Question 1

-In the above figure, below what minimum price will a perfectly competitive firm shut down rather than produce?

Accepted Answer

A)  for any price less than $16 per unit 
B)  for any price less than $12 per unit 
C)  for any price less than $8 per unit 
D)  for any price less than $4 per unit 
A)  for any price less than $16 per unit 
B)  for any price less than $12 per unit 
C)  for any price less than $8 per unit 
D)  for any price less than $4 per unit

Question 2

-Sue's Sea Shells by the Sea Shore is a perfectly competitive firm selling sea shells at the market price of $2 per dozen. Sue's Sea Shells by the Sea Shore has fixed costs of $40 per day and a variable cost schedule in the table above. The maximum profit attainable by Sue's Sea Shells by the Sea Shore is

Accepted Answer

A)  $262.00 per day. 
B)  $262.50 per day. 
C)  $302.00 per day. 
D)  $302.50 per day. 
A)  $262.00 per day. 
B)  $262.50 per day. 
C)  $302.00 per day. 
D)  $302.50 per day.

Question 3

In the long run, perfectly competitive firms make zero economic profit (their owners earn a normal profit) because

Accepted Answer

A)  any economic profit would attract newcomers to the industry. 
B)  the firms are incompetent. 
C)  any economic loss would increase the demand for the good, thereby raising its price. 
D)  there are many buyers and sellers. 
A)  any economic profit would attract newcomers to the industry. 
B)  the firms are incompetent. 
C)  any economic loss would increase the demand for the good, thereby raising its price. 
D)  there are many buyers and sellers.

Question 4

A perfectly competitive firm's supply curve

Accepted Answer

A)  shows the relationship between the price and the quantity the firm will produce. 
B)  is the portion of the marginal cost curve above the average variable cost curve. 
C)  is upward sloping. 
D)  All of the above are correct. 
A)  shows the relationship between the price and the quantity the firm will produce. 
B)  is the portion of the marginal cost curve above the average variable cost curve. 
C)  is upward sloping. 
D)  All of the above are correct.

Question 5

In the long run, a perfectly competitive firm will exit a market when

Accepted Answer

A)  its total revenue is less than its total cost. 
B)  its marginal revenue curve is below the minimum of its average total cost curve. 
C)  the price is greater than the minimum of its average total cost curve. 
D)  Both answers A and B are correct. 
A)  its total revenue is less than its total cost. 
B)  its marginal revenue curve is below the minimum of its average total cost curve. 
C)  the price is greater than the minimum of its average total cost curve. 
D)  Both answers A and B are correct.

Question 6

A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue will ________ and its profit will ________.

Accepted Answer

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

Question 7

In a perfectly competitive market, technological advances bring ________ economic profits for producers and ________ lower prices for consumers.

Accepted Answer

A)  permanent; permanently 
B)  permanent; temporarily 
C)  temporary; permanently 
D)  temporary; temporarily 
A)  permanent; permanently 
B)  permanent; temporarily 
C)  temporary; permanently 
D)  temporary; temporarily

Question 8

-The figure above shows a typical perfectly competitive corn farm, whose marginal cost curve is MC and average total cost curve is ATC. The market is initially in a long-run equilibrium, where the price is $3.00 per bushel. Then, the market demand for corn decreases and, in the short run, the price falls to $2.50 per bushel. In the long run, the price of corn is ________ and a typical farm produces ________ bushels of corn.

Accepted Answer

A)  $2.00; 200,000 
B)  $3.50; 250,000 
C)  $2.50; 250,000 
D)  $3.00; 300,000 
A)  $2.00; 200,000 
B)  $3.50; 250,000 
C)  $2.50; 250,000 
D)  $3.00; 300,000

Question 9

The market demand for wheat is ________ and the demand for wheat produced by an individual farm is ________.

Accepted Answer

A)  perfectly elastic; perfectly inelastic 
B)  not perfectly elastic; perfectly elastic 
C)  not perfectly inelastic; inelastic 
D)  elastic; unit elastic 
A)  perfectly elastic; perfectly inelastic 
B)  not perfectly elastic; perfectly elastic 
C)  not perfectly inelastic; inelastic 
D)  elastic; unit elastic

Question 10

A perfectly competitive firm's demand curve is

Accepted Answer

A)  upward sloping. 
B)  downward sloping. 
C)  a vertical line. 
D)  a horizontal line. 
A)  upward sloping. 
B)  downward sloping. 
C)  a vertical line. 
D)  a horizontal line.

