Question 1

Exhibit 22-10
   ​
-Refer to Exhibit 22-10. What is the marginal revenue and marginal cost, respectively, of the 7th unit of output?

Accepted Answer

A) $25 and $25 
B) $30 and $30 
C) $25 and $15 
D) $25 and $30 
E) There is not enough information to answer this question. 
A) $25 and $25 
B) $30 and $30 
C) $25 and $15 
D) $25 and $30 
E) There is not enough information to answer this question.

Question 2

Exhibit 22-8
​
  
-Refer to Exhibit 22-8. What is the total cost of firm B at the profit-maximizing (or loss-minimizing) level of production?

Accepted Answer

A) $11 
B) $750 
C) $1,650 
D) $400 
A) $11 
B) $750 
C) $1,650 
D) $400

Question 3

Exhibit 22-1
​
   ​
-Refer to Exhibit 22-1. The marginal revenue curve represented by the information in this table is

Accepted Answer

A) downward-sloping. 
B) upward-sloping. 
C) horizontal. 
D) vertical. 
A) downward-sloping. 
B) upward-sloping. 
C) horizontal. 
D) vertical.

Question 4

A firm operating in a perfectly competitive market finds itself producing a level of output for which marginal revenue is less than marginal cost. In order to maximize profits (or minimize losses), the firm should

Accepted Answer

A) increase its level of output. 
B) decrease its level of output. 
C) shut down operations. 
D) lower its price. 
E) raise its price. 
A) increase its level of output. 
B) decrease its level of output. 
C) shut down operations. 
D) lower its price. 
E) raise its price.

Question 5

Resource allocative efficiency occurs when a firm

Accepted Answer

A) minimizes costs of production yet charges the highest possible price. 
B) produces the quantity of output at which price exceeds average total cost by the greatest amount. 
C) produces the quantity of output at which price equals marginal cost. 
D) produces the quantity of output at which price equals average total cost. 
E) produces the quantity of output at which price equals average variable cost. 
A) minimizes costs of production yet charges the highest possible price. 
B) produces the quantity of output at which price exceeds average total cost by the greatest amount. 
C) produces the quantity of output at which price equals marginal cost. 
D) produces the quantity of output at which price equals average total cost. 
E) produces the quantity of output at which price equals average variable cost.

Question 6

If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing that unit the firm

Accepted Answer

A) added more to total costs than it added to total revenue. 
B) added more to total revenue than it added to total costs. 
C) added an equal amount to both total revenue and total costs. 
D) maximized profits or minimized losses. 
A) added more to total costs than it added to total revenue. 
B) added more to total revenue than it added to total costs. 
C) added an equal amount to both total revenue and total costs. 
D) maximized profits or minimized losses.

Question 7

A constant-cost industry has a long-run (industry) supply curve that is

Accepted Answer

A) upward sloping. 
B) downward sloping. 
C) horizontal. 
D) U-shaped. 
A) upward sloping. 
B) downward sloping. 
C) horizontal. 
D) U-shaped.

Question 8

One of the assumptions upon which the theory of perfect competition is built is that each firm produces and sells a heterogeneous product.

Accepted Answer

A) True 
 B)False

Question 9

There are 200 firms in a perfectly competitive industry. Half of the firms supply 100 units at $3 per unit and the other half of the firms supply 130 units at $3 per unit. One point on the market supply curve is

Accepted Answer

A) 23,000 units at $3. 
B) 10,000 units at $3. 
C) 13,000 units at $3. 
D) 23,000 units at $6. 
E) none of the above 
A) 23,000 units at $3. 
B) 10,000 units at $3. 
C) 13,000 units at $3. 
D) 23,000 units at $6. 
E) none of the above

Question 10

When the perfectly competitive firm produces the quantity of output at which marginal revenue equals marginal cost, it naturally

Accepted Answer

A) produces the quantity of output at which marginal cost equals price, since for the perfectly competitive firm price equals marginal revenue. 
B) produces the quantity of output at which short-run average total cost equals price, since for the perfectly competitive firm short-run average total cost equals marginal revenue. 
C) earns a profit, since equating marginal revenue and marginal cost guarantees profit. 
D) takes a loss. 
A) produces the quantity of output at which marginal cost equals price, since for the perfectly competitive firm price equals marginal revenue. 
B) produces the quantity of output at which short-run average total cost equals price, since for the perfectly competitive firm short-run average total cost equals marginal revenue. 
C) earns a profit, since equating marginal revenue and marginal cost guarantees profit. 
D) takes a loss.

Question 11

Exhibit 22-1
​
   ​
-Refer to Exhibit 22-1. The dollar amounts that go in blanks (C) and (D) are, respectively,

Accepted Answer

A) $1 and $1. 
B) $21 and $21. 
C) $4.90 and $4.95. 
D) $4 and $3. 
A) $1 and $1. 
B) $21 and $21. 
C) $4.90 and $4.95. 
D) $4 and $3.

Question 12

At the quantity of output for which total revenue equals total cost,

Accepted Answer

A) economic profit is zero. 
B) cost is minimized. 
C) cost is maximized. 
D) quantity is minimized. 
E) profit is maximized. 
A) economic profit is zero. 
B) cost is minimized. 
C) cost is maximized. 
D) quantity is minimized. 
E) profit is maximized.

Question 13

The demand curve facing a perfectly competitive firm

Accepted Answer

A) is downward sloping. 
B) is upward sloping. 
C) is perfectly horizontal. 
D) is perfectly vertical. 
E) may be downward or upward sloping, depending upon the type of product offered for sale. 
A) is downward sloping. 
B) is upward sloping. 
C) is perfectly horizontal. 
D) is perfectly vertical. 
E) may be downward or upward sloping, depending upon the type of product offered for sale.

Question 14

If, for a perfectly competitive firm, marginal cost is greater than marginal revenue for the 100th unit, then it follows that

Accepted Answer

A) producing the 100th unit adds more to total revenue than it does to total cost. 
B) producing the 100th unit adds more to total cost than it does to total revenue. 
C) marginal cost equals marginal revenue for the 99th unit. 
D) the firm is not maximizing profit, or minimizing losses, if it produces the 100th unit. 
E) b and d 
A) producing the 100th unit adds more to total revenue than it does to total cost. 
B) producing the 100th unit adds more to total cost than it does to total revenue. 
C) marginal cost equals marginal revenue for the 99th unit. 
D) the firm is not maximizing profit, or minimizing losses, if it produces the 100th unit. 
E) b and d

Question 15

Which of the following is not an assumption of the theory of perfect competition?

Accepted Answer

A) There are many sellers and many buyers, none of which is large in relation to total sales or purchases. 
B) Each firm produces and sells a differentiated product. 
C) Buyers and sellers have all relevant information with respect to prices, product quality, and sources of supply. 
D) There is easy entry and exit. 
A) There are many sellers and many buyers, none of which is large in relation to total sales or purchases. 
B) Each firm produces and sells a differentiated product. 
C) Buyers and sellers have all relevant information with respect to prices, product quality, and sources of supply. 
D) There is easy entry and exit.

Question 16

Exhibit 22-4
​
  
-Refer to Exhibit 22-4. The market equilibrium price is P1 and the firm produces Q1. At this level of output, average variable cost and average total cost are indicated by the dots. Given this situation, the firm is

Accepted Answer

A) receiving a profit equal to area 3. 
B) taking a loss equal to area 2 + area 3. 
C) earning total revenue equal to area 1 + area 2. 
D) receiving a profit equal to area 2. 
E) none of the above 
A) receiving a profit equal to area 3. 
B) taking a loss equal to area 2 + area 3. 
C) earning total revenue equal to area 1 + area 2. 
D) receiving a profit equal to area 2. 
E) none of the above

Question 17

Exhibit 22-8
​
  
-Refer to Exhibit 22-8. What is the total fixed cost of firm A at the profit-maximizing (or loss-minimizing) level of output?

Accepted Answer

A) $3 
B) $300 
C) $90 
D) $400 
E) There is not enough information provided to answer this question. 
A) $3 
B) $300 
C) $90 
D) $400 
E) There is not enough information provided to answer this question.

Question 18

Exhibit 22-7
​
  
-Refer to Exhibit 22-7. At the profit-maximizing output level, average total cost is

Accepted Answer

A) $2.00. 
B) $4.50. 
C) $5.00. 
D) $6.00. 
E) This cannot be determined based on the information provided. 
A) $2.00. 
B) $4.50. 
C) $5.00. 
D) $6.00. 
E) This cannot be determined based on the information provided.

Question 19

Marginal revenue is defined as

Accepted Answer

A) the difference between costs and revenues. 
B) the change in total revenue caused by selling one additional unit of output. 
C) price times quantity. 
D) total revenue divided by the level of output. 
E) total revenue minus the level of output. 
A) the difference between costs and revenues. 
B) the change in total revenue caused by selling one additional unit of output. 
C) price times quantity. 
D) total revenue divided by the level of output. 
E) total revenue minus the level of output.

Question 20

Firm X is producing the quantity of output at which marginal revenue equals marginal cost. It is earning

Accepted Answer

A) a positive economic profit. 
B) an economic loss. 
C) a normal profit. 
D) There is not enough information to answer the question. 
A) a positive economic profit. 
B) an economic loss. 
C) a normal profit. 
D) There is not enough information to answer the question.

Exam 22: Perfect Competition

Exhibit 22-10 ​ -Refer to Exhibit 22-10. What is the marginal revenue and marginal cost, respectively, of the 7th unit of output?

Exhibit 22-8 ​ -Refer to Exhibit 22-8. What is the total cost of firm B at the profit-maximizing (or loss-minimizing) level of production?

Exhibit 22-1 ​ ​ -Refer to Exhibit 22-1. The marginal revenue curve represented by the information in this table is

A firm operating in a perfectly competitive market finds itself producing a level of output for which marginal revenue is less than marginal cost. In order to maximize profits (or minimize losses), the firm should

Resource allocative efficiency occurs when a firm

If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing that unit the firm

A constant-cost industry has a long-run (industry) supply curve that is

One of the assumptions upon which the theory of perfect competition is built is that each firm produces and sells a heterogeneous product.

There are 200 firms in a perfectly competitive industry. Half of the firms supply 100 units at $3 per unit and the other half of the firms supply 130 units at $3 per unit. One point on the market supply curve is

When the perfectly competitive firm produces the quantity of output at which marginal revenue equals marginal cost, it naturally

Exhibit 22-1 ​ ​ -Refer to Exhibit 22-1. The dollar amounts that go in blanks (C) and (D) are, respectively,

At the quantity of output for which total revenue equals total cost,

The demand curve facing a perfectly competitive firm

If, for a perfectly competitive firm, marginal cost is greater than marginal revenue for the 100th unit, then it follows that

Which of the following is not an assumption of the theory of perfect competition?

Exhibit 22-4 ​ -Refer to Exhibit 22-4. The market equilibrium price is P1 and the firm produces Q1. At this level of output, average variable cost and average total cost are indicated by the dots. Given this situation, the firm is

Exhibit 22-8 ​ -Refer to Exhibit 22-8. What is the total fixed cost of firm A at the profit-maximizing (or loss-minimizing) level of output?

Exhibit 22-7 ​ -Refer to Exhibit 22-7. At the profit-maximizing output level, average total cost is

Marginal revenue is defined as

Firm X is producing the quantity of output at which marginal revenue equals marginal cost. It is earning

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Exhibit 22-10 -Refer to Exhibit 22-10. What is the marginal revenue and marginal cost, respectively, of the 7th unit of output?

Exhibit 22-8 -Refer to Exhibit 22-8. What is the total cost of firm B at the profit-maximizing (or loss-minimizing) level of production?

Exhibit 22-1 -Refer to Exhibit 22-1. The marginal revenue curve represented by the information in this table is

Exhibit 22-1 -Refer to Exhibit 22-1. The dollar amounts that go in blanks (C) and (D) are, respectively,

Exhibit 22-4 -Refer to Exhibit 22-4. The market equilibrium price is P₁ and the firm produces Q₁. At this level of output, average variable cost and average total cost are indicated by the dots. Given this situation, the firm is

Exhibit 22-8 -Refer to Exhibit 22-8. What is the total fixed cost of firm A at the profit-maximizing (or loss-minimizing) level of output?

Exhibit 22-7 -Refer to Exhibit 22-7. At the profit-maximizing output level, average total cost is