Question 1

The break-even point is defined as occurring at an output rate at which

Accepted Answer

A)  total revenue equals total opportunity cost. 
B)  economic profit is maximized. 
C)  marginal revenue equals marginal cost. 
D)  total cost is minimized. 
A)  total revenue equals total opportunity cost. 
B)  economic profit is maximized. 
C)  marginal revenue equals marginal cost. 
D)  total cost is minimized.

Question 2

If the market for maple syrup is perfectly competitive, then in the long-run equilibrium, firms are

Accepted Answer

A)  entering the market. 
B)  exiting the market. 
C)  making zero economic profit. 
D)  temporarily shutting down. 
A)  entering the market. 
B)  exiting the market. 
C)  making zero economic profit. 
D)  temporarily shutting down.

Question 3

Can a perfectly competitive firm make an economic profit in the short run? Can it incur an economic loss?

Accepted Answer

In the short run, a perfectly competitiv

Question 4

-In the above figure showing a perfectly competitive firm's total revenue line, the firm's marginal revenue

Accepted Answer

A)  falls as output increases. 
B)  does not change as output increases. 
C)  rises as output increases. 
D)  cannot be determined. 
A)  falls as output increases. 
B)  does not change as output increases. 
C)  rises as output increases. 
D)  cannot be determined.

Question 5

In a perfectly competitive market, the price elasticity of demand for the market demand is ________ and the price elasticity of demand for an individual firm's demand is ________.

Accepted Answer

A)  infinite; infinite 
B)  less than infinite; infinite 
C)  infinite; less than infinite 
D)  less than infinite; less than infinite 
A)  infinite; infinite 
B)  less than infinite; infinite 
C)  infinite; less than infinite 
D)  less than infinite; less than infinite

Question 6

The section of the marginal cost curve that lies above the average variable cost curve is

Accepted Answer

A)  a perfectly competitive firm's supply curve. 
B)  a perfectly competitive firm's average total cost curve. 
C)  a perfectly competitive firm's total fixed costs curve. 
D)  irrelevant to the firm because it never produces at any point along this curve. 
A)  a perfectly competitive firm's supply curve. 
B)  a perfectly competitive firm's average total cost curve. 
C)  a perfectly competitive firm's total fixed costs curve. 
D)  irrelevant to the firm because it never produces at any point along this curve.

Question 7

In a perfectly competitive market, many firms sell an identical product.

Accepted Answer

A) True 
 B)False

Question 8

As firms enter a perfectly competitive market, the price

Accepted Answer

A)  falls and the existing firms' economic profits do not change. 
B)  rises and the existing firms' economic profits decrease. 
C)  falls and the existing firms' economic profits decrease. 
D)  falls and the existing firms' economic losses do not change. 
A)  falls and the existing firms' economic profits do not change. 
B)  rises and the existing firms' economic profits decrease. 
C)  falls and the existing firms' economic profits decrease. 
D)  falls and the existing firms' economic losses do not change.

Question 9

-Consider the perfectly competitive firm in the figure above. At the profit maximizing level of output, the firm will

Accepted Answer

A)  make an economic profit equal to the area ABCD. 
B)  incur an economic loss equal to the area ABCD. 
C)  make zero economic profit. 
D)  make an economic profit equal to the area AECD. 
A)  make an economic profit equal to the area ABCD. 
B)  incur an economic loss equal to the area ABCD. 
C)  make zero economic profit. 
D)  make an economic profit equal to the area AECD.

Question 10

Price taking behavior exists in

Accepted Answer

A)  perfectly competitive markets. 
B)  markets with a monopolist, where consumers have to take price as it is given to them by the monopolist. 
C)  automobile markets where consumers have to take the price set by the dealer. 
D)  Both answers B and C are correct. 
A)  perfectly competitive markets. 
B)  markets with a monopolist, where consumers have to take price as it is given to them by the monopolist. 
C)  automobile markets where consumers have to take the price set by the dealer. 
D)  Both answers B and C are correct.

