Question 1

If a perfectly competitive firm's marginal revenue is less than its marginal cost,the firm

Accepted Answer

A) cannot increase its economic profit. 
B) must be making an economic profit. 
C) should decrease its output to increase economic profit. 
D) should increase its output to increase economic profit. 
E) must raise the price. 
A) cannot increase its economic profit. 
B) must be making an economic profit. 
C) should decrease its output to increase economic profit. 
D) should increase its output to increase economic profit. 
E) must raise the price.

Question 2

A perfectly competitive market,with no external economies or diseconomies,is initially in long-run equilibrium.There is a permanent decrease in demand.After adjustment to the new long-run equilibrium

Accepted Answer

A) the remaining firms in the market will each be producing more output than previously. 
B) the remaining firms in the market will each be producing less output than previously. 
C) the remaining firms in the market will each be producing the same output as previously. 
D) the remaining firms in the market may each be producing more output than previously, depending on the size of the change in demand. 
E) the remaining firms in the market will each be producing either the same or more output than previously. 
A) the remaining firms in the market will each be producing more output than previously. 
B) the remaining firms in the market will each be producing less output than previously. 
C) the remaining firms in the market will each be producing the same output as previously. 
D) the remaining firms in the market may each be producing more output than previously, depending on the size of the change in demand. 
E) the remaining firms in the market will each be producing either the same or more output than previously.

Question 3

For perfect competition to arise,it is necessary that market demand be

Accepted Answer

A) inelastic. 
B) elastic. 
C) perfectly elastic. 
D) large relative to the minimum efficient scale of a single firm. 
E) small relative to the minimum efficient scale of a single firm. 
A) inelastic. 
B) elastic. 
C) perfectly elastic. 
D) large relative to the minimum efficient scale of a single firm. 
E) small relative to the minimum efficient scale of a single firm.

Question 4

If a perfectly competitive firm is producing in the short run at an output where price is less than average total cost,the firm

Accepted Answer

A) will shut down. 
B) is breaking even. 
C) is still making a positive economic profit. 
D) is incurring an economic loss but will continue to operate as long as price is above minimum average fixed cost. 
E) is incurring an economic loss but will continue to operate as long as price is above minimum average variable cost. 
A) will shut down. 
B) is breaking even. 
C) is still making a positive economic profit. 
D) is incurring an economic loss but will continue to operate as long as price is above minimum average fixed cost. 
E) is incurring an economic loss but will continue to operate as long as price is above minimum average variable cost.

Question 5

The maximum loss a firm will experience in the short run equals

Accepted Answer

A) zero. 
B) its total fixed cost. 
C) its total variable cost. 
D) its total cost. 
E) its marginal cost. 
A) zero. 
B) its total fixed cost. 
C) its total variable cost. 
D) its total cost. 
E) its marginal cost.

Question 6

In the price range above minimum average variable cost,a perfectly competitive firm's supply curve is

Accepted Answer

A) horizontal at the market price. 
B) vertical at zero output. 
C) the same as its marginal cost curve. 
D) the same as its average variable cost curve. 
E) none of the above. 
A) horizontal at the market price. 
B) vertical at zero output. 
C) the same as its marginal cost curve. 
D) the same as its average variable cost curve. 
E) none of the above.

Question 7

The slope of a perfectly competitive firm's demand curve is

Accepted Answer

A) infinity. 
B) zero. 
C) 1. 
D) greater than 1. 
E) negative. 
A) infinity. 
B) zero. 
C) 1. 
D) greater than 1. 
E) negative.

Question 8

Use the figure below to answer the following questions.
   
Figure 12.3.4
-Refer to Figure 12.3.4 which shows cost curves of Paul's Picture Frames Inc.The picture frame market is perfectly competitive and the market price is $30 a frame.Paul produces ________ frames each week,makes ________ of total revenue,and makes zero ________ profit

Accepted Answer

A) 200;$4,000;economic 
B) 300;$9,000;normal 
C) 200;$4,000;normal 
D) 300;$9,000;economic 
E) 300;$3,000;economic 
A) 200;$4,000;economic 
B) 300;$9,000;normal 
C) 200;$4,000;normal 
D) 300;$9,000;economic 
E) 300;$3,000;economic

Question 9

In a perfectly competitive industry,the market price is $5.An individual firm is producing the level of output where marginal cost is $5 and is increasing,and average total cost is $25.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) insufficient information to answer 
A) shut down 
B) expand output 
C) contract output 
D) leave output unchanged 
E) insufficient information to answer

Question 10

If a perfectly competitive firm in the short run is able to pay its variable costs and part,but not all,of its fixed costs,then it is operating in the range on its marginal cost curve that is anywhere

Accepted Answer

A) above the break-even point. 
B) below the break-even point. 
C) above the shutdown point. 
D) below the shutdown point. 
E) between the shutdown and break-even points. 
A) above the break-even point. 
B) below the break-even point. 
C) above the shutdown point. 
D) below the shutdown point. 
E) between the shutdown and break-even points.

Question 11

A price-taking firm faces a

Accepted Answer

A) perfectly inelastic demand. 
B) downward-sloping marginal revenue curve. 
C) downward-sloping supply curve. 
D) perfectly elastic demand. 
E) downward-sloping demand curve. 
A) perfectly inelastic demand. 
B) downward-sloping marginal revenue curve. 
C) downward-sloping supply curve. 
D) perfectly elastic demand. 
E) downward-sloping demand curve.

Question 12

Economic profit equals

Accepted Answer

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

Question 13

A firm in a perfectly competitive industry is maximizing its economic profit by producing 500 units of output.At 500 units of output,which one of the following must be false?

Accepted Answer

A) MC  ATC 
D) MR  AVC 
A) MC  ATC 
D) MR  AVC

Question 14

Use the figure below to answer the following questions.
   
Figure 12.4.2
-Refer to Figure 12.4.2 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

Accepted Answer

A) demand will increase. 
B) demand will decrease. 
C) supply will increase. 
D) supply will decrease. 
E) supply and market demand will decrease. 
A) demand will increase. 
B) demand will decrease. 
C) supply will increase. 
D) supply will decrease. 
E) supply and market demand will decrease.

Question 15

What is the effect of a permanent increase in demand in a perfectly competitive market,with no external economies or diseconomies?

Accepted Answer

A) Market price increases in the long run. 
B) Average cost decreases in the long run. 
C) Market price decreases in the long run. 
D) Average cost increases in the long run. 
E) Market price remains constant in the long run. 
A) Market price increases in the long run. 
B) Average cost decreases in the long run. 
C) Market price decreases in the long run. 
D) Average cost increases in the long run. 
E) Market price remains constant in the long run.

Question 16

Resources are used efficiently when

Accepted Answer

A) consumers are on their marginal benefit curves. 
B) firms are economically efficient. 
C) price equals marginal social benefit equals marginal social cost. 
D) there are no external benefits or external costs. 
E) all of the above. 
A) consumers are on their marginal benefit curves. 
B) firms are economically efficient. 
C) price equals marginal social benefit equals marginal social cost. 
D) there are no external benefits or external costs. 
E) all of the above.

Question 17

A firm is producing the profit-maximizing amount of output when it is producing where its ________ curve intersects its ________ curve.

Accepted Answer

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

Question 18

Use the figure below to answer the following questions.
   
Figure 12.4.3
-Refer to Figure 12.4.3 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.Firms are

Accepted Answer

A) making an economic profit, and some firms leave the market.Market supply decreases. 
B) making an economic profit, and some firms enter the market.Market supply increases. 
C) incurring an economic loss, and some firms leave the market.Market supply decreases. 
D) incurring an economic loss, and some firms enter the market.Market supply increases. 
E) loss, but since they are covering average variable cost, no one will exit the market in the long run. 
A) making an economic profit, and some firms leave the market.Market supply decreases. 
B) making an economic profit, and some firms enter the market.Market supply increases. 
C) incurring an economic loss, and some firms leave the market.Market supply decreases. 
D) incurring an economic loss, and some firms enter the market.Market supply increases. 
E) loss, but since they are covering average variable cost, no one will exit the market in the long run.

Question 19

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 revenue received from the sale of the 4th unit of output is

Accepted Answer

A) $3. 
B) $15. 
C) $10. 
D) $120. 
E) $30. 
A) $3. 
B) $15. 
C) $10. 
D) $120. 
E) $30.

Question 20

Use the figure below to answer the following questions.
   
Figure 12.3.1
-Refer to Figure 12.3.1,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry.In the short run,if the market price of the good is $10,the firm produces ________ units of output and ________.

Accepted Answer

A) 10;incurs an economic loss of $20 
B) 10;incurs an economic loss of $40 
C) less than 10;incurs an economic loss of $20 
D) 10;makes an economic profit of $20 
E) less than 10;incurs an economic loss of less than $20 
A) 10;incurs an economic loss of $20 
B) 10;incurs an economic loss of $40 
C) less than 10;incurs an economic loss of $20 
D) 10;makes an economic profit of $20 
E) less than 10;incurs an economic loss of less than $20

Exam 12: Perfect Competition

If a perfectly competitive firm's marginal revenue is less than its marginal cost,the firm

A perfectly competitive market,with no external economies or diseconomies,is initially in long-run equilibrium.There is a permanent decrease in demand.After adjustment to the new long-run equilibrium

For perfect competition to arise,it is necessary that market demand be

If a perfectly competitive firm is producing in the short run at an output where price is less than average total cost,the firm

The maximum loss a firm will experience in the short run equals

In the price range above minimum average variable cost,a perfectly competitive firm's supply curve is

The slope of a perfectly competitive firm's demand curve is

In a perfectly competitive industry,the market price is $5.An individual firm is producing the level of output where marginal cost is $5 and is increasing,and average total cost is $25.What should the firm do to maximize its economic profit in the short run?

If a perfectly competitive firm in the short run is able to pay its variable costs and part,but not all,of its fixed costs,then it is operating in the range on its marginal cost curve that is anywhere

A price-taking firm faces a

Economic profit equals

A firm in a perfectly competitive industry is maximizing its economic profit by producing 500 units of output.At 500 units of output,which one of the following must be false?

Use the figure below to answer the following questions. Figure 12.4.2 -Refer to Figure 12.4.2 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

What is the effect of a permanent increase in demand in a perfectly competitive market,with no external economies or diseconomies?

Resources are used efficiently when

A firm is producing the profit-maximizing amount of output when it is producing where its ________ curve intersects its ________ curve.

Use the figure below to answer the following questions. Figure 12.4.3 -Refer to Figure 12.4.3 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.Firms are

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 revenue received from the sale of the 4th unit of output is

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

A firm is producing the profit-maximizing amount of output when it is producing where its curve intersects its curve.