Question 1

The short-run individual supply curve for a perfectly competitive firm is given by the marginal cost curve above minimum average fixed cost.

Accepted Answer

A) True 
 B)False

Question 2

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 cost 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 3

Use the following to answer questions:
Figure: The Profit-Maximizing Firm in the Short Run  
-(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The Profit-Maximizing Firm in the Short Run. M is the _____ curve.

Accepted Answer

A)  ATC 
B)  MR 
C)  MC 
D)  AVC 
A)  ATC 
B)  MR 
C)  MC 
D)  AVC

Question 4

If the price is consistently below average total cost, then in the short run a perfectly competitive firm should:

Accepted Answer

A)  shut down. 
B)  continue to produce to minimize losses. 
C)  raise the price. 
D)  There is not enough information given to answer this question. 
A)  shut down. 
B)  continue to produce to minimize losses. 
C)  raise the price. 
D)  There is not enough information given to answer this question.

Question 5

If firms are taking economic losses in the short run, firms will leave the industry, industry output will _____, and economic losses will _____ in the long run.

Accepted Answer

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

Question 6

Use the following to answer questions:
Figure: The Perfectly Competitive Firm II  
-(Figure: The Perfectly Competitive Firm II) Look at the figure The Perfectly Competitive Firm II. If this firm's MR curve is MR2, then this firm's optimal output is _____ units of output and its economic profit will be _____.

Accepted Answer

A)  Q1; positive 
B)  Q2; negative 
C)  Q3; positive 
D)  Q4; negative 
A)  Q1; positive 
B)  Q2; negative 
C)  Q3; positive 
D)  Q4; negative

Question 7

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. If the market price of a tub of ice cream is $20, how many tubs of ice cream will Sergei produce in the short run?

Accepted Answer

A)  0 
B)  1 
C)  2 
D)  3 
A)  0 
B)  1 
C)  2 
D)  3

Question 8

Use the following to answer questions:
Figure: The Profit-Maximizing Firm in the Short Run  
-(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The Profit-Maximizing Firm in the Short Run. If the market price is P4, the firm will produce quantity _____ and _____ in the short run.

Accepted Answer

A)  q1; break even 
B)  q3; make a profit 
C)  q4; break even 
D)  q5; lose fixed costs 
A)  q1; break even 
B)  q3; make a profit 
C)  q4; break even 
D)  q5; lose fixed costs

Question 9

A perfectly competitive firm will earn a profit and will continue producing the profit-maximizing quantity of output in the short run if the price is:

Accepted Answer

A)  less than the average fixed cost. 
B)  less than marginal cost. 
C)  greater than average variable cost but less than average total cost. 
D)  greater than average total cost. 
A)  less than the average fixed cost. 
B)  less than marginal cost. 
C)  greater than average variable cost but less than average total cost. 
D)  greater than average total cost.

Question 10

The break-even price for a perfectly competitive firm is equal to:

Accepted Answer

A)  the minimum value of average variable cost. 
B)  the marginal revenue, provided that marginal revenue is equal to marginal cost. 
C)  the average fixed cost at the given output level. 
D)  the minimum value of average total cost. 
A)  the minimum value of average variable cost. 
B)  the marginal revenue, provided that marginal revenue is equal to marginal cost. 
C)  the average fixed cost at the given output level. 
D)  the minimum value of average total cost.

Question 11

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. What is the minimum price that Sergei needs to receive for a tub of ice cream to stay in business in the short run?

Accepted Answer

A)  $10.00 
B)  $20.00 
C)  $33.33 
D)  $36.67 
A)  $10.00 
B)  $20.00 
C)  $33.33 
D)  $36.67

Question 12

In a long-run equilibrium, economic profits in a perfectly competitive industry are:

Accepted Answer

A)  positive. 
B)  zero. 
C)  negative. 
D)  indeterminate. 
A)  positive. 
B)  zero. 
C)  negative. 
D)  indeterminate.

Question 13

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, how many lots should Alexa clear?

Accepted Answer

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

Question 14

In the short run, a perfectly competitive firm produces output and earns an economic profit if:

Accepted Answer

A) P > ATC. B) P = ATC. C) P < MC. D) P < ATC. A) P > ATC. B) P = ATC. C) P < MC. D) P < ATC.

Question 15

Marginal revenue is a firm's:

Accepted Answer

A)  ratio of the change in total revenue to the change in output. 
B)  ratio of average revenue to total revenue. 
C)  profit per unit times the number of units sold. 
D)  increase in profit when it sells an additional unit of output. 
A)  ratio of the change in total revenue to the change in output. 
B)  ratio of average revenue to total revenue. 
C)  profit per unit times the number of units sold. 
D)  increase in profit when it sells an additional unit of output.

Question 16

Which of the following statements is NOT characteristic of perfect competition?

