Question 1

A firm will continue to operate in the long run as long as price exceeds long-run average variable cost.

Accepted Answer

A) True 
 B)False

Question 2

Refer to the graph shown. What area represents total economic profits?

Accepted Answer

A) DAFM 
B) CBWT 
C) MFWT 
D) DABC 
A) DAFM 
B) CBWT 
C) MFWT 
D) DABC

Question 3

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 4

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 5

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 6

Retail stores generally set a fixed price and let people buy all they want at that price.Does that mean that the supply curve of those goods is perfectly elastic?

Accepted Answer

No,not technically.Technically,a supply

Question 7

Using the following diagram,demonstrate graphically and explain verbally why Q0 is not a profit maximizing output level.

Accepted Answer

At Q₀ notice that MR > MC.This tells us t

Question 8

The existence of positive economic profits in an industry attracts new entrants into the industry.

Accepted Answer

A) True 
 B)False

Question 9

Refer to the graph shown. Assuming that the industry continues to operate under conditions of perfect competition and that the cost curves do not shift, in the long run this firm will produce:

Accepted Answer

A) 800 units of output. 
B) 1,000 units of output. 
C) 1,200 units of output. 
D) 1,400 units of output. 
A) 800 units of output. 
B) 1,000 units of output. 
C) 1,200 units of output. 
D) 1,400 units of output.

Question 10

Refer to the graph shown. What level of output should the perfectly competitive firm produce to maximize profits?

Accepted Answer

A) 7. 
B) 8. 
C) 6. 
D) 4. 
A) 7. 
B) 8. 
C) 6. 
D) 4.

Question 11

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 12

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

Accepted Answer

A) marginal revenue equals its marginal cost. 
B) price exceeds its marginal cost. 
C) price exceeds its marginal revenue. 
D) marginal cost exceeds its marginal revenue. 
A) marginal revenue equals its marginal cost. 
B) price exceeds its marginal cost. 
C) price exceeds its marginal revenue. 
D) marginal cost exceeds its marginal revenue.

Question 13

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 14

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

Accepted Answer

A) firm shown in the graph will produce q0, but all of the firms in the market will produce a total of Q0. 
B) firm shown in the graph will produce q1, but all of the firms in the market will produce a total of Q1. 
C) output of the firm shown in the graph is the same as quantity supplied in the market. 
D) firm is not producing where profit is maximized. 
A) firm shown in the graph will produce q0, but all of the firms in the market will produce a total of Q0. 
B) firm shown in the graph will produce q1, but all of the firms in the market will produce a total of Q1. 
C) output of the firm shown in the graph is the same as quantity supplied in the market. 
D) firm is not producing where profit is maximized.

Question 15

Define a perfectly competitive market,and list the six conditions necessary for a market to be perfectly competitive.

Accepted Answer

A perfectly competitive market is a mark

Question 16

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 17

Refer to the graph shown, which depicts a perfectly competitive firm. To maximize profit, the firm represented will produce:

Accepted Answer

A) 40 units of output. 
B) 90 units of output. 
C) 110 units of output. 
D) 130 units of output. 
A) 40 units of output. 
B) 90 units of output. 
C) 110 units of output. 
D) 130 units of output.

Question 18

Demonstrate graphically and explain verbally where the level of output should be when a perfectly competitive firm is earning a positive economic profit.Be sure to label the profit maximizing level of output and shade in the area that represents profit.

Accepted Answer

The firm chooses to produce q* because t

Question 19

Firms continue to produce (illegally)counterfeit computer software and documentation. Some of the illegal copies are Microsoft products, though Microsoft still has a large share of the market for its products. The presence of enforced copyright protection laws indicates that the market for Microsoft software cannot be considered a competitive market because:

Accepted Answer

A) the products of pirates are not identical to those of Microsoft. 
B) pirate producers are not profit-maximizing entrepreneurial firms. 
C) buyers are not price takers. 
D) there are significant barriers to entry. 
A) the products of pirates are not identical to those of Microsoft. 
B) pirate producers are not profit-maximizing entrepreneurial firms. 
C) buyers are not price takers. 
D) there are significant barriers to entry.

Question 20

The market demand curve for a product produced in a perfectly competitive industry is normally:

Accepted Answer

A) a vertical line. 
B) upward sloping. 
C) a horizontal line. 
D) downward sloping. 
A) a vertical line. 
B) upward sloping. 
C) a horizontal line. 
D) downward sloping.

Exam 13: Perfect Competition

A firm will continue to operate in the long run as long as price exceeds long-run average variable cost.

Refer to the graph shown. What area represents total economic profits?

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. To maximize profit, this perfectly competitive firm should produce:

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

Retail stores generally set a fixed price and let people buy all they want at that price.Does that mean that the supply curve of those goods is perfectly elastic?

Using the following diagram,demonstrate graphically and explain verbally why Q0 is not a profit maximizing output level.

The existence of positive economic profits in an industry attracts new entrants into the industry.

Refer to the graph shown. Assuming that the industry continues to operate under conditions of perfect competition and that the cost curves do not shift, in the long run this firm will produce:

Refer to the graph shown. What level of output should the perfectly competitive firm produce to maximize profits?

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:

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

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:

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

Define a perfectly competitive market,and list the six conditions necessary for a market to be perfectly competitive.

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

Refer to the graph shown, which depicts a perfectly competitive firm. To maximize profit, the firm represented will produce:

Demonstrate graphically and explain verbally where the level of output should be when a perfectly competitive firm is earning a positive economic profit.Be sure to label the profit maximizing level of output and shade in the area that represents profit.

The market demand curve for a product produced in a perfectly competitive industry is normally:

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 decreases from D₀ to D₁, the firm will:

Using the following diagram,demonstrate graphically and explain verbally why Q₀ is not a profit maximizing output level.

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