Question 1

If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 11 units is:

Accepted Answer

A)  $10. 
B)  $20. 
C)  $200. 
D)  $220. 
A)  $10. 
B)  $20. 
C)  $200. 
D)  $220.

Question 2

Zoe's Bakery operates in a perfectly competitive industry and has standard cost curves. The variable costs at Zoe's Bakery increase, so all of the cost curves (except fixed cost) shift upward. The demand for Zoe's pastries does not change, nor does the firm shut down. To maximize profits after the variable cost increase, Zoe's Bakery will _____ its price and _____ its level of production.

Accepted Answer

A)  raise; increase 
B)  decrease; increase 
C)  raise; decrease 
D)  do nothing to; decrease 
A)  raise; increase 
B)  decrease; increase 
C)  raise; decrease 
D)  do nothing to; decrease

Question 3

Use the following to answer questions:
Figure: Game-Day Shirts  
-(Figure: Game-Day Shirts) Rick is one of 10 vendors who sell game-day T-shirts at football games in a perfectly competitive market. His costs are identical to the costs of the other 9 vendors. If the price of a shirt is $9, the short-run industry supply will be _____ shirts.

Accepted Answer

A)  140 
B)  200 
C)  220 
D)  240 
A)  140 
B)  200 
C)  220 
D)  240

Question 4

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 $40, how much is Alex's total revenue at the profit-maximizing output?

Accepted Answer

A)  $1,000 
B)  $1,200 
C)  $500 
D)  $1,500 
A)  $1,000 
B)  $1,200 
C)  $500 
D)  $1,500

Question 5

For a perfectly competitive firm, marginal revenue:

Accepted Answer

A)  is less than price. 
B)  is greater than price. 
C)  decreases as the firm increases output. 
D)  is equal to price. 
A)  is less than price. 
B)  is greater than price. 
C)  decreases as the firm increases output. 
D)  is equal to price.

Question 6

Mikail's perfectly competitive camera memory card-producing factory is making positive economic profits. If the price of memory cards is $9, if Mikail's output is 3,000 cards a month, and if his monthly average total cost is $7, what are his monthly profits?

Accepted Answer

A)  $6,000 
B)  $27,000 
C)  $21,000 
D)  $2 
A)  $6,000 
B)  $27,000 
C)  $21,000 
D)  $2

Question 7

In long-run equilibrium in a perfectly competitive market, all firms will be operating at their lowest possible average total cost.

Accepted Answer

A) True 
 B)False

Question 8

Use the following to answer questions:  
-(Table: Variable Costs for Lots) Look at the table Variable Costs for Lots. During the winter, Alexa runs a snow-clearing service in a perfectly competitive industry. Assume that costs are constant in each interval; that is, the variable cost of clearing anywhere from 1 through 10 lots is $200. Her only fixed cost is $1,000 for a snowplow. Her variable costs include fuel, her time, and hot coffee. If the price to clear a lot is $60, what is Alexa's profit or loss at the optimal output?

Accepted Answer

A)  $3,000 
B)  $1,100 
C)  $900 
D)  $3,850 
A)  $3,000 
B)  $1,100 
C)  $900 
D)  $3,850

Question 9

Use the following to answer question:  
-(Table: Lilly's Apple Orchard) Look at the table Lilly's Apple Orchard. Lilly is the price-taking owner of an apple orchard; the orchard's variable costs are given in the table. Her orchard has fixed costs of $30. If the price of a bushel of apples is $85, we would expect total industry output to _____ and Lilly's output to _____ in the long run.

Accepted Answer

A)  rise; rise 
B)  fall; fall 
C)  fall; rise 
D)  rise; fall 
A)  rise; rise 
B)  fall; fall 
C)  fall; rise 
D)  rise; fall

Question 10

Use the following to answer questions:  
-(Table: Cherry Farm) Look at the table Cherry Farm. Which of the following is a point on the industry short-run supply curve?

Accepted Answer

A)  $2; 300 pounds 
B)  $11; 200 pounds 
C)  $3; 500 pounds 
D)  $8; 600 pounds 
A)  $2; 300 pounds 
B)  $11; 200 pounds 
C)  $3; 500 pounds 
D)  $8; 600 pounds

Question 11

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 many lawns will Alex mow?

Accepted Answer

A)  20 
B)  30 
C)  40 
D)  50 
A)  20 
B)  30 
C)  40 
D)  50

Question 12

Which of the following is NOT a characteristic of a perfectly competitive industry?

Accepted Answer

A)  Firms seek to maximize profits. 
B)  Profits may be positive in the short run. 
C)  There are many firms. 
D)  Products are differentiated. 
A)  Firms seek to maximize profits. 
B)  Profits may be positive in the short run. 
C)  There are many firms. 
D)  Products are differentiated.

Question 13

The slope of the total revenue curve is:

Accepted Answer

A)  marginal cost. 
B)  net revenue. 
C)  equal to marginal revenue and is constant under perfect competition. 
D)  equal to marginal revenue and varies under perfect competition. 
A)  marginal cost. 
B)  net revenue. 
C)  equal to marginal revenue and is constant under perfect competition. 
D)  equal to marginal revenue and varies under perfect competition.

Question 14

In a perfectly competitive industry, the market demand curve is usually:

Accepted Answer

A)  perfectly inelastic. 
B)  perfectly elastic. 
C)  downward-sloping. 
D)  relatively elastic. 
A)  perfectly inelastic. 
B)  perfectly elastic. 
C)  downward-sloping. 
D)  relatively elastic.

Question 15

A perfectly competitive firm will produce:

Accepted Answer

A)  whenever it can. 
B)  mostly in the long run and only if price is greater than AFC. 
C)  with a loss in the short run if its price is greater than AVC but less than ATC. 
D)  only when it earns profits in the short run. 
A)  whenever it can. 
B)  mostly in the long run and only if price is greater than AFC. 
C)  with a loss in the short run if its price is greater than AVC but less than ATC. 
D)  only when it earns profits in the short run.

Question 16

If firms are making positive economic profits in the short run, then in the long run:

Accepted Answer

A)  the short-run industry supply curve will shift leftward. 
B)  firms will enter the industry. 
C)  industry output will rise and the price will rise. 
D)  firms will leave the industry. 
A)  the short-run industry supply curve will shift leftward. 
B)  firms will enter the industry. 
C)  industry output will rise and the price will rise. 
D)  firms will leave the industry.

Question 17

The addition to the total revenue from selling one more unit of the good is:

Accepted Answer

A)  less than the market price. 
B)  average profit. 
C)  marginal cost. 
D)  marginal revenue. 
A)  less than the market price. 
B)  average profit. 
C)  marginal cost. 
D)  marginal revenue.

Question 18

Suppose that some firms in a perfectly competitive industry are earning positive economic profits. In the long run, the:

Accepted Answer

A)  industry is in equilibrium. 
B)  industry supply curve will shift to the left. 
C)  number of firms in the industry will not change. 
D)  number of firms in the industry will increase. 
A)  industry is in equilibrium. 
B)  industry supply curve will shift to the left. 
C)  number of firms in the industry will not change. 
D)  number of firms in the industry will increase.

Question 19

Use the following to answer questions:  
-(Table: Cherry Farm) Look at the table Cherry Farm. If Hank and Helen have one of 100 farms in the perfectly competitive cherry industry and if the price is $5, in the short run the industry will supply _____ pounds.

Accepted Answer

A)  100 
B)  200 
C)  400 
D)  500 
A)  100 
B)  200 
C)  400 
D)  500

Question 20

Suppose that some firms in a perfectly competitive industry earn negative economic profits. In the long run, the:

Accepted Answer

A)  short-run industry supply curve will not shift. 
B)  short-run industry supply curve will shift to the left. 
C)  number of firms in the industry will not change. 
D)  number of firms in the industry will increase. 
A)  short-run industry supply curve will not shift. 
B)  short-run industry supply curve will shift to the left. 
C)  number of firms in the industry will not change. 
D)  number of firms in the industry will increase.

If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 11 units is:

For a perfectly competitive firm, marginal revenue:

Mikail's perfectly competitive camera memory card-producing factory is making positive economic profits. If the price of memory cards is $9, if Mikail's output is 3,000 cards a month, and if his monthly average total cost is $7, what are his monthly profits?

In long-run equilibrium in a perfectly competitive market, all firms will be operating at their lowest possible average total cost.

Use the following to answer questions: -(Table: Cherry Farm) Look at the table Cherry Farm. Which of the following is a point on the industry short-run supply curve?

Which of the following is NOT a characteristic of a perfectly competitive industry?

The slope of the total revenue curve is:

In a perfectly competitive industry, the market demand curve is usually:

A perfectly competitive firm will produce:

If firms are making positive economic profits in the short run, then in the long run:

The addition to the total revenue from selling one more unit of the good is:

Suppose that some firms in a perfectly competitive industry are earning positive economic profits. In the long run, the:

Use the following to answer questions: -(Table: Cherry Farm) Look at the table Cherry Farm. If Hank and Helen have one of 100 farms in the perfectly competitive cherry industry and if the price is $5, in the short run the industry will supply _____ pounds.

Suppose that some firms in a perfectly competitive industry earn negative economic profits. In the long run, the:

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

If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 11 units is:

For a perfectly competitive firm, marginal revenue:

Mikail's perfectly competitive camera memory card-producing factory is making positive economic profits. If the price of memory cards is $9, if Mikail's output is 3,000 cards a month, and if his monthly average total cost is $7, what are his monthly profits?

In long-run equilibrium in a perfectly competitive market, all firms will be operating at their lowest possible average total cost.

Use the following to answer questions: -(Table: Cherry Farm) Look at the table Cherry Farm. Which of the following is a point on the industry short-run supply curve?

Which of the following is NOT a characteristic of a perfectly competitive industry?

The slope of the total revenue curve is:

In a perfectly competitive industry, the market demand curve is usually:

A perfectly competitive firm will produce:

If firms are making positive economic profits in the short run, then in the long run:

The addition to the total revenue from selling one more unit of the good is:

Suppose that some firms in a perfectly competitive industry are earning positive economic profits. In the long run, the:

Use the following to answer questions: -(Table: Cherry Farm) Look at the table Cherry Farm. If Hank and Helen have one of 100 farms in the perfectly competitive cherry industry and if the price is $5, in the short run the industry will supply _____ pounds.

Suppose that some firms in a perfectly competitive industry earn negative economic profits. In the long run, the:

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