Question 1

A perfectly competitive firm's short-run supply curve is its marginal cost curve below its average variable cost curve.

Accepted Answer

A) True 
 B)False

Question 2

By producing at the point where MR = MC, the firm:

Accepted Answer

A)  is guaranteed a profit. 
B)  will earn a profit of zero. 
C)  will lose money. 
D)  profit is maximized. 
E)  output. 
A)  is guaranteed a profit. 
B)  will earn a profit of zero. 
C)  will lose money. 
D)  profit is maximized. 
E)  output.

Question 3

Exhibit 8-3 Cost per unit curves  
-In Exhibit 8-3, if the price of the firm's product is $2.00 per unit, the firm will produce:

Accepted Answer

A)  5 units per day. 
B)  10 units per day. 
C)  15 units per day. 
D)  20 units per day. 
A)  5 units per day. 
B)  10 units per day. 
C)  15 units per day. 
D)  20 units per day.

Question 4

The long run is a planning period:

Accepted Answer

A)  during which the firm can vary its plant size. 
B)  less than six months. 
C)  less than one year. 
D)  less than five years. 
A)  during which the firm can vary its plant size. 
B)  less than six months. 
C)  less than one year. 
D)  less than five years.

Question 5

What is a firm's short run supply curve?

Accepted Answer

A firm's short run supply curv

Question 6

Which of the following statements is true?

Accepted Answer

A)  To maximize profits, a firm must maximize total revenue. 
B)  In long-run equilibrium, a competitive firm produces at the point of minimum average total cost. 
C)  In the short-run, a perfectly competitive firm produces where total cost is minimum. 
D)  In the short-run, a perfectly competitive firm will close down whenever price is less than average total cost. 
A)  To maximize profits, a firm must maximize total revenue. 
B)  In long-run equilibrium, a competitive firm produces at the point of minimum average total cost. 
C)  In the short-run, a perfectly competitive firm produces where total cost is minimum. 
D)  In the short-run, a perfectly competitive firm will close down whenever price is less than average total cost.

Question 7

If input prices for a perfectly competitive industry remain constant 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 8

In short-run competitive equilibrium, which of the following is always true?

Accepted Answer

A)  ​Profit equals zero. 
B)  ​Profit can be negative, zero, or positive. 
C)  ​Profit can be zero or positive, but not negative. 
D)  ​Profit is positive, otherwise firms would not produce. ​ 
A)  ​Profit equals zero. 
B)  ​Profit can be negative, zero, or positive. 
C)  ​Profit can be zero or positive, but not negative. 
D)  ​Profit is positive, otherwise firms would not produce. ​

Question 9

If a perfectly competitive firm sells 10 units of output at a market price of $5 per unit, its marginal revenue per unit is:

Accepted Answer

A)  $5. 
B)  $50. 
C)  more than $5 but less than $50. 
D)  less than $5. 
A)  $5. 
B)  $50. 
C)  more than $5 but less than $50. 
D)  less than $5.

Question 10

Exhibit 8-4 Marginal cost and revenue for a firm $$\begin{array} { | c | c | c | } 
\hline \begin{array} { c } 
\text { Unit } \
\text { Quantity }
\end{array} & \text { Marginal Cost } & \begin{array} { c } 
\text { Marginal } \
\text { Revenue }
\end{array} \
\hline 12 & \$ 5 & \$ 9 \
13 & 6 & 9 \
14 & 7 & 9 \
15 & 8 & 9 \
16 & 9 & 9 \
17 & 10 & 9 \
\hline
\end{array}$$
-In Exhibit 8-4, this firm is currently operating at its profit-maximizing level of output. How much profit is the firm earning?

Accepted Answer

A)  Zero. 
B)  $1. 
C)  $16. 
D)  ?$16. 
E)  Unable to determine with this information. 
A)  Zero. 
B)  $1. 
C)  $16. 
D)  ?$16. 
E)  Unable to determine with this information.

Question 11

The fundamental rule of profit maximization for firms is to produce where:

Accepted Answer

A)  MR = MC. 
B)  ATC is minimized. 
C)  quantity of output is maximized. 
D)  price is maximized. 
E)  total revenue is maximized. 
A)  MR = MC. 
B)  ATC is minimized. 
C)  quantity of output is maximized. 
D)  price is maximized. 
E)  total revenue is maximized.

Question 12

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 losing $20. 
C)  is earning a total profit of $60. 
D)  should shut down. 
E)  is earning a total profit of $3. 
A)  is at its profit-maximizing point. 
B)  is losing $20. 
C)  is earning a total profit of $60. 
D)  should shut down. 
E)  is earning a total profit of $3.

Question 13

A firm in a price-taker market:

Accepted Answer

A)  must take the price that is determined in the market. 
B)  must reduce its price if it wants to sell a larger quantity. 
C)  must be large relative to the total market. 
D)  can exert a major influence on the market price. 
A)  must take the price that is determined in the market. 
B)  must reduce its price if it wants to sell a larger quantity. 
C)  must be large relative to the total market. 
D)  can exert a major influence on the market price.

Question 14

Perfect competition is a market structure in which there is:

Accepted Answer

A)  a contest among firms to provide good service after the sale. 
B)  competition in product quality. 
C)  rivalry in product design. 
D)  none of these. 
A)  a contest among firms to provide good service after the sale. 
B)  competition in product quality. 
C)  rivalry in product design. 
D)  none of these.

Question 15

Which of the following best illustrates a perfectly competitive market?

Accepted Answer

A)  Soft drinks. 
B)  Automobiles. 
C)  Electric power. 
D)  Soybean farmers. 
A)  Soft drinks. 
B)  Automobiles. 
C)  Electric power. 
D)  Soybean farmers.

Question 16

Under perfect competition, which of the following are the same (equal) at all levels of output?

Accepted Answer

A)  Price and marginal cost. 
B)  Price and marginal revenue. 
C)  Marginal cost and marginal revenue. 
D)  All of these. 
A)  Price and marginal cost. 
B)  Price and marginal revenue. 
C)  Marginal cost and marginal revenue. 
D)  All of these.

Question 17

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

Accepted Answer

A)  Economies of real cost. 
B)  Maximum total revenue. 
C)  Diseconomies of scale cost. 
D)  Minimum point on the long-run average cost curve. 
A)  Economies of real cost. 
B)  Maximum total revenue. 
C)  Diseconomies of scale cost. 
D)  Minimum point on the long-run average cost curve.

Question 18

Exhibit 8-10 Price and cost data for a firm $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Q } & \text { P } & \text { AVC } & \text { ATC } & \text { MC } \
\hline 0 & \$ 12 & - & - & - \
1 & 12 & 3 & 5 & 5 \
2 & 12 & 5 & 6 & 7 \
3 & 12 & 7.3 & 8 & 12 \
4 & 12 & 9.5 & 10 & 16 \
\hline
\end{array}$$
-In Exhibit 8-10, following the rule regarding MR and MC, the most profitable output level is:

Accepted Answer

A)  0. 
B)  1. 
C)  2. 
D)  3. 
E)  4. 
A)  0. 
B)  1. 
C)  2. 
D)  3. 
E)  4.

Question 19

A perfectly competitive firm will shut down in the short run when marginal revenue equals marginal cost at a price less than minimum average variable cost.

Accepted Answer

A) True 
 B)False

Question 20

If a perfectly competitive firm sells 50 units of output at a market price of $10 per unit, its marginal revenue is:

Accepted Answer

A)  more than $10. 
B)  less than $10. 
C)  $10. 
D)  $5300. 
A)  more than $10. 
B)  less than $10. 
C)  $10. 
D)  $5300.

A perfectly competitive firm's short-run supply curve is its marginal cost curve below its average variable cost curve.

By producing at the point where MR = MC, the firm:

Exhibit 8-3 Cost per unit curves -In Exhibit 8-3, if the price of the firm's product is $2.00 per unit, the firm will produce:

The long run is a planning period:

What is a firm's short run supply curve?

Which of the following statements is true?

If input prices for a perfectly competitive industry remain constant as the output of the industry expands in the long run, the industry supply curve will:

In short-run competitive equilibrium, which of the following is always true?

If a perfectly competitive firm sells 10 units of output at a market price of $5 per unit, its marginal revenue per unit is:

Exhibit 8-4 Marginal cost and revenue for a firm Unit Quantity Marginal Cost Marginal Revenue 12 \ 5 \ 9 13 6 9 14 7 9 15 8 9 16 9 9 17 10 9 -In Exhibit 8-4, this firm is currently operating at its profit-maximizing level of output. How much profit is the firm earning?

The fundamental rule of profit maximization for firms is to produce where:

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:

A firm in a price-taker market:

Perfect competition is a market structure in which there is:

Which of the following best illustrates a perfectly competitive market?

Under perfect competition, which of the following are the same (equal) at all levels of output?

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

Exhibit 8-10 Price and cost data for a firm Q P AVC ATC MC 0 \ 12 - - - 1 12 3 5 5 2 12 5 6 7 3 12 7.3 8 12 4 12 9.5 10 16 -In Exhibit 8-10, following the rule regarding MR and MC, the most profitable output level is:

A perfectly competitive firm will shut down in the short run when marginal revenue equals marginal cost at a price less than minimum average variable cost.

If a perfectly competitive firm sells 50 units of output at a market price of $10 per unit, its marginal revenue 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

A perfectly competitive firm's short-run supply curve is its marginal cost curve below its average variable cost curve.

By producing at the point where MR = MC, the firm:

Exhibit 8-3 Cost per unit curves -In Exhibit 8-3, if the price of the firm's product is $2.00 per unit, the firm will produce:

The long run is a planning period:

What is a firm's short run supply curve?

Which of the following statements is true?

If input prices for a perfectly competitive industry remain constant as the output of the industry expands in the long run, the industry supply curve will:

In short-run competitive equilibrium, which of the following is always true?

If a perfectly competitive firm sells 10 units of output at a market price of $5 per unit, its marginal revenue per unit is:

Exhibit 8-4 Marginal cost and revenue for a firm Unit Quantity Marginal Cost Marginal Revenue 12 \ 5 \ 9 13 6 9 14 7 9 15 8 9 16 9 9 17 10 9 -In Exhibit 8-4, this firm is currently operating at its profit-maximizing level of output. How much profit is the firm earning?

The fundamental rule of profit maximization for firms is to produce where:

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:

A firm in a price-taker market:

Perfect competition is a market structure in which there is:

Which of the following best illustrates a perfectly competitive market?

Under perfect competition, which of the following are the same (equal) at all levels of output?

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

Exhibit 8-10 Price and cost data for a firm Q P AVC ATC MC 0 \ 12 - - - 1 12 3 5 5 2 12 5 6 7 3 12 7.3 8 12 4 12 9.5 10 16 -In Exhibit 8-10, following the rule regarding MR and MC, the most profitable output level is:

A perfectly competitive firm will shut down in the short run when marginal revenue equals marginal cost at a price less than minimum average variable cost.

If a perfectly competitive firm sells 50 units of output at a market price of $10 per unit, its marginal revenue 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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