Question 11

-In the above figure, at what price does a perfectly competitive firm make zero economic profit?

Accepted Answer

A)  $4 per unit 
B)  $8 per unit 
C)  $12 per unit 
D)  $16 per unit 
A)  $4 per unit 
B)  $8 per unit 
C)  $12 per unit 
D)  $16 per unit

Question 12

In a perfectly competitive market that is in long-run equilibrium, a permanent leftward shift in the market demand curve

Accepted Answer

A)  raises the price in the short run. 
B)  raises profits in the short run. 
C)  leads to new firms entering the market in the long run. 
D)  lowers the price at first but then raises it as firms leave the market. 
A)  raises the price in the short run. 
B)  raises profits in the short run. 
C)  leads to new firms entering the market in the long run. 
D)  lowers the price at first but then raises it as firms leave the market.

Question 13

Homer's Holesome Donuts has determined that its profit-maximizing quantity is 10,000 donuts per year. Homer's earns $12,000 in revenue from the sale of those donuts. Homer's has two costs. First he pays $16,000 in annual rental payments for its five-year lease on its store. Second Homer incurs an additional cost of $5,000 for ingredients. Should Homer's shut down in the short run?

Accepted Answer

A)  Yes, because he is incurring an economic loss. 
B)  Yes, because he cannot cover all of his fixed costs. 
C)  No, because is making positive economic profit. 
D)  No, because he can cover all of his variable costs. 
A)  Yes, because he is incurring an economic loss. 
B)  Yes, because he cannot cover all of his fixed costs. 
C)  No, because is making positive economic profit. 
D)  No, because he can cover all of his variable costs.

Question 14

-Petunia's Farm produces and sells milk. The market for milk is perfectly competitive. The market price of milk is $2.50 per gallon. The relationship between the farm's output and total costs is shown in the table above.
a) Draw Petunia's average variable, average total, and marginal cost curves.
b) Use your graphs to find Petunia's profit-maximizing output.
c) If Petunia maximizes her profit, how much profit does she make?
d) What is Petunia's shutdown point? What is her economic profit at the shut-down point?
e) Should Petunia shut down? Will farms with costs the same as Petunia's enter or exit the milk market? Explain.

Accepted Answer

@#IMG-DLM& @#IMG-DLM& a) Petunia's cost schedules are shown

Question 15

-In the above figure, if the milk industry is perfectly competitive, then the firm's marginal revenue curve is represented by

Accepted Answer

A)  curve F. 
B)  curve G. 
C)  curve H. 
D)  curve I. 
A)  curve F. 
B)  curve G. 
C)  curve H. 
D)  curve I.

Question 16

-The figure above portrays a total revenue curve for a perfectly competitive firm. The firm's marginal revenue from selling a unit of output

Accepted Answer

A)  equals $0.50. 
B)  equals $1.00. 
C)  equals $2.00. 
D)  cannot be determined. 
A)  equals $0.50. 
B)  equals $1.00. 
C)  equals $2.00. 
D)  cannot be determined.

Question 17

Initially, a perfectly competitive industry that has 1,000 firms is in long-run equilibrium. Then 100 firms in the industry adopt a new technology that reduces the average cost of producing the good. In the short run, the price ________, firms with the new technology make ________ economic profit, and firms with the old technology ________.

Accepted Answer

A)  remains the same; zero; incur economic losses 
B)  falls; positive; incur economic losses 
C)  remains the same; positive; make normal profit 
D)  remains the same; positive; incur economic losses 
A)  remains the same; zero; incur economic losses 
B)  falls; positive; incur economic losses 
C)  remains the same; positive; make normal profit 
D)  remains the same; positive; incur economic losses

Question 18

The demand for wheat from farm A is perfectly elastic because wheat from farm A is

Accepted Answer

A)  a perfect complement for wheat from farm B. 
B)  a normal good. 
C)  a perfect substitute for wheat from farm B. 
D)  an inferior good. 
A)  a perfect complement for wheat from farm B. 
B)  a normal good. 
C)  a perfect substitute for wheat from farm B. 
D)  an inferior good.

