Question 1

If marginal revenue exceeds marginal cost, profit maximizers should:

Accepted Answer

A)  reduce output until they are equal. 
B)  increase output until they are equal. 
C)  increase output until profits are zero. 
D)  decrease output unless profits are zero. 
E)  maintain current output. 
A)  reduce output until they are equal. 
B)  increase output until they are equal. 
C)  increase output until profits are zero. 
D)  decrease output unless profits are zero. 
E)  maintain current output.

Question 2

A perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the:

Accepted Answer

A)  average total cost curve. 
B)  average variable cost curve. 
C)  average fixed curve. 
D)  average price curve. 
A)  average total cost curve. 
B)  average variable cost curve. 
C)  average fixed curve. 
D)  average price curve.

Question 3

Which of the following is a firm's supply curve in a perfectly competitive market?

Accepted Answer

A)  Total cost. 
B)  Marginal revenue. 
C)  Marginal cost. 
D)  Average variable cost. 
A)  Total cost. 
B)  Marginal revenue. 
C)  Marginal cost. 
D)  Average variable cost.

Question 4

Exhibit 8-8 A firm's cost and marginal revenue curves  
-In Exhibit 8-8, product price in this market is fixed at $35. This firm is currently operating where MR = MC. Which of the following is true?

Accepted Answer

A)  Price  ATC and the firm is earning a positive profit. 
E)  Price > AVC, and the firm should stay at its current output. 
A)  Price  ATC and the firm is earning a positive profit. 
E)  Price > AVC, and the firm should stay at its current output.

Question 5

In the long-run equilibrium for a perfectly competitive firm, price equals which of the following?

Accepted Answer

A)  price. 
B)  minimum short-run average total cost. 
C)  short-run marginal cost. 
D)  All of these. 
A)  price. 
B)  minimum short-run average total cost. 
C)  short-run marginal cost. 
D)  All of these.

Question 6

The demand for the product of a competitive price-taker firm is:

Accepted Answer

A)  perfectly inelastic. 
B)  perfectly elastic. 
C)  greater than zero but less than one. 
D)  dependent on the availability of substitutes for the firm's product. 
A)  perfectly inelastic. 
B)  perfectly elastic. 
C)  greater than zero but less than one. 
D)  dependent on the availability of substitutes for the firm's product.

Question 7

Exhibit 8-17 Marginal revenue and cost per unit curves  
-As shown in Exhibit 8-17, if the product price is either $10, $15, $20, or $40, the firm's economic profit is maximum at an output of:

Accepted Answer

A)  20 units per day. 
B)  40 units per day. 
C)  60 units per day. 
D)  80 units per day. 
A)  20 units per day. 
B)  40 units per day. 
C)  60 units per day. 
D)  80 units per day.

Question 8

In the long run, a competitive firm will earn zero economic profit.

Accepted Answer

A) True 
 B)False

Question 9

Exhibit 8-7 A firm's cost and MR curves  
-In Exhibit 8-7, if this firm is currently producing 20 units of output, this firm:

Accepted Answer

A)  is at its profit-maximizing point. 
B)  is earning a $3 profit on each item sold. 
C)  is losing $3 on each item sold. 
D)  should shut down. 
E)  is earning a total profit of $3. 
A)  is at its profit-maximizing point. 
B)  is earning a $3 profit on each item sold. 
C)  is losing $3 on each item sold. 
D)  should shut down. 
E)  is earning a total profit of $3.

Question 10

Exhibit 8-12 Marginal revenue and cost per unit curves  
-As shown in Exhibit 8-12, the price that will yield zero economic profit is:

Accepted Answer

A)  OA. 
B)  OB. 
C)  OC. 
D)  OD. 
A)  OA. 
B)  OB. 
C)  OC. 
D)  OD.

