Question 1

The profit-maximizing output level minimizes average total cost.

Accepted Answer

A) True 
 B)False

Question 2

An increase in market price, given a fixed number of firms, causes market supply to shift to the right.

Accepted Answer

A) True 
 B)False

Question 3

Refer to the graph shown. If market price is currently $5.00 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 4

The existence of economic losses induces firms to:

Accepted Answer

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

Question 5

Describe how a market supply curve relates to a firm's supply curve.How does the short-run market supply curve differ from the long run market supply curve?

Accepted Answer

(a)In the short run,when the number of f

Question 6

Refer to the graph shown. A perfectly competitive firm would never operate if the price dropped to which segment of the marginal cost curve?

Accepted Answer

A) AC. 
B) CD. 
C) DE. 
D) CE. 
A) AC. 
B) CD. 
C) DE. 
D) CE.

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

An increase in the number of firms in a perfectly competitive market causes:

Accepted Answer

A) a movement along the market supply curve. 
B) an increase in each firm's supply curve. 
C) an increase in the market supply curve. 
D) a decrease in the market supply curve. 
A) a movement along the market supply curve. 
B) an increase in each firm's supply curve. 
C) an increase in the market supply curve. 
D) a decrease in the market supply curve.

Question 9

During a recession, the price of restaurant meals falls by over 10 percent. The most likely cause is:

Accepted Answer

A) a shift of the demand curve to the left. 
B) a shift of the supply curve to the left. 
C) a shift of the supply curve to the right. 
D) a shift of the demand curve to the right. 
A) a shift of the demand curve to the left. 
B) a shift of the supply curve to the left. 
C) a shift of the supply curve to the right. 
D) a shift of the demand curve to the right.

Question 10

The demand curve for a firm in perfect competition is equal to its:

Accepted Answer

A) marginal cost curve. 
B) marginal revenue curve. 
C) average total cost curve. 
D) average fixed cost curve. 
A) marginal cost curve. 
B) marginal revenue curve. 
C) average total cost curve. 
D) average fixed cost curve.

Question 11

Suppose the dry cleaning industry is initially in long-run equilibrium but then experiences a sharp increase in the price of its inputs. Assuming that the industry is perfectly competitive, the increase in costs should:

Accepted Answer

A) decrease the number of firms in the industry in the long run and raise the market price. 
B) increase the number of firms in the industry in the industry and raise the market price. 
C) decrease the number of firms in the industry in the long run and reduce the market price. 
D) increase the number of firms in the industry in the industry and reduce the market price. 
A) decrease the number of firms in the industry in the long run and raise the market price. 
B) increase the number of firms in the industry in the industry and raise the market price. 
C) decrease the number of firms in the industry in the long run and reduce the market price. 
D) increase the number of firms in the industry in the industry and reduce the market price.

Question 12

Suppose the minimum possible price of constructing homes is $50 per square foot. As a result of a sharp drop in the demand for home construction, the equilibrium price of home construction falls to $40 per square foot. Assuming the home construction industry is perfectly competitive and there are no specialized inputs, firms will:

Accepted Answer

A) exit the industry, and the price will fall below $40 in the long run. 
B) exit the industry, and the price will rise above $40 in the long run. 
C) exit the industry, and the price will remain at $40 in the long run. 
D) enter the industry as the price rises above $40 in the long run. 
A) exit the industry, and the price will fall below $40 in the long run. 
B) exit the industry, and the price will rise above $40 in the long run. 
C) exit the industry, and the price will remain at $40 in the long run. 
D) enter the industry as the price rises above $40 in the long run.

Question 13

Refer to the graphs shown, which depict a perfectly competitive market and firm in a constant-cost industry. If market demand increases from D0 to D1, in the long run:

Accepted Answer

A) new firms will enter this market and price will return to P0. 
B) new firms will enter this market and price will remain at P1. 
C) some firms will exit this market and price will return to P0. 
D) some firms will exit this market and price will remain at P1. 
A) new firms will enter this market and price will return to P0. 
B) new firms will enter this market and price will remain at P1. 
C) some firms will exit this market and price will return to P0. 
D) some firms will exit this market and price will remain at P1.

Question 14

Assume that the t-shirt industry is perfectly competitive. If the industry is in long-run equilibrium when the market price of t-shirts is $10:

Accepted Answer

A) minimum long-run average total cost is less than $10. 
B) marginal cost exceeds $10. 
C) minimum long-run average total cost is $10. 
D) minimum average variable cost equals marginal cost. 
A) minimum long-run average total cost is less than $10. 
B) marginal cost exceeds $10. 
C) minimum long-run average total cost is $10. 
D) minimum average variable cost equals marginal cost.

