Question 1

In perfect competition, restrictions on entry into an market

Accepted Answer

A)  apply to both capital and labor. 
B)  apply to labor but not to capital. 
C)  apply to capital but not to labor. 
D)  do not exist. 
A)  apply to both capital and labor. 
B)  apply to labor but not to capital. 
C)  apply to capital but not to labor. 
D)  do not exist.

Question 2

In perfect competition, the elasticity of demand for the product of a single firm is

Accepted Answer

A)  zero because the firm produces a unique product. 
B)  zero because many other firms produce identical products. 
C)  infinite because the firm produces a unique product. 
D)  infinite because many other firms produce identical products. 
A)  zero because the firm produces a unique product. 
B)  zero because many other firms produce identical products. 
C)  infinite because the firm produces a unique product. 
D)  infinite because many other firms produce identical products.

Question 3

If the price received by a perfectly competitive firm is less than its average variable cost, what will the firm do in the short run? Why?

Accepted Answer

If the price is less than the average va

Question 4

If a perfectly competitive firm is producing an amount of output such that MR > MC and P > AVC, to maximize its profit the firm will

Accepted Answer

A)  leave the industry. 
B)  decrease its output. 
C)  increase its output. 
D)  not change its behavior. 
A)  leave the industry. 
B)  decrease its output. 
C)  increase its output. 
D)  not change its behavior.

Question 5

Suppose some firms in a perfectly competitive market are incurring an economic loss. As a result,

Accepted Answer

A)  all the firms will eventually incur an economic loss. 
B)  some firms will leave the market and the price of the good will rise. 
C)  some firms will leave the market and the remaining firms' quantity will decrease. 
D)  the total market economic profit must equal $0. 
A)  all the firms will eventually incur an economic loss. 
B)  some firms will leave the market and the price of the good will rise. 
C)  some firms will leave the market and the remaining firms' quantity will decrease. 
D)  the total market economic profit must equal $0.

Question 6

-The figure above shows the costs for a grower in the perfectly competitive turnip market. If the price is $1,200 for a ton of turnips, the firm is

Accepted Answer

A)  making an economic profit. 
B)  making zero economic profit. 
C)  incurring an economic loss. 
D)  More information is needed to determine if the firm is making a positive economic profit, zero economic profit, or incurring an economic loss. 
A)  making an economic profit. 
B)  making zero economic profit. 
C)  incurring an economic loss. 
D)  More information is needed to determine if the firm is making a positive economic profit, zero economic profit, or incurring an economic loss.

Question 7

When a perfectly competitive market is in its long-run equilibrium, the fact that the firms make zero economic profit will

Accepted Answer

A)  encourage new firms to enter the market. 
B)  cause existing firms to shut down. 
C)  cause existing firms to leave the market. 
D)  mean that the firms' owners earn a normal return. 
A)  encourage new firms to enter the market. 
B)  cause existing firms to shut down. 
C)  cause existing firms to leave the market. 
D)  mean that the firms' owners earn a normal return.

Question 8

Describe how economic losses are eliminated in a perfectly competitive industry.

Accepted Answer

If firms are incurring economic losses,

Question 9

-If the price is $12 per pizza, the perfectly competitive firm in the above figure is

Accepted Answer

A)  making an economic profit. 
B)  making zero economic profit. 
C)  incurring an economic loss. 
D)  More information about the firm's total cost is needed to determine if the firm has a positive economic profit, zero economic profit, or an economic loss. 
A)  making an economic profit. 
B)  making zero economic profit. 
C)  incurring an economic loss. 
D)  More information about the firm's total cost is needed to determine if the firm has a positive economic profit, zero economic profit, or an economic loss.

Question 10

-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 $12.50 and if Archibald's does NOT shut down, 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 11

-In the above figure, at any price between $8 per unit to $12 per unit, how many units will a profit-maximizing perfectly competitive firm produce?

Accepted Answer

A)  None, because the producer will never choose to operate at a loss. 
B)  Less than 20 because this will reduce marginal cost. 
C)  Between 20 and 30, because variable costs are covered so the firm's losses will be minimized by producing rather than shutting down. 
D)  More than 30, because variable costs are covered so that the producer can earn economic profits. 
A)  None, because the producer will never choose to operate at a loss. 
B)  Less than 20 because this will reduce marginal cost. 
C)  Between 20 and 30, because variable costs are covered so the firm's losses will be minimized by producing rather than shutting down. 
D)  More than 30, because variable costs are covered so that the producer can earn economic profits.

Question 12

Consumer surplus

Accepted Answer

A)  equals total revenue minus marginal cost. 
B)  is maximized when the market outcome is efficient. 
C)  equals total revenue minus opportunity cost. 
D)  plus producer surplus is maximized when resources are used efficiently. 
A)  equals total revenue minus marginal cost. 
B)  is maximized when the market outcome is efficient. 
C)  equals total revenue minus opportunity cost. 
D)  plus producer surplus is maximized when resources are used efficiently.