Question 11

If a firm's marginal revenue from its 100th unit of output is $50 and the marginal cost from its 100th unit of output is $45, then in the short run this firm should:

Accepted Answer

A)  increase its plant size. 
B)  change its technology. 
C)  produce more than 99 units of output. 
D)  produce less than 100 units of output. 
E)  shut down. 
A)  increase its plant size. 
B)  change its technology. 
C)  produce more than 99 units of output. 
D)  produce less than 100 units of output. 
E)  shut down.

Question 12

Which of the following is not a characteristic of a perfectly competitive market?

Accepted Answer

A)  There is a large number of small firms. 
B)  Firms sell a homogeneous product. 
C)  Firms can easily enter or exit the market. 
D)  Firms are price makers, not price takers. 
A)  There is a large number of small firms. 
B)  Firms sell a homogeneous product. 
C)  Firms can easily enter or exit the market. 
D)  Firms are price makers, not price takers.

Question 13

Exhibit 8-2 Total revenue and total cost graph  
-In Exhibit 8-2, economic profit for the firm is at a maximum when output per week equals:

Accepted Answer

A)  zero units. 
B)  100 units. 
C)  200 units. 
D)  250 units. 
E)  300 units. 
A)  zero units. 
B)  100 units. 
C)  200 units. 
D)  250 units. 
E)  300 units.

Question 14

Exhibit 8-17 Marginal revenue and cost per unit curves  
-In Exhibit 8-17, if the price of the firm's product is $20 per unit, the firm will produce:

Accepted Answer

A)  20 units per day. 
B)  40 units per day. 
C)  60 units per day. 
D)  80 units per day. 
A)  20 units per day. 
B)  40 units per day. 
C)  60 units per day. 
D)  80 units per day.

Question 15

Market structure describes which of the following characteristics?

Accepted Answer

A)  The ease of entry into and exit from the market. 
B)  The similarity of the product sold. 
C)  The number of firms in each industry. 
D)  All of these are true. 
A)  The ease of entry into and exit from the market. 
B)  The similarity of the product sold. 
C)  The number of firms in each industry. 
D)  All of these are true.

Question 16

A fishing boat owner brings 50,000 fish to market and the market price is $4 per fish. Her average variable cost of 50,000 fish is $1 and the fixed cost of the boat is $100,000. What is her profit per fish?

Accepted Answer

A)  $1. 
B)  $500. 
C)  $5,000. 
D)  $25,000. 
E)  $500,000. 
A)  $1. 
B)  $500. 
C)  $5,000. 
D)  $25,000. 
E)  $500,000.

Question 17

In long-run equilibrium, the typical perfectly competitive firm has no incentive to:

Accepted Answer

A)  change output. 
B)  change plant size. 
C)  enter or leave the industry. 
D)  do any of these. 
A)  change output. 
B)  change plant size. 
C)  enter or leave the industry. 
D)  do any of these.

Question 18

Market structure is defined as the:

Accepted Answer

A)  number of firms in each industry. 
B)  similarity of the product sold. 
C)  ease of entry into and exit from the market. 
D)  all of these. 
A)  number of firms in each industry. 
B)  similarity of the product sold. 
C)  ease of entry into and exit from the market. 
D)  all of these.

Question 19

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

Accepted Answer

A)  total revenue minus total cost is at a maximum. 
B)  marginal cost equals marginal revenue. 
C)  Both of the above. 
D)  Neither of the above. 
A)  total revenue minus total cost is at a maximum. 
B)  marginal cost equals marginal revenue. 
C)  Both of the above. 
D)  Neither of the above.

Question 20

Exhibit 8-12 Marginal revenue and cost per unit curves  
-As shown in Exhibit 8-12, the firm's supply curve is the:

Accepted Answer

A)  entire marginal cost curve. 
B)  rising part of marginal cost beginning at E. 
C)  rising part of marginal cost beginning at F. 
D)  entire marginal revenue curve. 
A)  entire marginal cost curve. 
B)  rising part of marginal cost beginning at E. 
C)  rising part of marginal cost beginning at F. 
D)  entire marginal revenue curve.