Accepted Answer

A)  All firms produce the same standardized product. 
B)  There are many producers, and each has only a small market share. 
C)  There are many producers; one firm has a 25% market share, and all of the remaining firms have a market share of less than 2% each. 
D)  There are no obstacles to entry into or exit from the industry. 
A)  All firms produce the same standardized product. 
B)  There are many producers, and each has only a small market share. 
C)  There are many producers; one firm has a 25% market share, and all of the remaining firms have a market share of less than 2% each. 
D)  There are no obstacles to entry into or exit from the industry.

Question 17

In the short run, a perfectly competitive firm produces output and breaks even if the firm produces the quantity at which:

Accepted Answer

A)  P  ATC. 
D)  P = (TR / Q + TC / Q) × Q. 
A)  P  ATC. 
D)  P = (TR / Q + TC / Q) × Q.

Question 18

If a perfectly competitive firm sells 10 units of output at $30 per unit, its marginal revenue is:

Accepted Answer

A)  $10. 
B)  $30. 
C)  more than $30. 
D)  $300. 
A)  $10. 
B)  $30. 
C)  more than $30. 
D)  $300.

Question 19

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. Which of the following is a point on Alex's short-run supply curve?

Accepted Answer

A)  P = $5; Q = 10. 
B)  P = $10; Q = 100. 
C)  P = $60; Q = 40. 
D)  P = $20; Q = 300. 
A)  P = $5; Q = 10. 
B)  P = $10; Q = 100. 
C)  P = $60; Q = 40. 
D)  P = $20; Q = 300.

Question 20

If a Florida strawberry wholesaler operates in a perfectly competitive market, that wholesaler will have a _____ share of the market, and consumers will consider her strawberries and her competitors' strawberries to be _____. Therefore, _____ advertising will take place in this market.

Accepted Answer

A)  large; standardized; no 
B)  small; standardized; little or no 
C)  small; differentiated; no 
D)  large; differentiated; extensive 
A)  large; standardized; no 
B)  small; standardized; little or no 
C)  small; differentiated; no 
D)  large; differentiated; extensive

The short-run individual supply curve for a perfectly competitive firm is given by the marginal cost curve above minimum average fixed cost.

Use the following to answer questions: Figure: The Profit-Maximizing Firm in the Short Run -(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The Profit-Maximizing Firm in the Short Run. M is the _____ curve.

If the price is consistently below average total cost, then in the short run a perfectly competitive firm should:

If firms are taking economic losses in the short run, firms will leave the industry, industry output will _, and economic losses will _ in the long run.

Use the following to answer questions: Figure: The Profit-Maximizing Firm in the Short Run -(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The Profit-Maximizing Firm in the Short Run. If the market price is P₄, the firm will produce quantity _ and _ in the short run.

A perfectly competitive firm will earn a profit and will continue producing the profit-maximizing quantity of output in the short run if the price is:

The break-even price for a perfectly competitive firm is equal to:

In a long-run equilibrium, economic profits in a perfectly competitive industry are:

In the short run, a perfectly competitive firm produces output and earns an economic profit if:

Marginal revenue is a firm's:

Which of the following statements is NOT characteristic of perfect competition?

In the short run, a perfectly competitive firm produces output and breaks even if the firm produces the quantity at which:

If a perfectly competitive firm sells 10 units of output at $30 per unit, its marginal revenue is:

If a Florida strawberry wholesaler operates in a perfectly competitive market, that wholesaler will have a ___ share of the market, and consumers will consider her strawberries and her competitors' strawberries to be _. Therefore, ___ advertising will take place in this market.

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

The short-run individual supply curve for a perfectly competitive firm is given by the marginal cost curve above minimum average fixed cost.

Use the following to answer questions: Figure: The Profit-Maximizing Firm in the Short Run -(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The Profit-Maximizing Firm in the Short Run. M is the _____ curve.

If the price is consistently below average total cost, then in the short run a perfectly competitive firm should:

If firms are taking economic losses in the short run, firms will leave the industry, industry output will _____, and economic losses will _____ in the long run.

A perfectly competitive firm will earn a profit and will continue producing the profit-maximizing quantity of output in the short run if the price is:

The break-even price for a perfectly competitive firm is equal to:

In a long-run equilibrium, economic profits in a perfectly competitive industry are:

In the short run, a perfectly competitive firm produces output and earns an economic profit if:

Marginal revenue is a firm's:

Which of the following statements is NOT characteristic of perfect competition?

In the short run, a perfectly competitive firm produces output and breaks even if the firm produces the quantity at which:

If a perfectly competitive firm sells 10 units of output at $30 per unit, its marginal revenue is:

If a Florida strawberry wholesaler operates in a perfectly competitive market, that wholesaler will have a _____ share of the market, and consumers will consider her strawberries and her competitors' strawberries to be _____. Therefore, _____ advertising will take place in this market.

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

If firms are taking economic losses in the short run, firms will leave the industry, industry output will _, and economic losses will _ in the long run.

If a Florida strawberry wholesaler operates in a perfectly competitive market, that wholesaler will have a ___ share of the market, and consumers will consider her strawberries and her competitors' strawberries to be _. Therefore, ___ advertising will take place in this market.