Question 1

Marginal revenue is the change in:

Accepted Answer

A)  total revenue resulting from a one unit change in output. 
B)  total revenue resulting from a change in marginal cost. 
C)  price resulting from a one unit change in output. 
D)  none of these. 
A)  total revenue resulting from a one unit change in output. 
B)  total revenue resulting from a change in marginal cost. 
C)  price resulting from a one unit change in output. 
D)  none of these.

Question 2

A firm operating in a perfectly competitive market is a price taker because:

Accepted Answer

A)  no firm has a significant market share. 
B)  no firm's product is perceived as different. 
C)  setting a price higher than the going price results in zero sales. 
D)  all of these. 
A)  no firm has a significant market share. 
B)  no firm's product is perceived as different. 
C)  setting a price higher than the going price results in zero sales. 
D)  all of these.

Question 3

If a firm in a competitive industry is making zero economic profit but still producing, it must be the case that:

Accepted Answer

A)  MC = MR > ATC. 
B)  MC = MR  MR. 
D)  MC = MR = ATC. 
E)  this situation is not possible. 
A)  MC = MR > ATC. 
B)  MC = MR  MR. 
D)  MC = MR = ATC. 
E)  this situation is not possible.

Question 4

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 5

Above the shutdown point, a competitive firm's supply curve coincides with its:

Accepted Answer

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

Question 6

Exhibit 8-18 A typical firm in a perfectly competitive market  
-As shown in Exhibit 8-18, the perfectly competitive firm is in long-run equilibrium at an output of:

Accepted Answer

A)  zero units per week. 
B)  200 units per week. 
C)  400 units per week. 
D)  600 units per week. 
A)  zero units per week. 
B)  200 units per week. 
C)  400 units per week. 
D)  600 units per week.

Question 7

Assume that a firm's marginal revenue just barely exceeds marginal cost. Under these conditions the firm should:

Accepted Answer

A)  expand output. 
B)  contract output. 
C)  maintain output. 
D)  There is insufficient information to answer the question. 
A)  expand output. 
B)  contract output. 
C)  maintain output. 
D)  There is insufficient information to answer the question.

Question 8

Assume a competitive market has firms earning large economic profits. What is expected to happen over time in this competitive market and to firm's profits?

Accepted Answer

Economic profits will attract new firms

Question 9

Exhibit 8-18 A typical firm in a perfectly competitive market  
-In Exhibit 8-18, assume the perfectly competitive firm is in long-run equilibrium and there is an increase in demand. As a result, the firm in the short run will increase output along its:

Accepted Answer

A)  short-run average total cost curve B. 
B)  short-run marginal cost curve B. 
C)  long-run average cost curve. 
D)  none of these because the firm shuts down. 
A)  short-run average total cost curve B. 
B)  short-run marginal cost curve B. 
C)  long-run average cost curve. 
D)  none of these because the firm shuts down.

Question 10

Suppose product price is fixed at $24; MR = MC at Q = 200; AFC = $6; AVC = $16. What do you advise this firm to do?

Accepted Answer

A)  Increase output. 
B)  Decrease output. 
C)  Shut down operations. 
D)  Stay at the current output; the firm is earning a profit of $400. 
E)  Stay at the current output; the firm is losing $200. 
A)  Increase output. 
B)  Decrease output. 
C)  Shut down operations. 
D)  Stay at the current output; the firm is earning a profit of $400. 
E)  Stay at the current output; the firm is losing $200.

Question 11

The neighborhood ice cream shop finds that when it charges $3 per ice cream cone, its total revenues are $90,000. It has total variable costs of $30,000 and total fixed costs of $40,000. From this we can infer the:

Accepted Answer

A)  shop should be moved because the rent is too high. 
B)  price is less than average total cost. 
C)  economic profits are $20,000. 
D)  shop will be closed in the long run. 
E)  shop sells 10,000 ice cream cones. 
A)  shop should be moved because the rent is too high. 
B)  price is less than average total cost. 
C)  economic profits are $20,000. 
D)  shop will be closed in the long run. 
E)  shop sells 10,000 ice cream cones.

