Question 1

Which one of the following does not occur in the long run when firms in a market make an economic profit?

Accepted Answer

A) Firms enter the market. 
B) The market supply curve shifts rightward. 
C) Each firm increases production. 
D) Economic profit of each firm decreases. 
E) Market price falls. 
A) Firms enter the market. 
B) The market supply curve shifts rightward. 
C) Each firm increases production. 
D) Economic profit of each firm decreases. 
E) Market price falls.

Question 2

In which one of the following situations will a perfectly competitive firm make an economic profit?

Accepted Answer

A) MR > AVC 
B) MR > ATC 
C) ATC > MC 
D) ATC > MR 
E) MC > AVC 
A) MR > AVC 
B) MR > ATC 
C) ATC > MC 
D) ATC > MR 
E) MC > AVC

Question 3

Firms will stop exiting an market only when

Accepted Answer

A) marginal revenue equals price. 
B) marginal revenue equals marginal cost. 
C) all remaining firms are making an economic profit. 
D) all remaining firms are making zero economic profit. 
E) marginal revenue equals average fixed cost. 
A) marginal revenue equals price. 
B) marginal revenue equals marginal cost. 
C) all remaining firms are making an economic profit. 
D) all remaining firms are making zero economic profit. 
E) marginal revenue equals average fixed cost.

Question 4

Use the table below to answer the following questions.
Table 12.2.3
  
-Refer to Table 12.2.3,which gives the total cost schedule for Brenda's Balloon Shop,a perfectly competitive firm.The marginal cost of increasing production from 4 balloons an hour to 5 balloons an hour is

Accepted Answer

A) $1. 
B) $4.50. 
C) $4.70. 
D) $4.80. 
E) $4.40. 
A) $1. 
B) $4.50. 
C) $4.70. 
D) $4.80. 
E) $4.40.

Question 5

Use the table below to answer the following questions.
Table 12.2.1
  
-Refer to Table 12.2.1,which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.The marginal cost of increasing production from 4 units to 5 units is

Accepted Answer

A) $14. 
B) $128. 
C) $100. 
D) $25. 
E) $30. 
A) $14. 
B) $128. 
C) $100. 
D) $25. 
E) $30.

Question 6

Use the figure below to answer the following questions.
   
Figure 12.1.1
-Refer to Figure 12.1.1.The firm competes in a perfectly competitive market.Curve A is a straight line because the firm

Accepted Answer

A) is a price taker. 
B) faces constant returns to scale. 
C) wants to maximize profits. 
D) has perfect information. 
E) has constant marginal cost. 
A) is a price taker. 
B) faces constant returns to scale. 
C) wants to maximize profits. 
D) has perfect information. 
E) has constant marginal cost.

Question 7

Use the figure below to answer the following questions.
   
Figure 12.1.1
-Refer to Figure 12.1.1.The firm competes in a perfectly competitive market.Curve A represents the firm's

Accepted Answer

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

Question 8

If firms in a perfectly competitive market are incurring an economic loss,some firms will exit.This exit shifts the market

Accepted Answer

A) demand curve leftward, and the market price falls. 
B) demand curve rightward, and the market price rises. 
C) supply curve leftward, and the market price rises. 
D) supply curve rightward, and the market price falls. 
E) none of the above. 
A) demand curve leftward, and the market price falls. 
B) demand curve rightward, and the market price rises. 
C) supply curve leftward, and the market price rises. 
D) supply curve rightward, and the market price falls. 
E) none of the above.

Question 9

A firm maximizes profit by producing the output at which marginal cost equals

Accepted Answer

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

Question 10

Use the table below to answer the following questions.
Table 12.1.1
  
-Refer to Table 12.1.1 which gives the demand schedule for a perfectly competitive firm.If the firm sells 5 units of output,total revenue is

Accepted Answer

A) $15. 
B) $30. 
C) $75. 
D) $90. 
E) $105. 
A) $15. 
B) $30. 
C) $75. 
D) $90. 
E) $105.

Question 11

Consumers choose ________.
Consumers are efficient on the market demand curve because ________.

