Question 1

In the long run, a perfectly competitive firm maximizes profit so P = MC = AC.

Accepted Answer

A) True 
 B)False

Question 2

How does a firm that is losing money in the short run decide whether to shut down or continue to produce to minimize its losses?

Accepted Answer

The firm should continue to pr

Question 3

A firm sells in a competitive market in which price is $12.Its marginal cost is 6 + .25Q.Determine the profit-maximizing level of output.

Accepted Answer

The solution requires equating

Question 4

It pays the firm to produce only if total variable costs exceed total revenue.

Accepted Answer

A) True 
 B)False

Question 5

Which of the following is a characteristic of perfect competition?

Accepted Answer

A)  large barriers to entry 
B)  a small number of firms 
C)  firms selling unique goods 
D)  None of the above is correct. 
A)  large barriers to entry 
B)  a small number of firms 
C)  firms selling unique goods 
D)  None of the above is correct.

Question 6

The short-run supply curve for a perfectly competitive firm is that portion of the MC curve above the AVC curve.

Accepted Answer

A) True 
 B)False

Question 7

Exhibit 10-1
A perfectly competitive producer has the following short-run average cost curve and marginal cost curve:
SR AC = 2Q + 3
MC = 4Q + 3
where costs are measured in dollars and Q represents the firm's output in units.
-The firm whose short-run cost curves are given in Exhibit 10-1 has a long-run fixed cost of

Accepted Answer

A)  $0. 
B)  $2. 
C)  $3. 
D)  $4. 
A)  $0. 
B)  $2. 
C)  $3. 
D)  $4.

Question 8

What is the difference between the short run and the long run as economists define the two?

Accepted Answer

The short run is a period of time within

Question 9

Why study perfect competition, if it rarely exists?

Accepted Answer

Perfect competition is the circumstance

Question 10

Using only marginal revenue and marginal cost, we can determine whether a firm is incurring a profit or a loss.

Accepted Answer

A) True 
 B)False

Question 11

Illustrate the cost curves and average revenue (demand) curve for the perfectly competitive firm in long-run equilibrium.

Accepted Answer

The illustration sho

Question 12

If a firm sells its output at a price greater than AVC, it will earn economic profit.

Accepted Answer

A) True 
 B)False

Question 13

Draw a graph illustrating the relationship between the demand curve of the perfectly competitive firm and the perfectly competitive industry.Label all curves and axes correctly.

Accepted Answer

The diagram of the firm and in

Question 14

Draw a graph showing the typical competitive firm losing money but continuing to operate.Explain why the firm continues to operate rather than shut down.

Accepted Answer

Figure 10-10 shows price (= MR) above mi

Question 15

A perfectly competitive firm may, under some circumstances, be able to affect the market price.

Accepted Answer

A) True 
 B)False

Question 16

Under perfect competition, firms are relatively ignorant of the actions of their competitors.

Accepted Answer

A) True 
 B)False

Question 17

A firm in short-run equilibrium always earns positive profits if

Accepted Answer

A)  AC > P > AVC. 
B)  AR > AC. 
C)  MR = MC. 
D)  AC > MC. 
A)  AC > P > AVC. 
B)  AR > AC. 
C)  MR = MC. 
D)  AC > MC.

Question 18

In the long run, a perfectly competitive industry tends to develop differentiated products.

Accepted Answer

A) True 
 B)False

Question 19

The market for toothpaste is a good example of perfect competition.

Accepted Answer

A) True 
 B)False

Question 20

The short run for the industry is defined as a period

Accepted Answer

A)  too brief for new firms to enter the industry. 
B)  too brief for old firms to leave the industry. 
C)  in which the number of firms in the industry is fixed. 
D)  All of the above are correct. 
A)  too brief for new firms to enter the industry. 
B)  too brief for old firms to leave the industry. 
C)  in which the number of firms in the industry is fixed. 
D)  All of the above are correct.

Exam 10: The Firm and the Industry under Perfect Competition

In the long run, a perfectly competitive firm maximizes profit so P = MC = AC.

How does a firm that is losing money in the short run decide whether to shut down or continue to produce to minimize its losses?

A firm sells in a competitive market in which price is $12.Its marginal cost is 6 + .25Q.Determine the profit-maximizing level of output.

It pays the firm to produce only if total variable costs exceed total revenue.

Which of the following is a characteristic of perfect competition?

The short-run supply curve for a perfectly competitive firm is that portion of the MC curve above the AVC curve.

What is the difference between the short run and the long run as economists define the two?

Why study perfect competition, if it rarely exists?

Using only marginal revenue and marginal cost, we can determine whether a firm is incurring a profit or a loss.

Illustrate the cost curves and average revenue (demand) curve for the perfectly competitive firm in long-run equilibrium.

If a firm sells its output at a price greater than AVC, it will earn economic profit.

Draw a graph illustrating the relationship between the demand curve of the perfectly competitive firm and the perfectly competitive industry.Label all curves and axes correctly.

Draw a graph showing the typical competitive firm losing money but continuing to operate.Explain why the firm continues to operate rather than shut down.

A perfectly competitive firm may, under some circumstances, be able to affect the market price.

Under perfect competition, firms are relatively ignorant of the actions of their competitors.

A firm in short-run equilibrium always earns positive profits if

In the long run, a perfectly competitive industry tends to develop differentiated products.

The market for toothpaste is a good example of perfect competition.

The short run for the industry is defined as a period

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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