Question 1

In the short run, a perfectly competitive firm might

Accepted Answer

A)  set its price above marginal cost. 
B)  set its price above marginal revenue. 
C)  adjust the size of its fixed inputs. 
D)  operate even though it is incurring an economic loss. 
A)  set its price above marginal cost. 
B)  set its price above marginal revenue. 
C)  adjust the size of its fixed inputs. 
D)  operate even though it is incurring an economic loss.

Question 2

-Acme is a perfectly competitive firm. It has the total cost schedule given in the above table. Acme's product sells for $8.00 per unit. What amount of output is the most profitable and what is Acme's economic profit or economic loss?

Accepted Answer

Acme's profit-maximizing level of output

Question 3

Ellen's Painting Services is a perfectly competitive firm that currently paints 10 houses a month and charges $100 per house, which is the going market price. Ellen's marginal cost is positively related with the quantity of service she provides and is currently $120. What should Ellen do to increase her economic profit? Paint more houses? Raise her price? Explain your answer.

Accepted Answer

Ellen should decrease the number of hous

Question 4

For a perfectly competitive firm, as its output increases its marginal revenue ________ and its marginal cost ________.

Accepted Answer

A)  changes; changes 
B)  changes; does not change 
C)  does not change; changes 
D)  does not change; does not change 
A)  changes; changes 
B)  changes; does not change 
C)  does not change; changes 
D)  does not change; does not change

Question 5

The smallest quantity of output at which long-run average cost is at a minimum is a firm's

Accepted Answer

A)  maximum efficient scale. 
B)  profit-maximizing output point. 
C)  minimum efficient scale. 
D)  efficient output point. 
A)  maximum efficient scale. 
B)  profit-maximizing output point. 
C)  minimum efficient scale. 
D)  efficient output point.

Question 6

-In the above figure, when the firm produces output corresponding to point c, the firm's marginal cost

Accepted Answer

A)  is less than its marginal revenue. 
B)  equals its marginal revenue. 
C)  exceeds its marginal revenue. 
D)  equals its average revenue. 
A)  is less than its marginal revenue. 
B)  equals its marginal revenue. 
C)  exceeds its marginal revenue. 
D)  equals its average revenue.

Question 7

Will a perfectly competitive firm ever produce in the short run even though it is incurring an economic loss?

Accepted Answer

Yes, a perfectly competitive firm will c

Question 8

In the long-run equilibrium, perfectly competitive firms make zero economic profit because of

Accepted Answer

A)  government regulations. 
B)  the ability of firms to enter and exit. 
C)  inefficient production processes. 
D)  high fixed costs. 
A)  government regulations. 
B)  the ability of firms to enter and exit. 
C)  inefficient production processes. 
D)  high fixed costs.

Question 9

In the long run, the firms in a perfectly competitive market

Accepted Answer

A)  maximize their profit. 
B)  make an economic profit. 
C)  display price setting behavior. 
D)  are protected by barriers to entry. 
A)  maximize their profit. 
B)  make an economic profit. 
C)  display price setting behavior. 
D)  are protected by barriers to entry.

Question 10

For prices above the minimum average variable cost, a perfectly competitive firm's supply curve is

Accepted Answer

A)  horizontal at the market price. 
B)  vertical at zero output. 
C)  the same as its marginal cost curve. 
D)  the same as its average variable cost curve. 
A)  horizontal at the market price. 
B)  vertical at zero output. 
C)  the same as its marginal cost curve. 
D)  the same as its average variable cost curve.

Question 11

In the short run, a perfectly competitive firm

Accepted Answer

A)  cannot shut down. 
B)  must make zero economic profit. 
C)  can make an economic profit, incur an economic loss, or make zero economic profit. 
D)  will not incur an economic loss if it shuts down. 
A)  cannot shut down. 
B)  must make zero economic profit. 
C)  can make an economic profit, incur an economic loss, or make zero economic profit. 
D)  will not incur an economic loss if it shuts down.

Question 12

-Carol's Candies is producing 150 boxes of candy a day. Carol's marginal revenue and marginal cost curves are shown in the figure above. To increase her profit, Carol should

Accepted Answer

A)  increase her output. 
B)  decrease her output. 
C)  maintain the current level of output because it gives her the maximum profit. 
D)  Not enough information is given to determine if Carol should increase, decrease, or not change her level of output. 
A)  increase her output. 
B)  decrease her output. 
C)  maintain the current level of output because it gives her the maximum profit. 
D)  Not enough information is given to determine if Carol should increase, decrease, or not change her level of output.