Question 11

Economic profit is

Accepted Answer

A)  included in the firm's total opportunity cost. 
B)  equal to normal profit minus total opportunity cost. 
C)  equal to total revenue minus marginal cost. 
D)  equal to total revenue minus total opportunity cost. 
A)  included in the firm's total opportunity cost. 
B)  equal to normal profit minus total opportunity cost. 
C)  equal to total revenue minus marginal cost. 
D)  equal to total revenue minus total opportunity cost.

Question 12

-The figure above portrays a total revenue curve for a perfectly competitive firm. Curve A is straight because the firm

Accepted Answer

A)  is a price taker. 
B)  faces constant returns to scale. 
C)  wants to maximize its profits. 
D)  has perfect information. 
A)  is a price taker. 
B)  faces constant returns to scale. 
C)  wants to maximize its profits. 
D)  has perfect information.

Question 13

-The table above shows output and costs of Evan's Subs, a typical perfectly competitive firm in a local market for sandwiches. Evan's fixed cost is $9 per hour. The current market price of a sandwich is $6. What is Evan's marginal revenue from the 2nd sandwich sold?

Accepted Answer

A)  $10.00 
B)  $13.50 
C)  $3.00 
D)  $6.00 
A)  $10.00 
B)  $13.50 
C)  $3.00 
D)  $6.00

Question 14

A perfectly competitive firm has a total revenue curve that is

Accepted Answer

A)  upward sloping with an increasing slope. 
B)  downward sloping with a constant slope. 
C)  upward sloping with a decreasing slope. 
D)  upward sloping with a constant slope. 
A)  upward sloping with an increasing slope. 
B)  downward sloping with a constant slope. 
C)  upward sloping with a decreasing slope. 
D)  upward sloping with a constant slope.

Question 15

Ethanol is produced using corn. "Higher ethanol production definitely and directly raises the price of corn," said USDA economist Ephraim Leibtag. In the short run, what is TRUE if the production of ethanol increases?

Accepted Answer

A)  The demand for corn will increase. 
B)  The supply of ethanol will decrease. 
C)  The supply of corn will increase. 
D)  The demand for ethanol will increase. 
A)  The demand for corn will increase. 
B)  The supply of ethanol will decrease. 
C)  The supply of corn will increase. 
D)  The demand for ethanol will increase.

Question 16

If marginal revenue exceeds marginal cost, to increase its profit the firm will

Accepted Answer

A)  decrease its output. 
B)  increase its output. 
C)  keep its output the same. 
D)  shut down. 
A)  decrease its output. 
B)  increase its output. 
C)  keep its output the same. 
D)  shut down.

Question 17

-The figure above shows a firm in a perfectly competitive market. If the firm does NOT shut down, the least amount of output that it will produce is

Accepted Answer

A)  less than 5 units. 
B)  5 units. 
C)  8 units. 
D)  10 units. 
A)  less than 5 units. 
B)  5 units. 
C)  8 units. 
D)  10 units.

Question 18

A perfectly competitive firm produces so that its marginal cost equals the price.

Accepted Answer

A) True 
 B)False

Question 19

Bubba's BBQ has fallen on some hard times. Bubba has analyzed his past revenue and cost information and knows that if he shuts down, he will incur an economic loss equal to $20,000 in remaining lease payments. Apparently, Bubba's current planning horizon is

Accepted Answer

A)  the short run because he still faces some fixed costs. 
B)  the long run because he faces only variable costs. 
C)  the short run because he faces only variable costs. 
D)  neither the short run nor the long run because lease payments do not figure into cost determinations. 
A)  the short run because he still faces some fixed costs. 
B)  the long run because he faces only variable costs. 
C)  the short run because he faces only variable costs. 
D)  neither the short run nor the long run because lease payments do not figure into cost determinations.

Question 20

-Suppose the cost curves in the above figure apply to all firms in the market. If the initial price is P1, firms are ________ and some firms will ________ the industry.