Accepted Answer

A) to maximize profit;they only purchase goods and services that they can afford 
B) to buy a good or service only if they will receive a consumer surplus;every point on the market demand curve maximizes consumer surplus 
C) to purchase goods and services made with the newest technology;the market demand curve traces out the same path as the marginal revenue curve 
D) to allocate their budgets to get the most value possible out of them;we derive a consumer's demand curve by finding how the best budget allocation changes as the price of a good changes 
E) to allocate their budgets to get the most value possible out of them;they only purchase goods and services that they can afford 
A) to maximize profit;they only purchase goods and services that they can afford 
B) to buy a good or service only if they will receive a consumer surplus;every point on the market demand curve maximizes consumer surplus 
C) to purchase goods and services made with the newest technology;the market demand curve traces out the same path as the marginal revenue curve 
D) to allocate their budgets to get the most value possible out of them;we derive a consumer's demand curve by finding how the best budget allocation changes as the price of a good changes 
E) to allocate their budgets to get the most value possible out of them;they only purchase goods and services that they can afford

Question 12

In a perfectly competitive market,the short-run market supply curve is

Accepted Answer

A) the horizontal sum of the supply curves of all the individual firms. 
B) the vertical sum of the supply curves of all the individual firms. 
C) vertical at the total level of output being produced by all firms. 
D) horizontal at the current market price. 
E) none of the above. 
A) the horizontal sum of the supply curves of all the individual firms. 
B) the vertical sum of the supply curves of all the individual firms. 
C) vertical at the total level of output being produced by all firms. 
D) horizontal at the current market price. 
E) none of the above.

Question 13

A market with constant costs is in long-run equilibrium when it experiences a permanent increase in demand.
Market supply ________ and the market price ________.
Market output ________ and in the long run each remaining firm makes ________ profit.

Accepted Answer

A) increases;falls until it reaches each firms' minimum average total cost;increases;zero economic 
B) decreases;rises until it reaches each firms' minimum average variable cost;decreases;zero economic 
C) increases;falls;increases;an economic 
D) decreases;rises until it reaches each firms' minimum average total cost;decreases;an economic 
E) increases;does not change;increases;zero economic 
A) increases;falls until it reaches each firms' minimum average total cost;increases;zero economic 
B) decreases;rises until it reaches each firms' minimum average variable cost;decreases;zero economic 
C) increases;falls;increases;an economic 
D) decreases;rises until it reaches each firms' minimum average total cost;decreases;an economic 
E) increases;does not change;increases;zero economic

Question 14

Which one of the following is not true of a new long-run equilibrium which is the result of a new technology in a perfectly competitive market?

Accepted Answer

A) The equilibrium price falls. 
B) Industry output increases. 
C) Economic profit of each firm remaining in the industry increases. 
D) All firms in the industry use the new technology. 
E) Average total cost decreases. 
A) The equilibrium price falls. 
B) Industry output increases. 
C) Economic profit of each firm remaining in the industry increases. 
D) All firms in the industry use the new technology. 
E) Average total cost decreases.

Question 15

The long-run market supply curve is positively sloped when

Accepted Answer

A) external economies exist. 
B) external diseconomies exist. 
C) neither external economies nor diseconomies exist. 
D) external costs exist. 
E) external benefits exist. 
A) external economies exist. 
B) external diseconomies exist. 
C) neither external economies nor diseconomies exist. 
D) external costs exist. 
E) external benefits exist.

Question 16

In a perfectly competitive market,the market price is $8.An individual firm is producing the output at which MC = $8.AVC at that output is $10.What should the firm do to maximize its economic profit in the short run?

Accepted Answer

A) shut down 
B) expand output 
C) contract output 
D) leave output unchanged 
E) raise the price 
A) shut down 
B) expand output 
C) contract output 
D) leave output unchanged 
E) raise the price

Question 17

A perfectly competitive market is characterized by

Accepted Answer

A) firms that are price setters. 
B) firms that each face a downward-sloping demand curve. 
C) firms that each sell a unique good or service. 
D) buyers who are unaware of the price charged by each firm. 
E) no restrictions on entry into the market. 
A) firms that are price setters. 
B) firms that each face a downward-sloping demand curve. 
C) firms that each sell a unique good or service. 
D) buyers who are unaware of the price charged by each firm. 
E) no restrictions on entry into the market.

Question 18

Use the figure below to answer the following question.
   
Figure 12.2.1
-Refer to Figure 12.2.1,which shows a perfectly competitive firm's total revenue and total cost curves.Which one of the following statements is false?

