Question 1

If perfectly competitive firms exit a market, the

Accepted Answer

A)  market supply curve shifts leftward. 
B)  price of the good or service falls. 
C)  profits of the remaining firms decrease. 
D)  output of the industry increases. 
A)  market supply curve shifts leftward. 
B)  price of the good or service falls. 
C)  profits of the remaining firms decrease. 
D)  output of the industry increases.

Question 2

The supply curve for a perfectly competitive firm is the portion of its marginal cost curve that lies above the average variable cost curve.

Accepted Answer

A) True 
 B)False

Question 3

A perfectly competitive firm that is producing a positive quantity of a good maximizes its economic profit if it produces so that

Accepted Answer

A)  total revenue = total cost. 
B)  marginal revenue = marginal cost. 
C)  average revenue = average total cost. 
D)  average total cost = average variable cost. 
A)  total revenue = total cost. 
B)  marginal revenue = marginal cost. 
C)  average revenue = average total cost. 
D)  average total cost = average variable cost.

Question 4

The return that the entrepreneur can obtain in the best alternative business is called the

Accepted Answer

A)  normal profit. 
B)  economic profit. 
C)  marginal profit. 
D)  marginal revenue. 
A)  normal profit. 
B)  economic profit. 
C)  marginal profit. 
D)  marginal revenue.

Question 5

What role does economic profit play in a competitive market?

Accepted Answer

Economic profit acts as a signal to entr

Question 6

For a perfectly competitive firm, no matter how much the firm produces, price always equals

Accepted Answer

A)  marginal product. 
B)  average total cost. 
C)  minimum average total cost. 
D)  marginal revenue. 
A)  marginal product. 
B)  average total cost. 
C)  minimum average total cost. 
D)  marginal revenue.

Question 7

-Acme is a perfectly competitive firm. It has the cost schedules given in the above table and has a fixed cost of $12.00. The price of Acme's product is $4.00. What is Acme's most profitable amount of output? What is Acme's total economic profit or loss?

Accepted Answer

Acme's most profitable (which means, in

Question 8

In perfect competition, the marginal revenue of an individual firm

Accepted Answer

A)  is zero. 
B)  is positive but less than the price of the product. 
C)  equals the price of the product. 
D)  exceeds the price of the product. 
A)  is zero. 
B)  is positive but less than the price of the product. 
C)  equals the price of the product. 
D)  exceeds the price of the product.

Question 9

In a perfectly competitive market, which of the following determines the market price?

Accepted Answer

A)  market demand and a firm's supply 
B)  market supply and a firm's demand 
C)  a firm's demand and its supply 
D)  market demand and market supply 
A)  market demand and a firm's supply 
B)  market supply and a firm's demand 
C)  a firm's demand and its supply 
D)  market demand and market supply

Question 10

-In the above figure, if the price is P1 and the firm produced Q1, the firm's economic profit is ________ than if it produced Q2 and ________ than if it produced Q3.

Accepted Answer

A)  less; less 
B)  less; more 
C)  more; less 
D)  more; more 
A)  less; less 
B)  less; more 
C)  more; less 
D)  more; more

Question 11

Describe the different possible profit outcomes for a perfectly competitive firm in the short run versus the long run. Explain why they occur.

Accepted Answer

In the short run, a perfectly competitiv

Question 12

-Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price of a tattoo is $17.50 what is the firm's profit-maximizing output?

Accepted Answer

A)  2 tattoos per hour 
B)  3 tattoos per hour 
C)  4 tattoos per hour 
D)  5 tattoos per hour 
A)  2 tattoos per hour 
B)  3 tattoos per hour 
C)  4 tattoos per hour 
D)  5 tattoos per hour

Question 13

All along the beach in San Diego, California are shops which rent boogie boards for $3 per hour. Tourists perceive that all rental boogie boards are identical and there are no restrictions on entry and exit in the boogie board market. Suppose Surf's Up is a boogie board rental shop. To maximize profits, Surf's Up would produce a quantity where

Accepted Answer

A)  marginal revenue is greater than marginal cost. 
B)  marginal revenue is equal to marginal cost. 
C)  marginal revenue is less than marginal cost. 
D)  price is maximized. 
A)  marginal revenue is greater than marginal cost. 
B)  marginal revenue is equal to marginal cost. 
C)  marginal revenue is less than marginal cost. 
D)  price is maximized.

Question 14

In the long run, perfectly competitive firms cannot make an economic profit. Why?

Accepted Answer

An economic profit attracts entry by new

Question 15

-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 profit-maximizing level of output for Sue's Sea Shells by the Sea Shore is

Accepted Answer

A)  202 dozen sea shells by the sea shore per day. 
B)  204 dozen sea shells by the sea shore per day. 
C)  205 dozen sea shells by the sea shore per day. 
D)  206 dozen sea shells by the sea shore per day. 
A)  202 dozen sea shells by the sea shore per day. 
B)  204 dozen sea shells by the sea shore per day. 
C)  205 dozen sea shells by the sea shore per day. 
D)  206 dozen sea shells by the sea shore per day.

Question 16

-The table above shows the total cost incurred by Sue's Coat Shop, a perfectly competitive firm. If the market price of a coat is $285, Sue's will maximize economic profit by selling ________ coats a day.