Question 13

-The above table shows the per day total cost for Kiley's Baseball Glove Company. Each glove is priced at $50 and Kiley's Baseball Glove Company is a perfectly competitive firm. At which of the following amounts of output is the economic profit maximized for Kiley's Baseball Glove Company?

Accepted Answer

A)  0 
B)  2 
C)  5 
D)  8 
A)  0 
B)  2 
C)  5 
D)  8

Question 14

-The figure above shows the costs for the typical grower in the perfectly competitive turnip market. Currently, the price of a ton of turnips is $1,200. The demand for turnips increases permanently. The turnip industry experiences neither external economies nor external diseconomies. In the long run, the price of a ton of turnips

Accepted Answer

A)  increases so it is above $1,200. 
B)  is $1,200 and turnip growers will make normal profit. 
C)  decreases so it is below $1,200, and turnip growers will make normal profit. 
D)  decreases so it is below $1,200 and the turnip growers make an economic profit. 
A)  increases so it is above $1,200. 
B)  is $1,200 and turnip growers will make normal profit. 
C)  decreases so it is below $1,200, and turnip growers will make normal profit. 
D)  decreases so it is below $1,200 and the turnip growers make an economic profit.

Question 15

If a perfectly competitive market is in long-run equilibrium and there is a permanent decrease in demand, then

Accepted Answer

A)  some firms will incur economic losses. 
B)  firms are no longer maximizing profits. 
C)  some firms must immediately exit. 
D)  each firm must produce less output in the new long run equilibrium and earn less economic profit. 
A)  some firms will incur economic losses. 
B)  firms are no longer maximizing profits. 
C)  some firms must immediately exit. 
D)  each firm must produce less output in the new long run equilibrium and earn less economic profit.

Question 16

In the long-run equilibrium for a perfectly competitive market

Accepted Answer

A)  the firms' economic profits are zero. 
B)  there is no incentive for entry or exit. 
C)  average total costs of production are minimized. 
D)  All of the above are correct. 
A)  the firms' economic profits are zero. 
B)  there is no incentive for entry or exit. 
C)  average total costs of production are minimized. 
D)  All of the above are correct.

Question 17

"Higher ethanol production definitely and directly raises the price of corn," said USDA economist Ephraim Leibtag. In the long run in the corn market, what is TRUE if the production of ethanol increases?

Accepted Answer

A)  Individual corn farmers will make zero economic profit in the long run. 
B)  Individual corn farmers will make an economic profit in the long run. 
C)  Individual corn farmers will incur an economic loss in the long run, but they will still produce. 
D)  Individual corn farmers will incur an economic loss in the long run and will shut down. 
A)  Individual corn farmers will make zero economic profit in the long run. 
B)  Individual corn farmers will make an economic profit in the long run. 
C)  Individual corn farmers will incur an economic loss in the long run, but they will still produce. 
D)  Individual corn farmers will incur an economic loss in the long run and will shut down.

Question 18

In a perfectly competitive market that is in long-run equilibrium, which of the following will NOT occur?

Accepted Answer

A)  Firms make only zero economic profit. 
B)  Firms' owners earn a normal profit. 
C)  The price equals the minimum average total cost. 
D)  Entrepreneurs want to enter this industry. 
A)  Firms make only zero economic profit. 
B)  Firms' owners earn a normal profit. 
C)  The price equals the minimum average total cost. 
D)  Entrepreneurs want to enter this industry.

Question 19

Which of the following is NOT an assumption of perfect competition?

Accepted Answer

A)  Firms compete by making their product different from products produced by other firms. 
B)  There are no restrictions on entry into the market. 
C)  Established firms have no advantage over new firms. 
D)  Sellers and buyers are well informed about prices. 
A)  Firms compete by making their product different from products produced by other firms. 
B)  There are no restrictions on entry into the market. 
C)  Established firms have no advantage over new firms. 
D)  Sellers and buyers are well informed about prices.