Accepted Answer

A)  making an economic profit; leave 
B)  making an economic profit; enter 
C)  incurring an economic loss; leave 
D)  incurring an economic loss; enter 
A)  making an economic profit; leave 
B)  making an economic profit; enter 
C)  incurring an economic loss; leave 
D)  incurring an economic loss; enter

-In the above figure, below what minimum price will a perfectly competitive firm shut down rather than produce?

In the long run, perfectly competitive firms make zero economic profit (their owners earn a normal profit) because

A perfectly competitive firm's supply curve

In the long run, a perfectly competitive firm will exit a market when

A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue will and its profit will .

In a perfectly competitive market, technological advances bring economic profits for producers and lower prices for consumers.

The market demand for wheat is and the demand for wheat produced by an individual farm is .

A perfectly competitive firm's demand curve is

Economic profit is

-The figure above portrays a total revenue curve for a perfectly competitive firm. Curve A is straight because the firm

-The table above shows output and costs of Evan's Subs, a typical perfectly competitive firm in a local market for sandwiches. Evan's fixed cost is $9 per hour. The current market price of a sandwich is $6. What is Evan's marginal revenue from the 2nd sandwich sold?

A perfectly competitive firm has a total revenue curve that is

Ethanol is produced using corn. "Higher ethanol production definitely and directly raises the price of corn," said USDA economist Ephraim Leibtag. In the short run, what is TRUE if the production of ethanol increases?

If marginal revenue exceeds marginal cost, to increase its profit the firm will

-The figure above shows a firm in a perfectly competitive market. If the firm does NOT shut down, the least amount of output that it will produce is

A perfectly competitive firm produces so that its marginal cost equals the price.

Bubba's BBQ has fallen on some hard times. Bubba has analyzed his past revenue and cost information and knows that if he shuts down, he will incur an economic loss equal to $20,000 in remaining lease payments. Apparently, Bubba's current planning horizon is

-Suppose the cost curves in the above figure apply to all firms in the market. If the initial price is P₁, firms are and some firms will the industry.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 12: Perfect Competition

-In the above figure, below what minimum price will a perfectly competitive firm shut down rather than produce?

In the long run, perfectly competitive firms make zero economic profit (their owners earn a normal profit) because

A perfectly competitive firm's supply curve

In the long run, a perfectly competitive firm will exit a market when

A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue will ________ and its profit will ________.

In a perfectly competitive market, technological advances bring ________ economic profits for producers and ________ lower prices for consumers.

The market demand for wheat is ________ and the demand for wheat produced by an individual farm is ________.

A perfectly competitive firm's demand curve is

Economic profit is

-The figure above portrays a total revenue curve for a perfectly competitive firm. Curve A is straight because the firm

-The table above shows output and costs of Evan's Subs, a typical perfectly competitive firm in a local market for sandwiches. Evan's fixed cost is $9 per hour. The current market price of a sandwich is $6. What is Evan's marginal revenue from the 2nd sandwich sold?

A perfectly competitive firm has a total revenue curve that is

Ethanol is produced using corn. "Higher ethanol production definitely and directly raises the price of corn," said USDA economist Ephraim Leibtag. In the short run, what is TRUE if the production of ethanol increases?

If marginal revenue exceeds marginal cost, to increase its profit the firm will

-The figure above shows a firm in a perfectly competitive market. If the firm does NOT shut down, the least amount of output that it will produce is

A perfectly competitive firm produces so that its marginal cost equals the price.

Bubba's BBQ has fallen on some hard times. Bubba has analyzed his past revenue and cost information and knows that if he shuts down, he will incur an economic loss equal to $20,000 in remaining lease payments. Apparently, Bubba's current planning horizon is

-Suppose the cost curves in the above figure apply to all firms in the market. If the initial price is P1, firms are ________ and some firms will ________ the industry.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue will and its profit will .

In a perfectly competitive market, technological advances bring economic profits for producers and lower prices for consumers.

The market demand for wheat is and the demand for wheat produced by an individual farm is .

-Suppose the cost curves in the above figure apply to all firms in the market. If the initial price is P₁, firms are and some firms will the industry.