If marginal revenue exceeds marginal cost, profit maximizers should:

A perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the:

Which of the following is a firm's supply curve in a perfectly competitive market?

Exhibit 8-8 A firm's cost and marginal revenue curves -In Exhibit 8-8, product price in this market is fixed at $35. This firm is currently operating where MR = MC. Which of the following is true?

In the long-run equilibrium for a perfectly competitive firm, price equals which of the following?

The demand for the product of a competitive price-taker firm is:

Exhibit 8-17 Marginal revenue and cost per unit curves -As shown in Exhibit 8-17, if the product price is either $10, $15, $20, or $40, the firm's economic profit is maximum at an output of:

In the long run, a competitive firm will earn zero economic profit.

Exhibit 8-7 A firm's cost and MR curves -In Exhibit 8-7, if this firm is currently producing 20 units of output, this firm:

Exhibit 8-12 Marginal revenue and cost per unit curves -As shown in Exhibit 8-12, the price that will yield zero economic profit is:

If a firm's marginal revenue from its 100th unit of output is $50 and the marginal cost from its 100th unit of output is $45, then in the short run this firm should:

Which of the following is not a characteristic of a perfectly competitive market?

Exhibit 8-2 Total revenue and total cost graph -In Exhibit 8-2, economic profit for the firm is at a maximum when output per week equals:

Exhibit 8-17 Marginal revenue and cost per unit curves -In Exhibit 8-17, if the price of the firm's product is $20 per unit, the firm will produce:

Market structure describes which of the following characteristics?

A fishing boat owner brings 50,000 fish to market and the market price is $4 per fish. Her average variable cost of 50,000 fish is $1 and the fixed cost of the boat is $100,000. What is her profit per fish?

In long-run equilibrium, the typical perfectly competitive firm has no incentive to:

Market structure is defined as the:

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

Exhibit 8-12 Marginal revenue and cost per unit curves -As shown in Exhibit 8-12, the firm's supply curve is the:

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

If marginal revenue exceeds marginal cost, profit maximizers should:

A perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the:

Which of the following is a firm's supply curve in a perfectly competitive market?

Exhibit 8-8 A firm's cost and marginal revenue curves -In Exhibit 8-8, product price in this market is fixed at $35. This firm is currently operating where MR = MC. Which of the following is true?

In the long-run equilibrium for a perfectly competitive firm, price equals which of the following?

The demand for the product of a competitive price-taker firm is:

Exhibit 8-17 Marginal revenue and cost per unit curves -As shown in Exhibit 8-17, if the product price is either $10, $15, $20, or $40, the firm's economic profit is maximum at an output of:

In the long run, a competitive firm will earn zero economic profit.

Exhibit 8-7 A firm's cost and MR curves -In Exhibit 8-7, if this firm is currently producing 20 units of output, this firm:

Exhibit 8-12 Marginal revenue and cost per unit curves -As shown in Exhibit 8-12, the price that will yield zero economic profit is:

If a firm's marginal revenue from its 100th unit of output is $50 and the marginal cost from its 100th unit of output is $45, then in the short run this firm should:

Which of the following is not a characteristic of a perfectly competitive market?

Exhibit 8-2 Total revenue and total cost graph -In Exhibit 8-2, economic profit for the firm is at a maximum when output per week equals:

Exhibit 8-17 Marginal revenue and cost per unit curves -In Exhibit 8-17, if the price of the firm's product is $20 per unit, the firm will produce:

Market structure describes which of the following characteristics?

A fishing boat owner brings 50,000 fish to market and the market price is $4 per fish. Her average variable cost of 50,000 fish is $1 and the fixed cost of the boat is $100,000. What is her profit per fish?

In long-run equilibrium, the typical perfectly competitive firm has no incentive to:

Market structure is defined as the:

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

Exhibit 8-12 Marginal revenue and cost per unit curves -As shown in Exhibit 8-12, the firm's supply curve is the:

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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