Question 1

In the short run, a firm should shut down its operation if:

Accepted Answer

A)  its losses are less than TFC at the MR = MC point. 
B)  its losses equal TFC at the MR = MC point. 
C)  its losses are greater than TFC at the MR = MC point. 
D)  TR is less than TC. 
E)  TR exceeds TVC. 
A)  its losses are less than TFC at the MR = MC point. 
B)  its losses equal TFC at the MR = MC point. 
C)  its losses are greater than TFC at the MR = MC point. 
D)  TR is less than TC. 
E)  TR exceeds TVC.

Question 2

If, at the point where MR = MC, the firm incurs losses, in the short run the firm should:

Accepted Answer

A)  shut down. 
B)  increase output. 
C)  decrease output. 
D)  continue at its current output if P > AVC. 
E)  continue at its current output if P > ATC. 
A)  shut down. 
B)  increase output. 
C)  decrease output. 
D)  continue at its current output if P > AVC. 
E)  continue at its current output if P > ATC.

Question 3

In the short run, a perfectly competitive firm's most profitable level of output is where:

Accepted Answer

A)  marginal cost exceeds marginal revenue. 
B)  total revenue is at a maximum. 
C)  marginal cost equals marginal revenue. 
D)  All of these. 
A)  marginal cost exceeds marginal revenue. 
B)  total revenue is at a maximum. 
C)  marginal cost equals marginal revenue. 
D)  All of these.

Question 4

If marginal revenue equals marginal cost in the short run, the perfectly competitive firm earns zero profits.

Accepted Answer

A) True 
 B)False

Question 5

A firm that is a price taker can:

Accepted Answer

A)  substantially change the market price of its product by changing its level of production. 
B)  sell all of its output at the market price. 
C)  sell some of its output at a price higher than the market price. 
D)  decide what price to charge for its product. 
A)  substantially change the market price of its product by changing its level of production. 
B)  sell all of its output at the market price. 
C)  sell some of its output at a price higher than the market price. 
D)  decide what price to charge for its product.

Question 6

Maximizing profit means finding the maximum difference between:

Accepted Answer

A)  TR and TC. 
B)  MR and MC. 
C)  price and ATC. 
D)  price and AR. 
E)  ATC and MC. 
A)  TR and TC. 
B)  MR and MC. 
C)  price and ATC. 
D)  price and AR. 
E)  ATC and MC.

Question 7

If a firm increases output when MR < MC, then:

Accepted Answer

A)  profit will equal zero. 
B)  profit will increase. 
C)  profit will decrease. 
D)  profit will remain the same. 
E)  the firm is minimizing losses. 
A)  profit will equal zero. 
B)  profit will increase. 
C)  profit will decrease. 
D)  profit will remain the same. 
E)  the firm is minimizing losses.

Question 8

When faced with an economic loss, a competitive firm will shut down its operations in the short run.

Accepted Answer

A) True 
 B)False

Question 9

The profit maximizing or loss minimizing quantity of output for any firm to produce exists at that output level in which:

Accepted Answer

A)  total revenue is maximized. 
B)  total cost is minimized. 
C)  marginal cost is minimized. 
D)  marginal revenue equals marginal cost. 
A)  total revenue is maximized. 
B)  total cost is minimized. 
C)  marginal cost is minimized. 
D)  marginal revenue equals marginal cost.

Question 10

If a firm decreases output when MR < MC, then:

Accepted Answer

A)  profit will equal zero. 
B)  profit will increase. 
C)  profit will decrease. 
D)  profit will remain the same. 
E)  the firm is minimizing losses. 
A)  profit will equal zero. 
B)  profit will increase. 
C)  profit will decrease. 
D)  profit will remain the same. 
E)  the firm is minimizing losses.

Question 11

Exhibit 8-12 Marginal revenue and cost per unit curves  
-As shown in Exhibit 8-12, if the price is OB, the firm's total cost of producing at its most profitable level of output is:

Accepted Answer

A)  YF. 
B)  XL. 
C)  OYFB. 
D)  OXEA. 
A)  YF. 
B)  XL. 
C)  OYFB. 
D)  OXEA.

Question 12

Exhibit 8-14 Total cost and total revenue curves  
-If the firm in Exhibit 8-14 minimizes its loss at 200 units of output, marginal cost is:

Accepted Answer

A)  $75 per unit. 
B)  equal to marginal revenue. 
C)  $100 per unit. 
D)  $175 per unit. 
A)  $75 per unit. 
B)  equal to marginal revenue. 
C)  $100 per unit. 
D)  $175 per unit.

Question 13

Exhibit 8-3 Cost per unit curves  
-As shown in Exhibit 8-3, the price at which the firm earns zero economic profit in the short-run is:

Accepted Answer

A)  $1.00 per unit. 
B)  $1.50 per unit. 
C)  $4.00 per unit. 
D)  more than $2.00 per unit. 
E)  $2.00 per unit. 
A)  $1.00 per unit. 
B)  $1.50 per unit. 
C)  $4.00 per unit. 
D)  more than $2.00 per unit. 
E)  $2.00 per unit.

Question 14

When faced with an economic loss, a competitive firm will exit the industry in the long run.

Accepted Answer

A) True 
 B)False

Question 15

In the short run, a firm should shut down its business if price is less than:

Accepted Answer

A)  ATC. 
B)  AR. 
C)  MC. 
D)  AVC. 
E)  AFC. 
A)  ATC. 
B)  AR. 
C)  MC. 
D)  AVC. 
E)  AFC.