Question 12

A perfectly competitive firm's short-run supply curve is the part of its marginal cost curve that is:

Accepted Answer

A)  upward sloping. 
B)  above the minimum level of average variable cost. 
C)  above average fixed cost. 
D)  both a and b 
A)  upward sloping. 
B)  above the minimum level of average variable cost. 
C)  above average fixed cost. 
D)  both a and b

Question 13

In the perfectly competitive market, all firms in the market are assumed to be producing:

Accepted Answer

A)  identical products. 
B)  differentiated products. 
C)  products that are heavily advertised. 
D)  complementary products. 
A)  identical products. 
B)  differentiated products. 
C)  products that are heavily advertised. 
D)  complementary products.

Question 14

When the price of a good is a constant, the marginal revenue per unit of output is the same as:

Accepted Answer

A)  total revenue. 
B)  average total cost. 
C)  price. 
D)  quantity of output. 
E)  profit per unit. 
A)  total revenue. 
B)  average total cost. 
C)  price. 
D)  quantity of output. 
E)  profit per unit.

Question 15

A perfectly competitive market is characterized by the free entry and exit of firms.

Accepted Answer

A) True 
 B)False

Question 16

A perfectly competitive firm in the short-run can earn:

Accepted Answer

A)  positive economic profits. 
B)  negative economic profits. 
C)  zero economic profits. 
D)  all of these are possible 
A)  positive economic profits. 
B)  negative economic profits. 
C)  zero economic profits. 
D)  all of these are possible

Question 17

Consider a firm with the following cost and revenue information: ATC = $8, AVC = $7, and MR = MC = $6. If the firm produces Q = 60 in the short run, it:

Accepted Answer

A)  is minimizing losses. 
B)  makes a total loss of $60. 
C)  should produce more output. 
D)  is making a mistake and should shut down. 
E)  is maximizing total profit. 
A)  is minimizing losses. 
B)  makes a total loss of $60. 
C)  should produce more output. 
D)  is making a mistake and should shut down. 
E)  is maximizing total profit.

Question 18

Which of the following correctly explains why sellers in a perfectly competitive market are price takers?

Accepted Answer

A)  There are few sellers, and so they have the power to take whatever price they want. 
B)  There are many sellers, and so the market process generates an equilibrium price that cannot be influenced by any one seller. Thus they have no choice but to take the price generated by the market process. 
C)  Sellers in a competitive market have the power to influence price by colluding with one another and using quotas to limit overall market output and thus raise price. 
D)  Individual buyers in a competitive market have the power to influence price, and thus can impose prices and other conditions on powerless sellers. 
A)  There are few sellers, and so they have the power to take whatever price they want. 
B)  There are many sellers, and so the market process generates an equilibrium price that cannot be influenced by any one seller. Thus they have no choice but to take the price generated by the market process. 
C)  Sellers in a competitive market have the power to influence price by colluding with one another and using quotas to limit overall market output and thus raise price. 
D)  Individual buyers in a competitive market have the power to influence price, and thus can impose prices and other conditions on powerless sellers.

Question 19

Exhibit 8-5 A firm's MR and MC curves  
-In Exhibit 8-5, suppose a firm is currently producing 50 units of output. What would you advise this firm to do?

Accepted Answer

A)  Shut down. 
B)  Increase output. 
C)  Stay at its current output. 
D)  Decrease output. 
E)  Decrease price. 
A)  Shut down. 
B)  Increase output. 
C)  Stay at its current output. 
D)  Decrease output. 
E)  Decrease price.

Question 20

In long-run equilibrium, a competitive firm produces the level of output at which:

Accepted Answer

A)  marginal cost is at a minimum. 
B)  short-run average total cost and long-run average cost are at a minimum. 
C)  total revenue is at a maximum. 
D)  diseconomies of scale end. 
A)  marginal cost is at a minimum. 
B)  short-run average total cost and long-run average cost are at a minimum. 
C)  total revenue is at a maximum. 
D)  diseconomies of scale end.

Marginal revenue is the change in:

A firm operating in a perfectly competitive market is a price taker because:

If a firm in a competitive industry is making zero economic profit but still producing, it must be the case that:

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

Above the shutdown point, a competitive firm's supply curve coincides with its:

Exhibit 8-18 A typical firm in a perfectly competitive market -As shown in Exhibit 8-18, the perfectly competitive firm is in long-run equilibrium at an output of:

Assume that a firm's marginal revenue just barely exceeds marginal cost. Under these conditions the firm should:

Assume a competitive market has firms earning large economic profits. What is expected to happen over time in this competitive market and to firm's profits?

Exhibit 8-18 A typical firm in a perfectly competitive market -In Exhibit 8-18, assume the perfectly competitive firm is in long-run equilibrium and there is an increase in demand. As a result, the firm in the short run will increase output along its:

Suppose product price is fixed at $24; MR = MC at Q = 200; AFC = $6; AVC = $16. What do you advise this firm to do?

The neighborhood ice cream shop finds that when it charges $3 per ice cream cone, its total revenues are $90,000. It has total variable costs of $30,000 and total fixed costs of $40,000. From this we can infer the:

A perfectly competitive firm's short-run supply curve is the part of its marginal cost curve that is:

In the perfectly competitive market, all firms in the market are assumed to be producing:

When the price of a good is a constant, the marginal revenue per unit of output is the same as:

A perfectly competitive market is characterized by the free entry and exit of firms.

A perfectly competitive firm in the short-run can earn:

Consider a firm with the following cost and revenue information: ATC = $8, AVC = $7, and MR = MC = $6. If the firm produces Q = 60 in the short run, it:

Which of the following correctly explains why sellers in a perfectly competitive market are price takers?

Exhibit 8-5 A firm's MR and MC curves -In Exhibit 8-5, suppose a firm is currently producing 50 units of output. What would you advise this firm to do?

In long-run equilibrium, a competitive firm produces the level of output at which:

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

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Exam 8: Perfect Competition

Marginal revenue is the change in:

A firm operating in a perfectly competitive market is a price taker because:

If a firm in a competitive industry is making zero economic profit but still producing, it must be the case that:

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

Above the shutdown point, a competitive firm's supply curve coincides with its:

Exhibit 8-18 A typical firm in a perfectly competitive market -As shown in Exhibit 8-18, the perfectly competitive firm is in long-run equilibrium at an output of:

Assume that a firm's marginal revenue just barely exceeds marginal cost. Under these conditions the firm should:

Assume a competitive market has firms earning large economic profits. What is expected to happen over time in this competitive market and to firm's profits?

Exhibit 8-18 A typical firm in a perfectly competitive market -In Exhibit 8-18, assume the perfectly competitive firm is in long-run equilibrium and there is an increase in demand. As a result, the firm in the short run will increase output along its:

Suppose product price is fixed at $24; MR = MC at Q = 200; AFC = $6; AVC = $16. What do you advise this firm to do?

The neighborhood ice cream shop finds that when it charges $3 per ice cream cone, its total revenues are $90,000. It has total variable costs of $30,000 and total fixed costs of $40,000. From this we can infer the:

A perfectly competitive firm's short-run supply curve is the part of its marginal cost curve that is:

In the perfectly competitive market, all firms in the market are assumed to be producing:

When the price of a good is a constant, the marginal revenue per unit of output is the same as:

A perfectly competitive market is characterized by the free entry and exit of firms.

A perfectly competitive firm in the short-run can earn:

Consider a firm with the following cost and revenue information: ATC = $8, AVC = $7, and MR = MC = $6. If the firm produces Q = 60 in the short run, it:

Which of the following correctly explains why sellers in a perfectly competitive market are price takers?

Exhibit 8-5 A firm's MR and MC curves -In Exhibit 8-5, suppose a firm is currently producing 50 units of output. What would you advise this firm to do?

In long-run equilibrium, a competitive firm produces the level of output at which:

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

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