Question 1

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

Accepted Answer

A)  P  ATC. 
A)  P  ATC.

Question 2

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. If the market price is G, the firm's total economic profit at its most profitable level of output is:

Accepted Answer

A)  0GHB. 
B)  EFJS. 
C)  EGHS. 
D)  FGLK. 
A)  0GHB. 
B)  EFJS. 
C)  EGHS. 
D)  FGLK.

Question 3

Use the following to answer questions:  
-(Table: Cherry Farm) Look at the table Cherry Farm. If the price is $4 per pound:

Accepted Answer

A)  firms will enter the industry. 
B)  firms will exit the industry. 
C)  the industry is in long-run equilibrium. 
D)  the industry has maximized average total cost. 
A)  firms will enter the industry. 
B)  firms will exit the industry. 
C)  the industry is in long-run equilibrium. 
D)  the industry has maximized average total cost.

Question 4

In perfect competition, a change in fixed cost will:

Accepted Answer

A)  cause a change in the price in the short run. 
B)  cause a change in output in the short run. 
C)  encourage entry or exit in the long run so that price will change enough to leave firms earning zero profits. 
D)  cause a change in variable cost. 
A)  cause a change in the price in the short run. 
B)  cause a change in output in the short run. 
C)  encourage entry or exit in the long run so that price will change enough to leave firms earning zero profits. 
D)  cause a change in variable cost.

Question 5

If the price is greater than 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 a loss. 
B)  produce at a profit. 
C)  shut down production. 
D)  reduce its fixed costs. 
A)  continue to produce at a loss. 
B)  produce at a profit. 
C)  shut down production. 
D)  reduce its fixed costs.

Question 6

Suppose Sarah's pottery studio is charging the market price, which is just higher than her minimum average total cost. This means that Sarah:

Accepted Answer

A)  is breaking even. 
B)  should shut down immediately. 
C)  is earning a small economic profit. 
D)  is incurring a small economic loss. 
A)  is breaking even. 
B)  should shut down immediately. 
C)  is earning a small economic profit. 
D)  is incurring a small economic loss.

Question 7

The short-run supply curve for a perfectly competitive firm is the ____ cost curve above the _____ price.

Accepted Answer

A)  average total; break-even 
B)  average variable; shut-down 
C)  marginal; break-even 
D)  marginal; shut-down 
A)  average total; break-even 
B)  average variable; shut-down 
C)  marginal; break-even 
D)  marginal; shut-down

Question 8

A perfectly competitive industry with constant costs initially operates in long-run equilibrium. When demand increases, in the long run and the short run:

Accepted Answer

A)  positive economic profits will result for all firms. 
B)  higher prices will result. 
C)  output will increase. 
D)  negative economic profits will result for some firms. 
A)  positive economic profits will result for all firms. 
B)  higher prices will result. 
C)  output will increase. 
D)  negative economic profits will result for some firms.

Question 9

If a perfectly competitive firm is producing a quantity where MC > MR, then profit:

Accepted Answer

A)  is maximized. 
B)  can be increased by increasing production. 
C)  can be increased by decreasing production. 
D)  can be increased by decreasing the price. 
A)  is maximized. 
B)  can be increased by increasing production. 
C)  can be increased by decreasing production. 
D)  can be increased by decreasing the price.

Question 10

Which of the following is TRUE?

Accepted Answer

A)  If the price falls below the average total cost, the firm will earn economic profits. 
B)  Price and marginal revenue are the same in perfect competition. 
C)  Economic profit per unit is found by subtracting AVC from the price. 
D)  Economic profit is always positive in the short run. 
A)  If the price falls below the average total cost, the firm will earn economic profits. 
B)  Price and marginal revenue are the same in perfect competition. 
C)  Economic profit per unit is found by subtracting AVC from the price. 
D)  Economic profit is always positive in the short run.

Question 11

Firms will make a profit in the long run or short run if the price is:

Accepted Answer

A)  equal to marginal revenue. 
B)  greater than ATC. 
C)  less than MC. 
D)  greater than AVC. 
A)  equal to marginal revenue. 
B)  greater than ATC. 
C)  less than MC. 
D)  greater than AVC.

Question 12

The horizontal sum of individual firms' MC curves is the:

Accepted Answer

A)  short-run industry demand curve. 
B)  short-run industry supply curve. 
C)  long-run fixed cost curve. 
D)  long-run average variable cost curve. 
A)  short-run industry demand curve. 
B)  short-run industry supply curve. 
C)  long-run fixed cost curve. 
D)  long-run average variable cost curve.

Question 13

Use the following to answer questions:  
-(Table: Total Cost for a Perfectly Competitive Firm) Look at the table Total Cost for a Perfectly Competitive Firm. In the short run, the firm will produce, but at a loss, if the price is:

Accepted Answer

A)  $2.00. 
B)  $2.50. 
C)  $3.50. 
D)  $4.50. 
A)  $2.00. 
B)  $2.50. 
C)  $3.50. 
D)  $4.50.

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 will shut down in the short run if the price falls below:

Accepted Answer

A)  G. 
B)  F. 
C)  E. 
D)  P. 
A)  G. 
B)  F. 
C)  E. 
D)  P.

Question 15

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 $50, what quantity will Sergei produce to maximize profit?

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:
Figure: The Perfectly Competitive Firm  
-(Figure: The Perfectly Competitive Firm) Look at the figure The Perfectly Competitive Firm. The figure shows a perfectly competitive firm that faces demand curve d and maximizes profit. The firm's economic profit in the long run will be:

Accepted Answer

A)  $0. 
B)  $250. 
C)  $275. 
D)  $300. 
A)  $0. 
B)  $250. 
C)  $275. 
D)  $300.

Question 17

A perfectly competitive industry is in long-run equilibrium. Now suppose that the fixed costs of firms in the industry decrease. Describe how this change will affect short-run economic profits. How will this industry adjust in the long run?

Accepted Answer

The decrease in fixed costs shifts the A

Question 18

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. Where does Sergei's short-run supply curve begin?

Accepted Answer

A)  P = $0; Q = 0 
B)  P = $36.67; Q = 3 
C)  P = $33.33; Q = 3 
D)  P = $170; Q = 4 
A)  P = $0; Q = 0 
B)  P = $36.67; Q = 3 
C)  P = $33.33; Q = 3 
D)  P = $170; Q = 4

Question 19

For a perfectly competitive firm, the short-run supply curve is the:

Accepted Answer

A)  entire MC curve. 
B)  rising part of the MC curve beginning at the shut-down point. 
C)  rising part of the MC curve beginning where the firm starts earning economic profit. 
D)  MC curve below the shut-down point. 
A)  entire MC curve. 
B)  rising part of the MC curve beginning at the shut-down point. 
C)  rising part of the MC curve beginning where the firm starts earning economic profit. 
D)  MC curve below the shut-down point.

Question 20

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 $67.50, how much is Sergei's total cost at the profit-maximizing output?

Accepted Answer

A)  $270.00 
B)  $170.00 
C)  $135.00 
D)  $67.50 
A)  $270.00 
B)  $170.00 
C)  $135.00 
D)  $67.50

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

Use the following to answer questions: -(Table: Cherry Farm) Look at the table Cherry Farm. If the price is $4 per pound:

In perfect competition, a change in fixed cost will:

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

Suppose Sarah's pottery studio is charging the market price, which is just higher than her minimum average total cost. This means that Sarah:

The short-run supply curve for a perfectly competitive firm is the cost curve above the _ price.

A perfectly competitive industry with constant costs initially operates in long-run equilibrium. When demand increases, in the long run and the short run:

If a perfectly competitive firm is producing a quantity where MC > MR, then profit:

Which of the following is TRUE?

Firms will make a profit in the long run or short run if the price is:

The horizontal sum of individual firms' MC curves is the:

Use the following to answer questions: -(Table: Total Cost for a Perfectly Competitive Firm) Look at the table Total Cost for a Perfectly Competitive Firm. In the short run, the firm will produce, but at a loss, if the price is:

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 will shut down in the short run if the price falls below:

A perfectly competitive industry is in long-run equilibrium. Now suppose that the fixed costs of firms in the industry decrease. Describe how this change will affect short-run economic profits. How will this industry adjust in the long run?

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. Where does Sergei's short-run supply curve begin?

For a perfectly competitive firm, the short-run supply curve is 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

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

Use the following to answer questions: -(Table: Cherry Farm) Look at the table Cherry Farm. If the price is $4 per pound:

In perfect competition, a change in fixed cost will:

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

Suppose Sarah's pottery studio is charging the market price, which is just higher than her minimum average total cost. This means that Sarah:

The short-run supply curve for a perfectly competitive firm is the ____ cost curve above the _____ price.

A perfectly competitive industry with constant costs initially operates in long-run equilibrium. When demand increases, in the long run and the short run:

If a perfectly competitive firm is producing a quantity where MC > MR, then profit:

Which of the following is TRUE?

Firms will make a profit in the long run or short run if the price is:

The horizontal sum of individual firms' MC curves is the:

Use the following to answer questions: -(Table: Total Cost for a Perfectly Competitive Firm) Look at the table Total Cost for a Perfectly Competitive Firm. In the short run, the firm will produce, but at a loss, if the price is:

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 will shut down in the short run if the price falls below:

A perfectly competitive industry is in long-run equilibrium. Now suppose that the fixed costs of firms in the industry decrease. Describe how this change will affect short-run economic profits. How will this industry adjust in the long run?

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. Where does Sergei's short-run supply curve begin?

For a perfectly competitive firm, the short-run supply curve is 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

The short-run supply curve for a perfectly competitive firm is the cost curve above the _ price.