Question 19

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $15, what is Giuseppe's profit-maximizing output?

Accepted Answer

A)  2 pizzas per hour 
B)  3 pizzas per hour 
C)  4 pizzas per hour 
D)  0 pizzas per hour 
A)  2 pizzas per hour 
B)  3 pizzas per hour 
C)  4 pizzas per hour 
D)  0 pizzas per hour

Question 20

In perfect competition, the market demand for the good ________ perfectly elastic and the demand for the output of one firm ________ perfectly elastic.

Accepted Answer

A)  is; is 
B)  is; is not 
C)  is not; is 
D)  is not; is not 
A)  is; is 
B)  is; is not 
C)  is not; is 
D)  is not; is not

The break-even point is defined as occurring at an output rate at which

If the market for maple syrup is perfectly competitive, then in the long-run equilibrium, firms are

Can a perfectly competitive firm make an economic profit in the short run? Can it incur an economic loss?

-In the above figure showing a perfectly competitive firm's total revenue line, the firm's marginal revenue

In a perfectly competitive market, the price elasticity of demand for the market demand is and the price elasticity of demand for an individual firm's demand is .

The section of the marginal cost curve that lies above the average variable cost curve is

In a perfectly competitive market, many firms sell an identical product.

As firms enter a perfectly competitive market, the price

-Consider the perfectly competitive firm in the figure above. At the profit maximizing level of output, the firm will

Price taking behavior exists in

-In the above figure, at what price does a perfectly competitive firm make zero economic profit?

In a perfectly competitive market that is in long-run equilibrium, a permanent leftward shift in the market demand curve

-In the above figure, if the milk industry is perfectly competitive, then the firm's marginal revenue curve is represented by

-The figure above portrays a total revenue curve for a perfectly competitive firm. The firm's marginal revenue from selling a unit of output

The demand for wheat from farm A is perfectly elastic because wheat from farm A is

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $15, what is Giuseppe's profit-maximizing output?

In perfect competition, the market demand for the good perfectly elastic and the demand for the output of one firm perfectly elastic.

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

The break-even point is defined as occurring at an output rate at which

If the market for maple syrup is perfectly competitive, then in the long-run equilibrium, firms are

Can a perfectly competitive firm make an economic profit in the short run? Can it incur an economic loss?

-In the above figure showing a perfectly competitive firm's total revenue line, the firm's marginal revenue

In a perfectly competitive market, the price elasticity of demand for the market demand is ________ and the price elasticity of demand for an individual firm's demand is ________.

The section of the marginal cost curve that lies above the average variable cost curve is

In a perfectly competitive market, many firms sell an identical product.

As firms enter a perfectly competitive market, the price

-Consider the perfectly competitive firm in the figure above. At the profit maximizing level of output, the firm will

Price taking behavior exists in

-In the above figure, at what price does a perfectly competitive firm make zero economic profit?

In a perfectly competitive market that is in long-run equilibrium, a permanent leftward shift in the market demand curve

-In the above figure, if the milk industry is perfectly competitive, then the firm's marginal revenue curve is represented by

-The figure above portrays a total revenue curve for a perfectly competitive firm. The firm's marginal revenue from selling a unit of output

The demand for wheat from farm A is perfectly elastic because wheat from farm A is

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $15, what is Giuseppe's profit-maximizing output?

In perfect competition, the market demand for the good ________ perfectly elastic and the demand for the output of one firm ________ perfectly elastic.

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 a perfectly competitive market, the price elasticity of demand for the market demand is and the price elasticity of demand for an individual firm's demand is .

In perfect competition, the market demand for the good perfectly elastic and the demand for the output of one firm perfectly elastic.