Question 16

Exhibit 8-2 Total revenue and total cost graph  
-In Exhibit 8-2, if output is 200 units per week, economic profit for the firm is:

Accepted Answer

A)  zero. 
B)  at its minimum. 
C)  at its maximum. 
D)  none of these. 
A)  zero. 
B)  at its minimum. 
C)  at its maximum. 
D)  none of these.

Question 17

If a potato farmer expands output, he finds that the increase in total revenue is less than the increase in total costs. This means that:

Accepted Answer

A)  profit is being maximized. 
B)  he should not have expanded output. 
C)  he should produce even more output. 
D)  the firm is wasting resources. 
E)  the farmer should go out of business. 
A)  profit is being maximized. 
B)  he should not have expanded output. 
C)  he should produce even more output. 
D)  the firm is wasting resources. 
E)  the farmer should go out of business.

Question 18

In long-run equilibrium, a perfectly competitive firm's short-run marginal cost curve crosses the long-run average cost curve at the lowest point on the long-run average cost curve.

Accepted Answer

A) True 
 B)False

Question 19

A perfectly competitive market is characterized by highly advertised goods.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 8-19 Long-run perfectly competitive industry  
-As shown in Exhibit 8-19, assume that a perfectly competitive industry is in long-run equilibrium at point A and the demand curve shifts from D1 to D2. The result is a long-run supply curve drawn from point:

Accepted Answer

A)  A to point B. 
B)  B to point A. 
C)  A to point D. 
D)  A to point C. 
A)  A to point B. 
B)  B to point A. 
C)  A to point D. 
D)  A to point C.

In the short run, a firm should shut down its operation if:

If, at the point where MR = MC, the firm incurs losses, in the short run the firm should:

In the short run, a perfectly competitive firm's most profitable level of output is where:

If marginal revenue equals marginal cost in the short run, the perfectly competitive firm earns zero profits.

A firm that is a price taker can:

Maximizing profit means finding the maximum difference between:

If a firm increases output when MR < MC, then:

When faced with an economic loss, a competitive firm will shut down its operations in the short run.

The profit maximizing or loss minimizing quantity of output for any firm to produce exists at that output level in which:

If a firm decreases output when MR < MC, then:

Exhibit 8-12 Marginal revenue and cost per unit curves -As shown in Exhibit 8-12, if the price is OB, the firm's total cost of producing at its most profitable level of output is:

Exhibit 8-14 Total cost and total revenue curves -If the firm in Exhibit 8-14 minimizes its loss at 200 units of output, marginal cost is:

Exhibit 8-3 Cost per unit curves -As shown in Exhibit 8-3, the price at which the firm earns zero economic profit in the short-run is:

When faced with an economic loss, a competitive firm will exit the industry in the long run.

In the short run, a firm should shut down its business if price is less than:

Exhibit 8-2 Total revenue and total cost graph -In Exhibit 8-2, if output is 200 units per week, economic profit for the firm is:

If a potato farmer expands output, he finds that the increase in total revenue is less than the increase in total costs. This means that:

In long-run equilibrium, a perfectly competitive firm's short-run marginal cost curve crosses the long-run average cost curve at the lowest point on the long-run average cost curve.

A perfectly competitive market is characterized by highly advertised goods.

Exhibit 8-19 Long-run perfectly competitive industry -As shown in Exhibit 8-19, assume that a perfectly competitive industry is in long-run equilibrium at point A and the demand curve shifts from D₁ to D₂. The result is a long-run supply curve drawn from point:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

Filters

Exam 8: Perfect Competition

In the short run, a firm should shut down its operation if:

If, at the point where MR = MC, the firm incurs losses, in the short run the firm should:

In the short run, a perfectly competitive firm's most profitable level of output is where:

If marginal revenue equals marginal cost in the short run, the perfectly competitive firm earns zero profits.

A firm that is a price taker can:

Maximizing profit means finding the maximum difference between:

If a firm increases output when MR < MC, then:

When faced with an economic loss, a competitive firm will shut down its operations in the short run.

The profit maximizing or loss minimizing quantity of output for any firm to produce exists at that output level in which:

If a firm decreases output when MR < MC, then:

Exhibit 8-12 Marginal revenue and cost per unit curves -As shown in Exhibit 8-12, if the price is OB, the firm's total cost of producing at its most profitable level of output is:

Exhibit 8-14 Total cost and total revenue curves -If the firm in Exhibit 8-14 minimizes its loss at 200 units of output, marginal cost is:

Exhibit 8-3 Cost per unit curves -As shown in Exhibit 8-3, the price at which the firm earns zero economic profit in the short-run is:

When faced with an economic loss, a competitive firm will exit the industry in the long run.

In the short run, a firm should shut down its business if price is less than:

Exhibit 8-2 Total revenue and total cost graph -In Exhibit 8-2, if output is 200 units per week, economic profit for the firm is:

If a potato farmer expands output, he finds that the increase in total revenue is less than the increase in total costs. This means that:

In long-run equilibrium, a perfectly competitive firm's short-run marginal cost curve crosses the long-run average cost curve at the lowest point on the long-run average cost curve.

A perfectly competitive market is characterized by highly advertised goods.

Exhibit 8-19 Long-run perfectly competitive industry -As shown in Exhibit 8-19, assume that a perfectly competitive industry is in long-run equilibrium at point A and the demand curve shifts from D1 to D2. The result is a long-run supply curve drawn from point:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution, Poverty, and Discrimination

Antitrust and Regulation

Environmental Economics

International Trade and Finance

Economies in Transition

Growth and the

Filters

Exhibit 8-19 Long-run perfectly competitive industry -As shown in Exhibit 8-19, assume that a perfectly competitive industry is in long-run equilibrium at point A and the demand curve shifts from D₁ to D₂. The result is a long-run supply curve drawn from point: