Question 1

In the short run, fixed costs:

Accepted Answer

A)  are an important feature in a firm's decision to produce or not produce. 
B)  have no impact on a firm's profit level. 
C)  do not exist. 
D)  remain constant. 
A)  are an important feature in a firm's decision to produce or not produce. 
B)  have no impact on a firm's profit level. 
C)  do not exist. 
D)  remain constant.

Question 2

Price in a perfectly competitive industry:

Accepted Answer

A)  is determined by each firm, depending on its costs of production. 
B)  is always equal to marginal revenue for the firm. 
C)  must be greater than average total cost or the firm will shut down in the short run. 
D)  is indeterminate in the short run. 
A)  is determined by each firm, depending on its costs of production. 
B)  is always equal to marginal revenue for the firm. 
C)  must be greater than average total cost or the firm will shut down in the short run. 
D)  is indeterminate in the short run.

Question 3

Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, that the price of each candy cane is $0.10, and that the market demand curve is downward-sloping. The price of sugar rises, increasing the marginal and average total cost of producing candy canes by $0.05; there are no other changes in production costs. Once all of the adjustments to long-run equilibrium have been made, the price of candy canes will equal:

Accepted Answer

A)  $0.05. 
B)  $0.10. 
C)  $0.15. 
D)  The question is impossible to answer without knowing exactly how many firms entered and/or left the industry. 
A)  $0.05. 
B)  $0.10. 
C)  $0.15. 
D)  The question is impossible to answer without knowing exactly how many firms entered and/or left the industry.

Question 4

Use the following to answer questions:
Figure: Cost Curves for Corn Producers  
-(Figure: Cost Curves for Corn Producers) Look at the figure Cost Curves for Corn Producers. The market for corn is perfectly competitive. If the price of a bushel of corn is $10, then in the short run the farmer will produce _____ bushels of corn and take an economic loss equal to _____.

Accepted Answer

A)  0; average fixed costs 
B)  0; total variable costs 
C)  3; total fixed costs 
D)  3; $22 per bushel 
A)  0; average fixed costs 
B)  0; total variable costs 
C)  3; total fixed costs 
D)  3; $22 per bushel

Question 5

Suppose a perfectly competitive firm can increase its profits by increasing its output. Then it must be true that the firm's _____ exceeds its _____.

Accepted Answer

A)  marginal revenue; marginal cost 
B)  price; average total cost but is less than marginal cost 
C)  marginal cost; marginal revenue 
D)  price; marginal revenue 
A)  marginal revenue; marginal cost 
B)  price; average total cost but is less than marginal cost 
C)  marginal cost; marginal revenue 
D)  price; marginal revenue

Question 6

Use the following to answer questions:  
-(Table: Total Cost and Output) Look at the table Total Cost and Output, which describes Sergei's total costs for his perfectly competitive all-natural ice cream firm. How many tubs of ice cream will Sergei produce in the long run?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 7

In the long run, firms will leave an industry if the market price is consistently less than their break-even price.

Accepted Answer

A) True 
 B)False

Question 8

Perfectly competitive firms will:

Accepted Answer

A)  maximize total revenue by using the marginal decision rule. 
B)  increase output up to the point that the marginal benefit of an additional unit of output is greater than the marginal cost. 
C)  increase output up to the point that the marginal benefit of an additional unit of output is equal to the marginal cost. 
D)  always attempt to minimize average variable cost. 
A)  maximize total revenue by using the marginal decision rule. 
B)  increase output up to the point that the marginal benefit of an additional unit of output is greater than the marginal cost. 
C)  increase output up to the point that the marginal benefit of an additional unit of output is equal to the marginal cost. 
D)  always attempt to minimize average variable cost.

Question 9

Tony runs Read Economic Reports. If Tony finds that the cost of completing an additional report is $100 and someone offers him $125 to complete this additional report, Tony should:

Accepted Answer

A)  not complete the additional report, since he will incur a loss. 
B)  complete the additional report but make the person buy two reports. 
C)  complete the additional report. 
D)  not complete the additional report, since his additional cost is more than his additional revenue. 
A)  not complete the additional report, since he will incur a loss. 
B)  complete the additional report but make the person buy two reports. 
C)  complete the additional report. 
D)  not complete the additional report, since his additional cost is more than his additional revenue.

Question 10

Use the following to answer question:
Figure: Total Revenue and Total Cost  
-(Figure: Total Revenue and Total Cost) Look at the figure Total Revenue and Total Cost. The most profitable level of output occurs at quantity:

Accepted Answer

A)  F. 
B)  K. 
C)  L. 
D)  M. 
A)  F. 
B)  K. 
C)  L. 
D)  M.

Question 11

Consider a perfectly competitive firm in the short run. Assume that it is sustaining economic losses but continues to produce at the profit-maximizing (loss-minimizing) output. Which statement is FALSE?

Accepted Answer

A)  Marginal cost is less than average total cost. 
B)  Marginal cost is equal to marginal revenue. 
C)  Price is equal to marginal cost. 
D)  Marginal cost is less than average variable cost. 
A)  Marginal cost is less than average total cost. 
B)  Marginal cost is equal to marginal revenue. 
C)  Price is equal to marginal cost. 
D)  Marginal cost is less than average variable cost.

Question 12

If the price is greater than the average variable cost and less than the average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

Accepted Answer

A)  continue to produce at an economic loss. 
B)  earn an economic profit. 
C)  encourage other firms to enter the industry. 
D)  produce more than the profit-maximizing quantity. 
A)  continue to produce at an economic loss. 
B)  earn an economic profit. 
C)  encourage other firms to enter the industry. 
D)  produce more than the profit-maximizing quantity.

Question 13

Use the following to answer questions:
Figure: Revenues, Costs, and Profits for Tomato Producers III  
-(Figure: Revenues, Costs, and Profits for Tomato Producers III) Look at the figure Revenues, Costs, and Profits for Tomato Producers III. The market for tomatoes is perfectly competitive. If the market price of a bushel of tomatoes is $18, this farm will:

Accepted Answer

A)  minimize its losses by shutting down. 
B)  minimize its losses by continuing to produce. 
C)  break even. 
D)  earn an economic profit. 
A)  minimize its losses by shutting down. 
B)  minimize its losses by continuing to produce. 
C)  break even. 
D)  earn an economic profit.

Question 14

Use the following to answer questions:
Figure: A Perfectly Competitive Firm in the Short Run  
-(Figure: A Perfectly Competitive Firm in the Short Run) Look at the figure A Perfectly Competitive Firm in the Short Run. The firm's total cost of producing its most profitable level of output is:

Accepted Answer

A)  BS. 
B)  DK. 
C)  0FKD. 
D)  0ESB. 
A)  BS. 
B)  DK. 
C)  0FKD. 
D)  0ESB.

Question 15

Use the following to answer questions:
Figure: Revenues, Costs, and Profits for Tomato Producers III  
-(Figure: Revenues, Costs, and Profits for Tomato Producers III) Look at the figure Revenues, Costs, and Profits for Tomato Producers III. The market for tomatoes is perfectly competitive. If the market price of a bushel of tomatoes is $14, in the short run the farmer's profit-maximizing output is _____ bushels.

Accepted Answer

A)  2 
B)  3 
C)  4 
D)  5 
A)  2 
B)  3 
C)  4 
D)  5

Question 16

Use the following to answer questions:  
-(Table: Variable Costs for Lawns) Look at the table Variable Costs for Lawns. During the summer, Alex runs a lawn-mowing service, and lawn-mowing is a perfectly competitive industry. Assume that costs are constant in each interval; that is, the variable cost of mowing 1 through 10 lawns is $100. His only fixed cost is $1,000 for the mower. His variable costs include fuel, his time, and mower parts. If the price for mowing a lawn is $70, how much is Alex's total revenue at the profit-maximizing output?

Accepted Answer

A)  $3,500 
B)  $2,800 
C)  $2,100 
D)  $1,800 
A)  $3,500 
B)  $2,800 
C)  $2,100 
D)  $1,800

Question 17

_____ almost always take the market price as given-that is, are considered _____-but this is often not true of _____.

Accepted Answer

A)  Consumers; quantity minimizers; producers 
B)  Producers; quantity takers; consumers 
C)  Consumers and producers; price takers; firms that produce a differentiated product 
D)  Producers; price searchers; consumers 
A)  Consumers; quantity minimizers; producers 
B)  Producers; quantity takers; consumers 
C)  Consumers and producers; price takers; firms that produce a differentiated product 
D)  Producers; price searchers; consumers

Question 18

Use the following to answer questions:  
-(Table: Variable Costs for Lawns) Look at the table Variable Costs for Lawns. During the summer, Alex runs a lawn-mowing service, and lawn-mowing is a perfectly competitive industry. Assume that costs are constant in each interval; that is, the variable cost of mowing 1 through 10 lawns is $100. His only fixed cost is $1,000 for the mower. His variable costs include fuel, his time, and mower parts. If the price for mowing a lawn is $70, how much is Alex's profit per unit at the profit-maximizing output?

Accepted Answer

A)  -$10 
B)  $10 
C)  $34 
D)  $14 
A)  -$10 
B)  $10 
C)  $34 
D)  $14

Question 19

For a perfectly competitive firm in the short run, if the firm produces the quantity at which _____, the firm _____.

Accepted Answer

A) P > ATC; is profitable B) P < ATC; breaks even C) P = ATC; incurs a loss D) P < ATC; is profitable A) P > ATC; is profitable B) P < ATC; breaks even C) P = ATC; incurs a loss D) P < ATC; is profitable

Question 20

One characteristic of a perfectly competitive market is that there are _____ sellers of the good or service.

Accepted Answer

A)  one or two 
B)  a few 
C)  usually fewer than 10 
D)  many 
A)  one or two 
B)  a few 
C)  usually fewer than 10 
D)  many

In the short run, fixed costs:

Price in a perfectly competitive industry:

Suppose a perfectly competitive firm can increase its profits by increasing its output. Then it must be true that the firm's _ exceeds its _.

Use the following to answer questions: -(Table: Total Cost and Output) Look at the table Total Cost and Output, which describes Sergei's total costs for his perfectly competitive all-natural ice cream firm. How many tubs of ice cream will Sergei produce in the long run?

In the long run, firms will leave an industry if the market price is consistently less than their break-even price.

Perfectly competitive firms will:

Tony runs Read Economic Reports. If Tony finds that the cost of completing an additional report is $100 and someone offers him $125 to complete this additional report, Tony should:

Use the following to answer question: Figure: Total Revenue and Total Cost -(Figure: Total Revenue and Total Cost) Look at the figure Total Revenue and Total Cost. The most profitable level of output occurs at quantity:

Consider a perfectly competitive firm in the short run. Assume that it is sustaining economic losses but continues to produce at the profit-maximizing (loss-minimizing) output. Which statement is FALSE?

If the price is greater than the average variable cost and less than the average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

Use the following to answer questions: Figure: A Perfectly Competitive Firm in the Short Run -(Figure: A Perfectly Competitive Firm in the Short Run) Look at the figure A Perfectly Competitive Firm in the Short Run. The firm's total cost of producing its most profitable level of output is:

___ almost always take the market price as given-that is, are considered _-but this is often not true of ___.

For a perfectly competitive firm in the short run, if the firm produces the quantity at which _, the firm _.

One characteristic of a perfectly competitive market is that there are _____ sellers of the good or service.

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 12: Perfect Competition and the Supply Curve

In the short run, fixed costs:

Price in a perfectly competitive industry:

Suppose a perfectly competitive firm can increase its profits by increasing its output. Then it must be true that the firm's _____ exceeds its _____.

Use the following to answer questions: -(Table: Total Cost and Output) Look at the table Total Cost and Output, which describes Sergei's total costs for his perfectly competitive all-natural ice cream firm. How many tubs of ice cream will Sergei produce in the long run?

In the long run, firms will leave an industry if the market price is consistently less than their break-even price.

Perfectly competitive firms will:

Tony runs Read Economic Reports. If Tony finds that the cost of completing an additional report is $100 and someone offers him $125 to complete this additional report, Tony should:

Use the following to answer question: Figure: Total Revenue and Total Cost -(Figure: Total Revenue and Total Cost) Look at the figure Total Revenue and Total Cost. The most profitable level of output occurs at quantity:

Consider a perfectly competitive firm in the short run. Assume that it is sustaining economic losses but continues to produce at the profit-maximizing (loss-minimizing) output. Which statement is FALSE?

If the price is greater than the average variable cost and less than the average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

Use the following to answer questions: Figure: A Perfectly Competitive Firm in the Short Run -(Figure: A Perfectly Competitive Firm in the Short Run) Look at the figure A Perfectly Competitive Firm in the Short Run. The firm's total cost of producing its most profitable level of output is:

_____ almost always take the market price as given-that is, are considered _____-but this is often not true of _____.

For a perfectly competitive firm in the short run, if the firm produces the quantity at which _____, the firm _____.

One characteristic of a perfectly competitive market is that there are _____ sellers of the good or service.

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Monopoly

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Suppose a perfectly competitive firm can increase its profits by increasing its output. Then it must be true that the firm's _ exceeds its _.

___ almost always take the market price as given-that is, are considered _-but this is often not true of ___.

For a perfectly competitive firm in the short run, if the firm produces the quantity at which _, the firm _.