Question 1

Exhibit 8-14 Total cost and total revenue curves  
-In Exhibit 8-14, if output is at 200 units per week, total economic profit for the firm is:

Accepted Answer

A)  zero. 
B)  positive. 
C)  negative. 
D)  none of these. 
A)  zero. 
B)  positive. 
C)  negative. 
D)  none of these.

Question 2

What are the pros and cons of a competitive market in the long run?

Accepted Answer

The pros include price equals minimum av

Question 3

If a firm is currently equating MR and MC and product price = $24, AVC = $22, and ATC = $26, then in the long run this firm:

Accepted Answer

A)  will continue to operate at a loss. 
B)  will earn a positive profit. 
C)  will go out of business. 
D)  should increase output. 
E)  should decrease price. 
A)  will continue to operate at a loss. 
B)  will earn a positive profit. 
C)  will go out of business. 
D)  should increase output. 
E)  should decrease price.

Question 4

Assume the short-run average total cost for a perfectly competitive industry decreases as the output of the industry expands. In the long run, the industry supply curve will:

Accepted Answer

A)  have a positive slope. 
B)  have a negative slope. 
C)  be perfectly horizontal. 
D)  be perfectly vertical. 
A)  have a positive slope. 
B)  have a negative slope. 
C)  be perfectly horizontal. 
D)  be perfectly vertical.

Question 5

If the demand for a product increases in an increasing cost industry, as the market adjusts in the long run:

Accepted Answer

A)  price will rise. 
B)  the firm's per-unit cost will increase. 
C)  the firm's per-unit cost will fall. 
D)  the market price will return to its initial position. 
A)  price will rise. 
B)  the firm's per-unit cost will increase. 
C)  the firm's per-unit cost will fall. 
D)  the market price will return to its initial position.

Question 6

Exhibit 8-1 Quantity and total revenue data for a firm $$\begin{array} { | c | c | } 
\hline \text { Quantity } & \text { Total Revenue } \
\hline 0 & \$ 0 \
1 & 62 \
2 & 124 \
3 & 186 \
\hline
\end{array}$$
-In the perfectly competitive market, individual firms exert no effect on the market price. Therefore, the firm's marginal revenue curve is:

Accepted Answer

A)  indeterminate. 
B)  an upward-sloping curve. 
C)  a downward-sloping curve. 
D)  the same as the firm's demand curve. 
A)  indeterminate. 
B)  an upward-sloping curve. 
C)  a downward-sloping curve. 
D)  the same as the firm's demand curve.

Question 7

Suppose that, in the long run, the price of feature films rises as the movie production industry expands. We can conclude that movie production is a(n):

Accepted Answer

A)  increasing-cost industry. 
B)  constant-cost industry. 
C)  decreasing-cost industry. 
D)  marginal-cost industry. 
A)  increasing-cost industry. 
B)  constant-cost industry. 
C)  decreasing-cost industry. 
D)  marginal-cost industry.

Question 8

The supply curve for a perfectly competitive firm is its marginal cost curve for all levels of output.

Accepted Answer

A) True 
 B)False

Question 9

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 a price of:

Accepted Answer

A)  $100. 
B)  $200. 
C)  $300. 
D)  $400. 
A)  $100. 
B)  $200. 
C)  $300. 
D)  $400.

Question 10

Jerome, the florist, sold 500 bridesmaid's bouquets in June. He estimates his costs that month were ATC = $10, AVC = $6, and MC = $9. If he sold each bouquet at the constant market price of $9, Jerome:

Accepted Answer

A)  made an economic profit of $500. 
B)  made a loss of $500. 
C)  made an economic profit of $1,500. 
D)  made a loss of $1,500. 
E)  should have shut down in June. 
A)  made an economic profit of $500. 
B)  made a loss of $500. 
C)  made an economic profit of $1,500. 
D)  made a loss of $1,500. 
E)  should have shut down in June.

Question 11

In a constant-cost industry, input prices remain constant as:

Accepted Answer

A)  the supply of inputs fluctuates. 
B)  firms encounter diseconomies of scale. 
C)  workers become more experienced. 
D)  firms enter and exit the industry. 
A)  the supply of inputs fluctuates. 
B)  firms encounter diseconomies of scale. 
C)  workers become more experienced. 
D)  firms enter and exit the industry.