Question 15

Using the following diagram,demonstrate that producing at the level of output associated with maximum per unit profit (minimum of the ATC curve)does not maximize total profit.

Accepted Answer

Maximum per unit profit occurs at output

Question 16

Suppose that the firms in the perfectly competitive oat industry currently are receiving a price of $2 per bushel for their product. The minimum possible average total cost of producing oats in the long run is $1 per bushel. It follows that:

Accepted Answer

A) the oat industry is in equilibrium. 
B) new firms will enter the oat industry. 
C) the price of oats will remain at $2 per bushel in the long run. 
D) firms in the oat industry will earn economic profits in both the long run and the short run. 
A) the oat industry is in equilibrium. 
B) new firms will enter the oat industry. 
C) the price of oats will remain at $2 per bushel in the long run. 
D) firms in the oat industry will earn economic profits in both the long run and the short run.

Question 17

Refer to the graph shown depicting a perfectly competitive firm. If average variable cost is $3 at quantity 450, points A through E represent the:

Accepted Answer

A) firm's total cost curve. 
B) firm's total revenue curve. 
C) demand for the firm's product. 
D) firm's supply curve. 
A) firm's total cost curve. 
B) firm's total revenue curve. 
C) demand for the firm's product. 
D) firm's supply curve.

Question 18

Suppose there is an improvement in the technology of producing TVs and the production of TVs becomes an increasingly competitive industry. Assuming that the TV industry is initially in equilibrium, the long-run effect of this improvement is:

Accepted Answer

A) higher TV prices and greater TV production. 
B) lower TV prices and greater TV production. 
C) higher TV prices and lower TV production. 
D) lower TV prices and lower TV production. 
A) higher TV prices and greater TV production. 
B) lower TV prices and greater TV production. 
C) higher TV prices and lower TV production. 
D) lower TV prices and lower TV production.

Question 19

Refer to the graph shown, which depicts a perfectly competitive firm. When the industry is in long-run competitive equilibrium:

Accepted Answer

A) the price of the product will be $6. 
B) the firm will produce 100 units of output. 
C) the firm will earn economic profits of $300 per day. 
D) the marginal cost of production will be $3. 
A) the price of the product will be $6. 
B) the firm will produce 100 units of output. 
C) the firm will earn economic profits of $300 per day. 
D) the marginal cost of production will be $3.

Question 20

If the marginal revenue of the next unit a firm produces is $50 and its marginal cost is $35, a firm should:

Accepted Answer

A) reconsider past production decisions. 
B) decrease production. 
C) increase production. 
D) hold production constant. 
A) reconsider past production decisions. 
B) decrease production. 
C) increase production. 
D) hold production constant.

Exam 13: Perfect Competition

The profit-maximizing output level minimizes average total cost.

An increase in market price, given a fixed number of firms, causes market supply to shift to the right.

Refer to the graph shown. If market price is currently $5.00 per unit, this perfectly competitive firm will maximize profit by producing:

The existence of economic losses induces firms to:

Describe how a market supply curve relates to a firm's supply curve.How does the short-run market supply curve differ from the long run market supply curve?

Refer to the graph shown. A perfectly competitive firm would never operate if the price dropped to which segment of the marginal cost curve?

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

An increase in the number of firms in a perfectly competitive market causes:

During a recession, the price of restaurant meals falls by over 10 percent. The most likely cause is:

The demand curve for a firm in perfect competition is equal to its:

Suppose the dry cleaning industry is initially in long-run equilibrium but then experiences a sharp increase in the price of its inputs. Assuming that the industry is perfectly competitive, the increase in costs should:

Refer to the graphs shown, which depict a perfectly competitive market and firm in a constant-cost industry. If market demand increases from D0 to D1, in the long run:

Assume that the t-shirt industry is perfectly competitive. If the industry is in long-run equilibrium when the market price of t-shirts is $10:

Using the following diagram,demonstrate that producing at the level of output associated with maximum per unit profit (minimum of the ATC curve)does not maximize total profit.

Suppose that the firms in the perfectly competitive oat industry currently are receiving a price of $2 per bushel for their product. The minimum possible average total cost of producing oats in the long run is $1 per bushel. It follows that:

Refer to the graph shown depicting a perfectly competitive firm. If average variable cost is $3 at quantity 450, points A through E represent the:

Suppose there is an improvement in the technology of producing TVs and the production of TVs becomes an increasingly competitive industry. Assuming that the TV industry is initially in equilibrium, the long-run effect of this improvement is:

Refer to the graph shown, which depicts a perfectly competitive firm. When the industry is in long-run competitive equilibrium:

If the marginal revenue of the next unit a firm produces is $50 and its marginal cost is $35, a firm should:

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 in a constant-cost industry. If market demand increases from D₀ to D₁, in the long run: