Question 1

Exhibit 22-3
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   ​
-Refer to Exhibit 22-3. What is the increase in profit that would result from producing 43 units of the product rather than producing 40 units?

Accepted Answer

A) $60 
B) $48 
C) $28 
D) $16 
E) $10 
A) $60 
B) $48 
C) $28 
D) $16 
E) $10

Question 2

For a perfectly competitive firm,

Accepted Answer

A) marginal revenue is equal to price. 
B) price is equal to marginal cost at the output level that maximizes profit. 
C) selling an additional unit of the good it produces increases total revenue by the price of the good. 
D) a and b 
E) a, b, and c 
A) marginal revenue is equal to price. 
B) price is equal to marginal cost at the output level that maximizes profit. 
C) selling an additional unit of the good it produces increases total revenue by the price of the good. 
D) a and b 
E) a, b, and c

Question 3

Exhibit 22-3
​
   ​
-Refer to Exhibit 22-3. Is it possible for this firm to produce "too much" in the short-run (in terms of profitability)?

Accepted Answer

A) Any quantity above 42 units is too much. 
B) Any quantity above 44 units is too much. 
C) Any quantity above 40 units is too much. 
D) none of the above 
A) Any quantity above 42 units is too much. 
B) Any quantity above 44 units is too much. 
C) Any quantity above 40 units is too much. 
D) none of the above

Question 4

If the firm is producing a quantity of output for which MC > MR, then the firm should increase production to increase its profits.

Accepted Answer

A) True 
 B)False

Question 5

Exhibit 22-2
​
  
-Refer to Exhibit 22-2. If the firm produces the quantity of output at which marginal revenue (MR) equals marginal cost (MC), is it guaranteed maximum profit or minimized loss?

Accepted Answer

A) Yes, when MR = MC, it follows that MR - MC = 0, and thus the firm maximizes profit and minimizes losses. 
B) No, at the quantity of output at which MR = MC, it could be the case that average variable cost is greater than price and the firm would do better to shut down. 
C) Yes, when the firm produces the quantity at which MR = MC, it has maximized both revenue and profit. 
D) Yes, because if the MC curve is rising, the average total cost curve always lies below it and thus profit is earned. 
A) Yes, when MR = MC, it follows that MR - MC = 0, and thus the firm maximizes profit and minimizes losses. 
B) No, at the quantity of output at which MR = MC, it could be the case that average variable cost is greater than price and the firm would do better to shut down. 
C) Yes, when the firm produces the quantity at which MR = MC, it has maximized both revenue and profit. 
D) Yes, because if the MC curve is rising, the average total cost curve always lies below it and thus profit is earned.

Question 6

Consider the following data: equilibrium price = $15, quantity of output produced = 10,000 units, average total cost = $12, and average variable cost $7. Given this data, total revenue is __________, total cost is __________, and total fixed cost is __________.

Accepted Answer

A) $15,000; $12,000; $7,000 
B) $150,000; $120,000; $70,000 
C) $15,000; $12,000; $5,000 
D) $150,000; $120,000; $50,000 
E) none of the above 
A) $15,000; $12,000; $7,000 
B) $150,000; $120,000; $70,000 
C) $15,000; $12,000; $5,000 
D) $150,000; $120,000; $50,000 
E) none of the above

Question 7

Demand increases in an increasing-cost industry that is initially in long-run competitive equilibrium. After full adjustment, price will be

Accepted Answer

A) equal to its original level. 
B) below its original level. 
C) above its original level. 
D) There is not enough information to answer the question. 
A) equal to its original level. 
B) below its original level. 
C) above its original level. 
D) There is not enough information to answer the question.

Question 8

Which of the following is a characteristic of perfect competition?

Accepted Answer

A) many sellers and few buyers 
B) many buyers and few sellers 
C) a heterogeneous product 
D) buyers and sellers having all relevant information 
E) high barriers to entry and exit 
A) many sellers and few buyers 
B) many buyers and few sellers 
C) a heterogeneous product 
D) buyers and sellers having all relevant information 
E) high barriers to entry and exit

Question 9

If firms are earning zero economic profits, they must be producing at an output level at which

Accepted Answer

A) price equals marginal cost. 
B) price equals average total cost. 
C) price equals average variable cost. 
D) marginal revenue equals marginal cost. 
E) none of the above 
A) price equals marginal cost. 
B) price equals average total cost. 
C) price equals average variable cost. 
D) marginal revenue equals marginal cost. 
E) none of the above

Question 10

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

Accepted Answer

A) $300 
B) $700 
C) $1,000 
D) $400 
A) $300 
B) $700 
C) $1,000 
D) $400

Question 11

If, for a perfectly competitive firm, price is greater than average variable cost, then it follows that

Accepted Answer

A) total revenue is greater than total cost. 
B) total revenue is greater than total variable cost. 
C) the firm will lose more or earn less by shutting down in the short run than by continuing to produce. 
D) b and c 
E) There is not enough information to answer the question. 
A) total revenue is greater than total cost. 
B) total revenue is greater than total variable cost. 
C) the firm will lose more or earn less by shutting down in the short run than by continuing to produce. 
D) b and c 
E) There is not enough information to answer the question.

Question 12

Exhibit 22-9
​
  
-Refer to Exhibit 22-9. Following an increase in market demand from D1 to D2, the firm's profits in the short run will

Accepted Answer

A) remain the same at P1 times q1. 
B) remain the same at zero. 
C) increase by less than (P2 - P1) times q2. 
D) increase by (P2 - P1) times q3. 
A) remain the same at P1 times q1. 
B) remain the same at zero. 
C) increase by less than (P2 - P1) times q2. 
D) increase by (P2 - P1) times q3.

Question 13

In the theory of perfect competition,

Accepted Answer

A) sellers of the product are not influenced by other sellers and therefore have virtually complete control over the production and pricing of their product. 
B) buyers of the product may have a preference as to whom they purchase from based on brand loyalty. 
C) buyers and sellers of the product know everything that there is to know about the product. 
D) it can be quite expensive for a firm to enter this type of market, but once the firm is established, it will be a profitable venture. 
A) sellers of the product are not influenced by other sellers and therefore have virtually complete control over the production and pricing of their product. 
B) buyers of the product may have a preference as to whom they purchase from based on brand loyalty. 
C) buyers and sellers of the product know everything that there is to know about the product. 
D) it can be quite expensive for a firm to enter this type of market, but once the firm is established, it will be a profitable venture.

Question 14

A perfectly competitive firm is a price taker.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit 22-3
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   ​
-Refer to Exhibit 22-3. Based upon the information provided in this table, what is the maximum profit this firm can earn?

Accepted Answer

A) $65 
B) $16 
C) $6 
D) $308 
A) $65 
B) $16 
C) $6 
D) $308

Question 16

Which of the following conditions does not characterize long-run competitive equilibrium?

Accepted Answer

A) Economic profit is zero. 
B) Price is greater than marginal cost. 
C) No firm has an incentive to change its plant size. 
D) No firm has an incentive to produce more or less output. 
A) Economic profit is zero. 
B) Price is greater than marginal cost. 
C) No firm has an incentive to change its plant size. 
D) No firm has an incentive to produce more or less output.

Question 17

List and describe the four assumptions that underlie the theory of perfect competition.

Accepted Answer

1) There are many sellers and buyers, ea

Question 18

When a firm produces the quantity of output where price equals marginal cost, it has achieved resource allocative efficiency.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) $1 and $1. 
B) $21 and $21. 
C) $4.80 and $4.86. 
D) $21 and $12. 
A) $1 and $1. 
B) $21 and $21. 
C) $4.80 and $4.86. 
D) $21 and $12.

Question 20

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

Accepted Answer

A) -$600 
B) $270 
C) $600 
D) $400 
E) ​-$400 
A) -$600 
B) $270 
C) $600 
D) $400 
E) ​-$400

Exam 22: Perfect Competition

Exhibit 22-3 ​ ​ -Refer to Exhibit 22-3. What is the increase in profit that would result from producing 43 units of the product rather than producing 40 units?

For a perfectly competitive firm,

Exhibit 22-3 ​ ​ -Refer to Exhibit 22-3. Is it possible for this firm to produce "too much" in the short-run (in terms of profitability)?

If the firm is producing a quantity of output for which MC > MR, then the firm should increase production to increase its profits.

Exhibit 22-2 ​ -Refer to Exhibit 22-2. If the firm produces the quantity of output at which marginal revenue (MR) equals marginal cost (MC), is it guaranteed maximum profit or minimized loss?

Consider the following data: equilibrium price = $15, quantity of output produced = 10,000 units, average total cost = $12, and average variable cost $7. Given this data, total revenue is __________, total cost is __________, and total fixed cost is __________.

Demand increases in an increasing-cost industry that is initially in long-run competitive equilibrium. After full adjustment, price will be

Which of the following is a characteristic of perfect competition?

If firms are earning zero economic profits, they must be producing at an output level at which

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

If, for a perfectly competitive firm, price is greater than average variable cost, then it follows that

Exhibit 22-9 ​ -Refer to Exhibit 22-9. Following an increase in market demand from D1 to D2, the firm's profits in the short run will

In the theory of perfect competition,

A perfectly competitive firm is a price taker.

Exhibit 22-3 ​ ​ -Refer to Exhibit 22-3. Based upon the information provided in this table, what is the maximum profit this firm can earn?

Which of the following conditions does not characterize long-run competitive equilibrium?

List and describe the four assumptions that underlie the theory of perfect competition.

When a firm produces the quantity of output where price equals marginal cost, it has achieved resource allocative efficiency.

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

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

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II Gdp and Real Gdp

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability a Critique of the Self Regulating Economy

Fiscal Policy and the Federal Budget

Money Banking and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth Resources Technology Ideas and Institutions

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice and Behavioral Economics

Production and Costs

Monopoly

Monopolistic Competition Oligopoly and Game Theory

Government and Product Markets Antitrust and Regulation

Factor Markets With Emphasis on the Labor Market

Wages Unions and Labor

The Distribution of Income and Poverty

Interest Rent and Profit

Market Failure Externalities Public Goods and Asymmetric Information

Public Choice and Special Interest Group Politics

Building Theories to Explain Everyday Life From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government Five Topics Considered

Stocks Bonds Futures and Options

Filters

Exhibit 22-3 -Refer to Exhibit 22-3. What is the increase in profit that would result from producing 43 units of the product rather than producing 40 units?

Exhibit 22-3 -Refer to Exhibit 22-3. Is it possible for this firm to produce "too much" in the short-run (in terms of profitability)?

Exhibit 22-2 -Refer to Exhibit 22-2. If the firm produces the quantity of output at which marginal revenue (MR) equals marginal cost (MC), is it guaranteed maximum profit or minimized loss?

Consider the following data: equilibrium price = $15, quantity of output produced = 10,000 units, average total cost = $12, and average variable cost $7. Given this data, total revenue is , total cost is , and total fixed cost is __.

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

Exhibit 22-9 -Refer to Exhibit 22-9. Following an increase in market demand from D₁ to D₂, the firm's profits in the short run will

Exhibit 22-3 -Refer to Exhibit 22-3. Based upon the information provided in this table, what is the maximum profit this firm can earn?

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

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