Question 12

Exhibit 8-12 Marginal revenue and cost per unit curves  
-As shown in Exhibit 8-12, the firm will shut down in the short-run at a price below:

Accepted Answer

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

Question 13

Exhibit 8-15 Short-run cost curves for E-Z Care lawn mowing company  
-In Exhibit 8-15, what market price would cause E-Z-Care to just beak even?

Accepted Answer

A)  $6 per lawn. 
B)  $8 per lawn. 
C)  $12 per lawn. 
D)  $16 per lawn. 
A)  $6 per lawn. 
B)  $8 per lawn. 
C)  $12 per lawn. 
D)  $16 per lawn.

Question 14

When the marginal cost of a price-taker firm is more than the market price of its product, the firm should:

Accepted Answer

A)  expand output. 
B)  reduce output. 
C)  maintain output. 
D)  charge more than the market price. 
A)  expand output. 
B)  reduce output. 
C)  maintain output. 
D)  charge more than the market price.

Question 15

Consider a firm operating with the following: price = 10; MR = 10; MC = 10; ATC = 10. This firm is:

Accepted Answer

A)  making an economic profit of 10. 
B)  an example of monopolistic competition. 
C)  going to go out of business in the long run. 
D)  a monopolist for a product with a relatively inelastic demand. 
E)  perfectly competitive in long-run equilibrium. 
A)  making an economic profit of 10. 
B)  an example of monopolistic competition. 
C)  going to go out of business in the long run. 
D)  a monopolist for a product with a relatively inelastic demand. 
E)  perfectly competitive in long-run equilibrium.

Question 16

What is the largest possible loss that is consistent with a firm producing in a perfectly competitive market in long-run competitive equilibrium?

Accepted Answer

A)  An amount equal to (price less average variable cost). 
B)  An amount equal to total variable. 
C)  Zero. 
D)  An amount equal to total fixed cost. 
A)  An amount equal to (price less average variable cost). 
B)  An amount equal to total variable. 
C)  Zero. 
D)  An amount equal to total fixed cost.

Question 17

If a firm has no ability to select the price of its product, it:

Accepted Answer

A)  will go out of business due to losses. 
B)  is a price-maker. 
C)  cannot maximize profit. 
D)  has a horizontal individual demand curve. 
A)  will go out of business due to losses. 
B)  is a price-maker. 
C)  cannot maximize profit. 
D)  has a horizontal individual demand curve.

Question 18

If a firm is operating at a loss in the short run and finds that its price is greater than average variable cost, then in the short run:

Accepted Answer

A)  it should produce where MR = MC. 
B)  it should produce zero output. 
C)  it should go out of business. 
D)  total revenue is less than total variable costs. 
E)  total revenue is greater than total costs. 
A)  it should produce where MR = MC. 
B)  it should produce zero output. 
C)  it should go out of business. 
D)  total revenue is less than total variable costs. 
E)  total revenue is greater than total costs.

Question 19

If input prices for a perfectly competitive firm increase as the output of the industry expand in the long run, the long-run industry supply curve will:

Accepted Answer

A)  have a positive slope. 
B)  have a negative slope. 
C)  be perfectly horizontal. 
D)  be perfectly vertical. 
A)  have a positive slope. 
B)  have a negative slope. 
C)  be perfectly horizontal. 
D)  be perfectly vertical.

Question 20

Exhibit 8-13 Price and cost per unit curves  
-As shown by the five points in Exhibit 8-13, the firm's total economic profit is maximized when the price is:

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
E)  P5. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
E)  P5.

Exhibit 8-14 Total cost and total revenue curves -In Exhibit 8-14, if output is at 200 units per week, total economic profit for the firm is:

What are the pros and cons of a competitive market in the long run?

If a firm is currently equating MR and MC and product price = $24, AVC = $22, and ATC = $26, then in the long run this firm:

Assume the short-run average total cost for a perfectly competitive industry decreases as the output of the industry expands. In the long run, the industry supply curve will:

If the demand for a product increases in an increasing cost industry, as the market adjusts in the long run:

Exhibit 8-1 Quantity and total revenue data for a firm Quantity Total Revenue 0 \ 0 1 62 2 124 3 186 -In the perfectly competitive market, individual firms exert no effect on the market price. Therefore, the firm's marginal revenue curve is:

Suppose that, in the long run, the price of feature films rises as the movie production industry expands. We can conclude that movie production is a(n):

The supply curve for a perfectly competitive firm is its marginal cost curve for all levels of output.

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 a price of:

Jerome, the florist, sold 500 bridesmaid's bouquets in June. He estimates his costs that month were ATC = $10, AVC = $6, and MC = $9. If he sold each bouquet at the constant market price of $9, Jerome:

In a constant-cost industry, input prices remain constant as:

Exhibit 8-12 Marginal revenue and cost per unit curves -As shown in Exhibit 8-12, the firm will shut down in the short-run at a price below:

Exhibit 8-15 Short-run cost curves for E-Z Care lawn mowing company -In Exhibit 8-15, what market price would cause E-Z-Care to just beak even?

When the marginal cost of a price-taker firm is more than the market price of its product, the firm should:

Consider a firm operating with the following: price = 10; MR = 10; MC = 10; ATC = 10. This firm is:

What is the largest possible loss that is consistent with a firm producing in a perfectly competitive market in long-run competitive equilibrium?

If a firm has no ability to select the price of its product, it:

If a firm is operating at a loss in the short run and finds that its price is greater than average variable cost, then in the short run:

If input prices for a perfectly competitive firm increase as the output of the industry expand in the long run, the long-run industry supply curve will:

Exhibit 8-13 Price and cost per unit curves -As shown by the five points in Exhibit 8-13, the firm's total economic profit is maximized when the price is:

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

Exhibit 8-14 Total cost and total revenue curves -In Exhibit 8-14, if output is at 200 units per week, total economic profit for the firm is:

What are the pros and cons of a competitive market in the long run?

If a firm is currently equating MR and MC and product price = $24, AVC = $22, and ATC = $26, then in the long run this firm:

Assume the short-run average total cost for a perfectly competitive industry decreases as the output of the industry expands. In the long run, the industry supply curve will:

If the demand for a product increases in an increasing cost industry, as the market adjusts in the long run:

Exhibit 8-1 Quantity and total revenue data for a firm Quantity Total Revenue 0 \ 0 1 62 2 124 3 186 -In the perfectly competitive market, individual firms exert no effect on the market price. Therefore, the firm's marginal revenue curve is:

Suppose that, in the long run, the price of feature films rises as the movie production industry expands. We can conclude that movie production is a(n):

The supply curve for a perfectly competitive firm is its marginal cost curve for all levels of output.

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 a price of:

Jerome, the florist, sold 500 bridesmaid's bouquets in June. He estimates his costs that month were ATC = $10, AVC = $6, and MC = $9. If he sold each bouquet at the constant market price of $9, Jerome:

In a constant-cost industry, input prices remain constant as:

Exhibit 8-12 Marginal revenue and cost per unit curves -As shown in Exhibit 8-12, the firm will shut down in the short-run at a price below:

Exhibit 8-15 Short-run cost curves for E-Z Care lawn mowing company -In Exhibit 8-15, what market price would cause E-Z-Care to just beak even?

When the marginal cost of a price-taker firm is more than the market price of its product, the firm should:

Consider a firm operating with the following: price = 10; MR = 10; MC = 10; ATC = 10. This firm is:

What is the largest possible loss that is consistent with a firm producing in a perfectly competitive market in long-run competitive equilibrium?

If a firm has no ability to select the price of its product, it:

If a firm is operating at a loss in the short run and finds that its price is greater than average variable cost, then in the short run:

If input prices for a perfectly competitive firm increase as the output of the industry expand in the long run, the long-run industry supply curve will:

Exhibit 8-13 Price and cost per unit curves -As shown by the five points in Exhibit 8-13, the firm's total economic profit is maximized when the price is:

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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