Question 1

The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where _____ equals _____.

Accepted Answer

A)  marginal cost; price 
B)  marginal revenue; price 
C)  total revenue; total cost 
D)  average revenue; average total cost 
A)  marginal cost; price 
B)  marginal revenue; price 
C)  total revenue; total cost 
D)  average revenue; average total cost

Question 2

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. What is Alexa's shut-down price in the short run?

Accepted Answer

A)  $20 
B)  $15 
C)  $50 
D)  $42 
A)  $20 
B)  $15 
C)  $50 
D)  $42

Question 3

Use the following to answer questions:  
-(Table: Lilly's Apple Orchard) Look at the table Lilly's Apple Orchard. Lilly is the price-taking owner of an apple orchard. Her orchard has fixed costs of $30. If the price of a bushel of apples is $35, her economic profit will be:

Accepted Answer

A)  -$30 
B)  -$5 
C)  $0 
D)  $5 
A)  -$30 
B)  -$5 
C)  $0 
D)  $5

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 profit per unit at the profit-maximizing output?

Accepted Answer

A)  -$10.00 
B)  $10.00 
C)  $23.33 
D)  -$20.00 
A)  -$10.00 
B)  $10.00 
C)  $23.33 
D)  -$20.00

Question 5

In perfect competition:

Accepted Answer

A)  price and average variable cost are the same. 
B)  price and marginal revenue are the same. 
C)  price and total revenue are the same. 
D)  total revenue and total variable cost are the same. 
A)  price and average variable cost are the same. 
B)  price and marginal revenue are the same. 
C)  price and total revenue are the same. 
D)  total revenue and total variable cost are the same.

Question 6

In the long run, when there are economic losses, firms leave the industry, which will decrease the market supply and increase price until economic losses are zero.

Accepted Answer

A) True 
 B)False

Question 7

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. The farm's short-run supply curve is the _____ cost curve above a price of _____.

Accepted Answer

A)  average total; $14 
B)  average variable; $10 
C)  marginal; $10 
D)  marginal; $14 
A)  average total; $14 
B)  average variable; $10 
C)  marginal; $10 
D)  marginal; $14

Question 8

A perfectly competitive firm's supply curve is its marginal cost curve above the average variable cost curve.

Accepted Answer

A) True 
 B)False

Question 9

The price received by a firm in a perfectly competitive market:

Accepted Answer

A)  is equal to the market price. 
B)  is less than the market price. 
C)  is greater than the market price. 
D)  decreases with the quantity of output sold by the firm. 
A)  is equal to the market price. 
B)  is less than the market price. 
C)  is greater than the market price. 
D)  decreases with the quantity of output sold by the firm.

Question 10

A firm's total output times the price at which it sells that output is _____ revenue.

Accepted Answer

A)  net 
B)  total 
C)  average 
D)  marginal 
A)  net 
B)  total 
C)  average 
D)  marginal

Question 11

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

Accepted Answer

A) P > ATC. B) P P > ATC. D) AVC < P < ATC. A) P > ATC. B) P P > ATC. D) AVC < P < ATC.

Question 12

In long-run equilibrium in a perfectly competitive market, all firms will be operating at the same level of marginal cost.

Accepted Answer

A) True 
 B)False

Question 13

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 $60, how much is Alex's total cost at the profit-maximizing output?

Accepted Answer

A)  $60 
B)  $1,100 
C)  $2,400 
D)  $2,100 
A)  $60 
B)  $1,100 
C)  $2,400 
D)  $2,100

Question 14

Assume that in the short run a perfectly competitive firm does not produce output and has economic losses. This occurs at the quantity where MR = MC and:

Accepted Answer

A)  P = ATC and FC = 0. 
B)  P  0. 
C)  AVC > P > ATC and FC = 0. 
D)  AVC  0. 
A)  P = ATC and FC = 0. 
B)  P  0. 
C)  AVC > P > ATC and FC = 0. 
D)  AVC  0.

Question 15

If a perfectly competitive firm is producing a quantity where P < MC, then profit:

Accepted Answer

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

Question 16

Which of the following is TRUE?

Accepted Answer

A)  Profit per unit is price minus MC. 
B)  Total economic profit is per-unit profit times quantity. 
C)  If price is less than ATC, the firm will break even in the short run. 
D)  If price is less than marginal cost, the perfectly competitive firm should raise the price and increase output. 
A)  Profit per unit is price minus MC. 
B)  Total economic profit is per-unit profit times quantity. 
C)  If price is less than ATC, the firm will break even in the short run. 
D)  If price is less than marginal cost, the perfectly competitive firm should raise the price and increase output.

Question 17

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 $60, how much is Alex's profit per unit at the profit-maximizing output?

Accepted Answer

A)  $7.50 
B)  $32.50 
C)  $20.00 
D)  $60.00 
A)  $7.50 
B)  $32.50 
C)  $20.00 
D)  $60.00

Question 18

Use the following to answer questions:
Figure: The Perfectly Competitive Firm  
-(Figure: 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. If the firm faces a market price of $3, its total profit per day is:

Accepted Answer

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

Question 19

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. If the market price is $5.50, the profit-maximizing quantity of output is _____ units.

Accepted Answer

A)  5 
B)  7 
C)  8 
D)  9 
A)  5 
B)  7 
C)  8 
D)  9

Question 20

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 $8, in the short run the farmer's profit-maximizing output is _____ bushels.

Accepted Answer

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

The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where _ equals _.

Use the following to answer questions: -(Table: Lilly's Apple Orchard) Look at the table Lilly's Apple Orchard. Lilly is the price-taking owner of an apple orchard. Her orchard has fixed costs of $30. If the price of a bushel of apples is $35, her economic profit will be:

In perfect competition:

In the long run, when there are economic losses, firms leave the industry, which will decrease the market supply and increase price until economic losses are zero.

A perfectly competitive firm's supply curve is its marginal cost curve above the average variable cost curve.

The price received by a firm in a perfectly competitive market:

A firm's total output times the price at which it sells that output is _____ revenue.

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

In long-run equilibrium in a perfectly competitive market, all firms will be operating at the same level of marginal cost.

Assume that in the short run a perfectly competitive firm does not produce output and has economic losses. This occurs at the quantity where MR = MC and:

If a perfectly competitive firm is producing a quantity where P < MC, then profit:

Which of the following is TRUE?

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. If the market price is $5.50, the profit-maximizing quantity of output is _____ units.

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 profit-maximizing level of output for a perfectly competitive firm in the short run occurs where _____ equals _____.

Use the following to answer questions: -(Table: Lilly's Apple Orchard) Look at the table Lilly's Apple Orchard. Lilly is the price-taking owner of an apple orchard. Her orchard has fixed costs of $30. If the price of a bushel of apples is $35, her economic profit will be:

In perfect competition:

In the long run, when there are economic losses, firms leave the industry, which will decrease the market supply and increase price until economic losses are zero.

A perfectly competitive firm's supply curve is its marginal cost curve above the average variable cost curve.

The price received by a firm in a perfectly competitive market:

A firm's total output times the price at which it sells that output is _____ revenue.

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

In long-run equilibrium in a perfectly competitive market, all firms will be operating at the same level of marginal cost.

Assume that in the short run a perfectly competitive firm does not produce output and has economic losses. This occurs at the quantity where MR = MC and:

If a perfectly competitive firm is producing a quantity where P < MC, then profit:

Which of the following is TRUE?

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. If the market price is $5.50, the profit-maximizing quantity of output is _____ units.

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 profit-maximizing level of output for a perfectly competitive firm in the short run occurs where _ equals _.