Accepted Answer

A) Economic profit is the vertical distance between the total revenue curve and the total cost curve. 
B) At an output of Q? units a day, the firm makes zero economic profit. 
C) At an output greater than Q? units a day, the firm incurs an economic loss. 
D) At an output of Q? units a day, the firm incurs an economic loss. 
E) At an output less than Q? units a day, the firm incurs an economic loss. 
A) Economic profit is the vertical distance between the total revenue curve and the total cost curve. 
B) At an output of Q? units a day, the firm makes zero economic profit. 
C) At an output greater than Q? units a day, the firm incurs an economic loss. 
D) At an output of Q? units a day, the firm incurs an economic loss. 
E) At an output less than Q? units a day, the firm incurs an economic loss.

Question 19

As a firm in a perfectly competitive market increases its output,its marginal revenue ________ and its marginal cost ________.

Accepted Answer

A) increases;increases 
B) increases;does not change 
C) does not change;decreases 
D) decreases;increases 
E) does not change;increases 
A) increases;increases 
B) increases;does not change 
C) does not change;decreases 
D) decreases;increases 
E) does not change;increases

Question 20

Suppose that the market in which bakeries compete is a perfectly competitive market.Which one of the following reasons does not explain why it is difficult for a bakery to make an economic profit in the long run?

Accepted Answer

A) All bakeries are price takers. 
B) All bakeries are able to set the market price. 
C) The threat of entry by potential bakeries. 
D) The demand facing each bakery is perfectly elastic. 
E) All bakeries produce identical goods. 
A) All bakeries are price takers. 
B) All bakeries are able to set the market price. 
C) The threat of entry by potential bakeries. 
D) The demand facing each bakery is perfectly elastic. 
E) All bakeries produce identical goods.

Exam 12: Perfect Competition

Which one of the following does not occur in the long run when firms in a market make an economic profit?

In which one of the following situations will a perfectly competitive firm make an economic profit?

Firms will stop exiting an market only when

Use the table below to answer the following questions. Table 12.2.3 -Refer to Table 12.2.3,which gives the total cost schedule for Brenda's Balloon Shop,a perfectly competitive firm.The marginal cost of increasing production from 4 balloons an hour to 5 balloons an hour is

Use the table below to answer the following questions. Table 12.2.1 -Refer to Table 12.2.1,which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.The marginal cost of increasing production from 4 units to 5 units is

Use the figure below to answer the following questions. Figure 12.1.1 -Refer to Figure 12.1.1.The firm competes in a perfectly competitive market.Curve A is a straight line because the firm

Use the figure below to answer the following questions. Figure 12.1.1 -Refer to Figure 12.1.1.The firm competes in a perfectly competitive market.Curve A represents the firm's

If firms in a perfectly competitive market are incurring an economic loss,some firms will exit.This exit shifts the market

A firm maximizes profit by producing the output at which marginal cost equals

Use the table below to answer the following questions. Table 12.1.1 -Refer to Table 12.1.1 which gives the demand schedule for a perfectly competitive firm.If the firm sells 5 units of output,total revenue is

Consumers choose ________. Consumers are efficient on the market demand curve because ________.

In a perfectly competitive market,the short-run market supply curve is

A market with constant costs is in long-run equilibrium when it experiences a permanent increase in demand. Market supply ________ and the market price ________. Market output ________ and in the long run each remaining firm makes ________ profit.

Which one of the following is not true of a new long-run equilibrium which is the result of a new technology in a perfectly competitive market?

The long-run market supply curve is positively sloped when

In a perfectly competitive market,the market price is $8.An individual firm is producing the output at which MC = $8.AVC at that output is $10.What should the firm do to maximize its economic profit in the short run?

A perfectly competitive market is characterized by

Use the figure below to answer the following question. Figure 12.2.1 -Refer to Figure 12.2.1,which shows a perfectly competitive firm's total revenue and total cost curves.Which one of the following statements is false?

As a firm in a perfectly competitive market increases its output,its marginal revenue ________ and its marginal cost ________.

Suppose that the market in which bakeries compete is a perfectly competitive market.Which one of the following reasons does not explain why it is difficult for a bakery to make an economic profit in the long run?

What Is Economics?

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring GDP and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers: The Keynesian Model

Canadian Inflation, Unemployment, and Business Cycle

Fiscal Policy

Monetary Policy

International Trade Policy

Filters

Consumers choose . Consumers are efficient on the market demand curve because .

A market with constant costs is in long-run equilibrium when it experiences a permanent increase in demand. Market supply and the market price . Market output and in the long run each remaining firm makes profit.

As a firm in a perfectly competitive market increases its output,its marginal revenue and its marginal cost .