Question 20

A perfectly competitive firm initially is earning zero economic profit. Then, a decrease in demand for the firm's product occurs. Of the following, in the long run which action listed below is the firm most likely to take?

Accepted Answer

A)  Increase the quantity it produces. 
B)  Increase its advertising to increase the demand for its product. 
C)  Exit the market. 
D)  Increase the size of its plant. 
A)  Increase the quantity it produces. 
B)  Increase its advertising to increase the demand for its product. 
C)  Exit the market. 
D)  Increase the size of its plant.

In the short run, a perfectly competitive firm might

-Acme is a perfectly competitive firm. It has the total cost schedule given in the above table. Acme's product sells for $8.00 per unit. What amount of output is the most profitable and what is Acme's economic profit or economic loss?

For a perfectly competitive firm, as its output increases its marginal revenue and its marginal cost .

The smallest quantity of output at which long-run average cost is at a minimum is a firm's

-In the above figure, when the firm produces output corresponding to point c, the firm's marginal cost

Will a perfectly competitive firm ever produce in the short run even though it is incurring an economic loss?

In the long-run equilibrium, perfectly competitive firms make zero economic profit because of

In the long run, the firms in a perfectly competitive market

For prices above the minimum average variable cost, a perfectly competitive firm's supply curve is

In the short run, a perfectly competitive firm

-Carol's Candies is producing 150 boxes of candy a day. Carol's marginal revenue and marginal cost curves are shown in the figure above. To increase her profit, Carol should

-The above table shows the per day total cost for Kiley's Baseball Glove Company. Each glove is priced at $50 and Kiley's Baseball Glove Company is a perfectly competitive firm. At which of the following amounts of output is the economic profit maximized for Kiley's Baseball Glove Company?

If a perfectly competitive market is in long-run equilibrium and there is a permanent decrease in demand, then

In the long-run equilibrium for a perfectly competitive market

"Higher ethanol production definitely and directly raises the price of corn," said USDA economist Ephraim Leibtag. In the long run in the corn market, what is TRUE if the production of ethanol increases?

In a perfectly competitive market that is in long-run equilibrium, which of the following will NOT occur?

Which of the following is NOT an assumption of perfect competition?

A perfectly competitive firm initially is earning zero economic profit. Then, a decrease in demand for the firm's product occurs. Of the following, in the long run which action listed below is the firm most likely to take?

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 short run, a perfectly competitive firm might

-Acme is a perfectly competitive firm. It has the total cost schedule given in the above table. Acme's product sells for $8.00 per unit. What amount of output is the most profitable and what is Acme's economic profit or economic loss?

For a perfectly competitive firm, as its output increases its marginal revenue ________ and its marginal cost ________.

The smallest quantity of output at which long-run average cost is at a minimum is a firm's

-In the above figure, when the firm produces output corresponding to point c, the firm's marginal cost

Will a perfectly competitive firm ever produce in the short run even though it is incurring an economic loss?

In the long-run equilibrium, perfectly competitive firms make zero economic profit because of

In the long run, the firms in a perfectly competitive market

For prices above the minimum average variable cost, a perfectly competitive firm's supply curve is

In the short run, a perfectly competitive firm

-Carol's Candies is producing 150 boxes of candy a day. Carol's marginal revenue and marginal cost curves are shown in the figure above. To increase her profit, Carol should

-The above table shows the per day total cost for Kiley's Baseball Glove Company. Each glove is priced at $50 and Kiley's Baseball Glove Company is a perfectly competitive firm. At which of the following amounts of output is the economic profit maximized for Kiley's Baseball Glove Company?

If a perfectly competitive market is in long-run equilibrium and there is a permanent decrease in demand, then

In the long-run equilibrium for a perfectly competitive market

"Higher ethanol production definitely and directly raises the price of corn," said USDA economist Ephraim Leibtag. In the long run in the corn market, what is TRUE if the production of ethanol increases?

In a perfectly competitive market that is in long-run equilibrium, which of the following will NOT occur?

Which of the following is NOT an assumption of perfect competition?

A perfectly competitive firm initially is earning zero economic profit. Then, a decrease in demand for the firm's product occurs. Of the following, in the long run which action listed below is the firm most likely to take?

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

For a perfectly competitive firm, as its output increases its marginal revenue and its marginal cost .