Accepted Answer

A)  7 
B)  11 
C)  8 
D)  9 
A)  7 
B)  11 
C)  8 
D)  9

Question 17

3 Output, Price, and Profit in the Short Run
-If there are 1,000 rutabaga farms, all perfectly competitive, an increase in the price of fertilizer used for growing rutabagas will

Accepted Answer

A)  have no effect on the total quantity of rutabagas supplied, because no farm has enough market power to raise the price. 
B)  have no effect on the total quantity of rutabagas supplied, because each farm's supply curve is a vertical line. 
C)  decrease the total quantity of rutabagas supplied, because each farm's supply curve shifts leftward. 
D)  reduce the total quantity of rutabagas supplied, because each farm's supply curve is a horizontal line and will shift upward. 
A)  have no effect on the total quantity of rutabagas supplied, because no farm has enough market power to raise the price. 
B)  have no effect on the total quantity of rutabagas supplied, because each farm's supply curve is a vertical line. 
C)  decrease the total quantity of rutabagas supplied, because each farm's supply curve shifts leftward. 
D)  reduce the total quantity of rutabagas supplied, because each farm's supply curve is a horizontal line and will shift upward.

Question 18

Suppose a farmer raising beef is making a normal profit. Then, because of a scare about mad cow disease, the demand for beef decreases drastically. What happens to the profits of the beef farmer in the short run and in the long run?

Accepted Answer

In the short run, the fall in beef price

Question 19

If the market price in a perfectly competitive market is less than a firm's minimum average variable cost, then the firm's total revenue will always

Accepted Answer

A)  exceed its total fixed cost. 
B)  be less than its total economic loss. 
C)  equal its total cost. 
D)  be less than its total variable cost. 
A)  exceed its total fixed cost. 
B)  be less than its total economic loss. 
C)  equal its total cost. 
D)  be less than its total variable cost.

Question 20

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

Accepted Answer

A)  There are many firms, each selling an identical product. 
B)  There are many buyers. 
C)  The price each firm sets differs from the prices set by the other firms. 
D)  There are no restrictions on entry into the market. 
A)  There are many firms, each selling an identical product. 
B)  There are many buyers. 
C)  The price each firm sets differs from the prices set by the other firms. 
D)  There are no restrictions on entry into the market.

If perfectly competitive firms exit a market, the

The supply curve for a perfectly competitive firm is the portion of its marginal cost curve that lies above the average variable cost curve.

A perfectly competitive firm that is producing a positive quantity of a good maximizes its economic profit if it produces so that

The return that the entrepreneur can obtain in the best alternative business is called the

What role does economic profit play in a competitive market?

For a perfectly competitive firm, no matter how much the firm produces, price always equals

-Acme is a perfectly competitive firm. It has the cost schedules given in the above table and has a fixed cost of $12.00. The price of Acme's product is $4.00. What is Acme's most profitable amount of output? What is Acme's total economic profit or loss?

In perfect competition, the marginal revenue of an individual firm

In a perfectly competitive market, which of the following determines the market price?

-In the above figure, if the price is P₁ and the firm produced Q₁, the firm's economic profit is than if it produced Q₂ and than if it produced Q₃.

Describe the different possible profit outcomes for a perfectly competitive firm in the short run versus the long run. Explain why they occur.

-Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price of a tattoo is $17.50 what is the firm's profit-maximizing output?

In the long run, perfectly competitive firms cannot make an economic profit. Why?

-The table above shows the total cost incurred by Sue's Coat Shop, a perfectly competitive firm. If the market price of a coat is $285, Sue's will maximize economic profit by selling ________ coats a day.

3 Output, Price, and Profit in the Short Run -If there are 1,000 rutabaga farms, all perfectly competitive, an increase in the price of fertilizer used for growing rutabagas will

Suppose a farmer raising beef is making a normal profit. Then, because of a scare about mad cow disease, the demand for beef decreases drastically. What happens to the profits of the beef farmer in the short run and in the long run?

If the market price in a perfectly competitive market is less than a firm's minimum average variable cost, then the firm's total revenue will always

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

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

If perfectly competitive firms exit a market, the

The supply curve for a perfectly competitive firm is the portion of its marginal cost curve that lies above the average variable cost curve.

A perfectly competitive firm that is producing a positive quantity of a good maximizes its economic profit if it produces so that

The return that the entrepreneur can obtain in the best alternative business is called the

What role does economic profit play in a competitive market?

For a perfectly competitive firm, no matter how much the firm produces, price always equals

-Acme is a perfectly competitive firm. It has the cost schedules given in the above table and has a fixed cost of $12.00. The price of Acme's product is $4.00. What is Acme's most profitable amount of output? What is Acme's total economic profit or loss?

In perfect competition, the marginal revenue of an individual firm

In a perfectly competitive market, which of the following determines the market price?

-In the above figure, if the price is P1 and the firm produced Q1, the firm's economic profit is ________ than if it produced Q2 and ________ than if it produced Q3.

Describe the different possible profit outcomes for a perfectly competitive firm in the short run versus the long run. Explain why they occur.

-Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price of a tattoo is $17.50 what is the firm's profit-maximizing output?

In the long run, perfectly competitive firms cannot make an economic profit. Why?

-The table above shows the total cost incurred by Sue's Coat Shop, a perfectly competitive firm. If the market price of a coat is $285, Sue's will maximize economic profit by selling ________ coats a day.

3 Output, Price, and Profit in the Short Run -If there are 1,000 rutabaga farms, all perfectly competitive, an increase in the price of fertilizer used for growing rutabagas will

Suppose a farmer raising beef is making a normal profit. Then, because of a scare about mad cow disease, the demand for beef decreases drastically. What happens to the profits of the beef farmer in the short run and in the long run?

If the market price in a perfectly competitive market is less than a firm's minimum average variable cost, then the firm's total revenue will always

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

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

-In the above figure, if the price is P₁ and the firm produced Q₁, the firm's economic profit is than if it produced Q₂ and than if it produced Q₃.