. 
A) Price = $15 and Quantity supplied = 2,500. 
B) Price = $15 and Quantity supplied = 25,000. 
C) Price = $3.33 and Quantity supplied = 2,500. 
D) Price = $3.33 and Quantity supplied = 25,000.

Question 6

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 7

Suppose cookie sales fall as consumers become more carbohydrate-conscious. If the cookie industry is a constant-cost, perfectly competitive industry, this decline in market demand will cause market supply to:

Accepted Answer

A) decrease in the long run, resulting in a lower equilibrium price. 
B) decrease in the long run until the equilibrium price is again equal to minimum average total cost. 
C) increase in the long run, resulting in a higher equilibrium price. 
D) increase in the long run until the equilibrium price is again equal to minimum average total cost. 
A) decrease in the long run, resulting in a lower equilibrium price. 
B) decrease in the long run until the equilibrium price is again equal to minimum average total cost. 
C) increase in the long run, resulting in a higher equilibrium price. 
D) increase in the long run until the equilibrium price is again equal to minimum average total cost.

Question 8

Refer to the table shown. The maximum profit that the perfectly competitive firm represented by the above data could earn is: $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \text { Tatal Cast } & \text { Tatal Revenue } \
\hline 10 & \$ 25 & 50 \
\hline 20 & 60 & 100 \
\hline 30 & 105 & 150 \
\hline 40 & 160 & 200 \
\hline
\end{array}$$

Accepted Answer

A) $25. 
B) $35. 
C) $45. 
D) $55. 
A) $25. 
B) $35. 
C) $45. 
D) $55.

Question 9

Refer to the graph shown. If the market price is $4, a perfectly competitive firm:

Accepted Answer

A) breaks even. 
B) earns a profit. 
C) incurs a loss but can still cover its variable costs and some of its fixed costs. 
D) incurs a loss and cannot cover its variable costs. 
A) breaks even. 
B) earns a profit. 
C) incurs a loss but can still cover its variable costs and some of its fixed costs. 
D) incurs a loss and cannot cover its variable costs.

Question 10

Refer to the table shown. If the market price is $8, a perfectly competitive profit-maximizing firm will produce: $$\begin{array} { | c | c | } 
\hline \text { Quantity } & \text { Marginal Cast } \
\hline 1 & \$ 3 \
\hline 2 & 5 \
\hline 3 & 7 \
\hline 4 & 9 \
\hline
\end{array}$$

Accepted Answer

A) 1 unit of output. 
B) 2 units of output. 
C) 3 units of output. 
D) 4 units of output. 
A) 1 unit of output. 
B) 2 units of output. 
C) 3 units of output. 
D) 4 units of output.

Question 11

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 12

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

Accepted Answer

A) lower 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) lower 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 13

In determining the supply curve of a perfectly competitive firm,what cost information do you need? Why do you need that information? Explain.

Accepted Answer

To determine the supply curve of a perfe

Question 14

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 15

Refer to the graph shown. If market price decreases from $7.00 per unit to $6.00 per unit, a profit-maximizing perfectly competitive firm will:

Accepted Answer

A) increase output from 650 to 750. 
B) decrease output from 850 to 750. 
C) continue to produce 850 units. 
D) produce 850 units of output. 
A) increase output from 650 to 750. 
B) decrease output from 850 to 750. 
C) continue to produce 850 units. 
D) produce 850 units of output.

Question 16

In a perfectly competitive market, an increase in market demand in a long-run constant-cost industry causes:

Accepted Answer

A) an increase in price, quantity, and profit in the short run. 
B) an increase in price, quantity, and profit in the long run. 
C) a decrease in price, a decrease in quantity, and a decrease in profit in the short run. 
D) a decrease in price, a decrease in quantity, and a decrease in profit in the long run. 
A) an increase in price, quantity, and profit in the short run. 
B) an increase in price, quantity, and profit in the long run. 
C) a decrease in price, a decrease in quantity, and a decrease in profit in the short run. 
D) a decrease in price, a decrease in quantity, and a decrease in profit in the long run.

Question 17

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 18

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 19

Which of the following is a requirement for a perfectly competitive market?

Accepted Answer

A) Buyers and sellers are price takers. 
B) There are barriers to entry. 
C) There are indivisible setup costs. 
D) Sellers maximize sales. 
A) Buyers and sellers are price takers. 
B) There are barriers to entry. 
C) There are indivisible setup costs. 
D) Sellers maximize sales.

Question 20

Refer to the following graphs.   Which graph depicts a perfectly competitive firm in long-run equilibrium?

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

Exam 13: Perfect Competition

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

The existence of positive economic profits induces firms to:

A perfectly competitive firm in the long run earns:

A perfectly competitive firm in the long run:

Suppose there are 50 firms in a perfectly competitive market and each maximizes profit at 50 units of output when market price is $15.00 per unit. One of the points on the market supply curve must be at:

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

Suppose cookie sales fall as consumers become more carbohydrate-conscious. If the cookie industry is a constant-cost, perfectly competitive industry, this decline in market demand will cause market supply to:

Refer to the table shown. The maximum profit that the perfectly competitive firm represented by the above data could earn is: Quantity Tatal Cast Tatal Revenue 10 \ 25 50 20 60 100 30 105 150 40 160 200

Refer to the graph shown. If the market price is $4, a perfectly competitive firm:

Refer to the table shown. If the market price is $8, a perfectly competitive profit-maximizing firm will produce: Quantity Marginal Cast 1 \ 3 2 5 3 7 4 9

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:

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

In determining the supply curve of a perfectly competitive firm,what cost information do you need? Why do you need that information? Explain.

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

Refer to the graph shown. If market price decreases from $7.00 per unit to $6.00 per unit, a profit-maximizing perfectly competitive firm will:

In a perfectly competitive market, an increase in market demand in a long-run constant-cost industry causes:

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

Which of the following is a requirement for a perfectly competitive market?

Refer to the following graphs. Which graph depicts a perfectly competitive firm in long-run equilibrium?

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

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

Filters

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