Question 13

-The feature of the above figure that indicates that the firm is a perfectly competitive firm is the

Accepted Answer

A)  shape of the total cost curve. 
B)  shape of the total revenue curve. 
C)  fact that the total cost and total revenue curves are farthest apart at output is Q2. 
D)  fact that the total cost and total revenue curves cross twice. 
A)  shape of the total cost curve. 
B)  shape of the total revenue curve. 
C)  fact that the total cost and total revenue curves are farthest apart at output is Q2. 
D)  fact that the total cost and total revenue curves cross twice.

Question 14

As long as it does NOT shut down, a perfectly competitive firm earns the maximum profit as long as it operates so that

Accepted Answer

A)  its price exceeds its average total cost. 
B)  market demand is inelastic. 
C)  its price exceeds its marginal revenue. 
D)  its marginal revenue equals its marginal cost. 
A)  its price exceeds its average total cost. 
B)  market demand is inelastic. 
C)  its price exceeds its marginal revenue. 
D)  its marginal revenue equals its marginal cost.

Question 15

-Tammy sells woolen hats in a perfectly competitive market. The marginal cost of producing 1 hat is $24. The marginal cost of producing a second hat is $26 and the marginal cost of producing a third hat is $28. The market price of a hat is $26. To maximize profit, Tammy produces ________ per day.

Accepted Answer

A)  1 hat 
B)  3 hats 
C)  2 hats 
D)  as many hats as possible 
A)  1 hat 
B)  3 hats 
C)  2 hats 
D)  as many hats as possible

Question 16

Jane's Copy Services is in perfect competition. Jane currently charges 10 cents per page, which is the going market price. Jane thinks that she can increase her profit if she lowers her price to 8 cents per page to increase the demand for her service. Is Jane right? Why or why not?

Accepted Answer

If Jane lowers her price, her profit wil

Question 17

When a perfectly competitive firm is in long-run equilibrium, what is the relationship between the firm's marginal cost, average total cost, marginal revenue, and price?

Accepted Answer

Marginal cost and av

Question 18

-In the above figure, the line represented by the "1" is the

Accepted Answer

A)  average fixed cost. 
B)  marginal revenue. 
C)  total cost. 
D)  average total cost. 
A)  average fixed cost. 
B)  marginal revenue. 
C)  total cost. 
D)  average total cost.

Question 19

-The figure above shows a perfectly competitive firm. When the firm maximizes its profit, its economic profit

Accepted Answer

A)  is more than $300. 
B)  is $300. 
C)  is less than $300. 
D)  The premise of the question is wrong because the firm is incurring an economic loss. 
A)  is more than $300. 
B)  is $300. 
C)  is less than $300. 
D)  The premise of the question is wrong because the firm is incurring an economic loss.

Question 20

In the short run, the firm makes zero economic profit when the price is ________ minimum average total cost, makes an economic profit when the price is ________ minimum average total cost, and incurs an economic loss when the price is ________ minimum average total cost.

Accepted Answer

A)  equal to; higher than; lower than 
B)  equal to; lower than; higher than 
C)  higher than; equal to; lower than 
D)  lower than; equal to; higher than 
A)  equal to; higher than; lower than 
B)  equal to; lower than; higher than 
C)  higher than; equal to; lower than 
D)  lower than; equal to; higher than

In perfect competition, restrictions on entry into an market

In perfect competition, the elasticity of demand for the product of a single firm is

If the price received by a perfectly competitive firm is less than its average variable cost, what will the firm do in the short run? Why?

If a perfectly competitive firm is producing an amount of output such that MR > MC and P > AVC, to maximize its profit the firm will

Suppose some firms in a perfectly competitive market are incurring an economic loss. As a result,

-The figure above shows the costs for a grower in the perfectly competitive turnip market. If the price is $1,200 for a ton of turnips, the firm is

When a perfectly competitive market is in its long-run equilibrium, the fact that the firms make zero economic profit will

Describe how economic losses are eliminated in a perfectly competitive industry.

-If the price is $12 per pizza, the perfectly competitive firm in the above figure is

-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 $12.50 and if Archibald's does NOT shut down, what is the firm's profit-maximizing output?

-In the above figure, at any price between $8 per unit to $12 per unit, how many units will a profit-maximizing perfectly competitive firm produce?

Consumer surplus

-The feature of the above figure that indicates that the firm is a perfectly competitive firm is the

As long as it does NOT shut down, a perfectly competitive firm earns the maximum profit as long as it operates so that

-Tammy sells woolen hats in a perfectly competitive market. The marginal cost of producing 1 hat is $24. The marginal cost of producing a second hat is $26 and the marginal cost of producing a third hat is $28. The market price of a hat is $26. To maximize profit, Tammy produces ________ per day.

Jane's Copy Services is in perfect competition. Jane currently charges 10 cents per page, which is the going market price. Jane thinks that she can increase her profit if she lowers her price to 8 cents per page to increase the demand for her service. Is Jane right? Why or why not?

When a perfectly competitive firm is in long-run equilibrium, what is the relationship between the firm's marginal cost, average total cost, marginal revenue, and price?

-In the above figure, the line represented by the "1" is the

-The figure above shows a perfectly competitive firm. When the firm maximizes its profit, its economic profit

In the short run, the firm makes zero economic profit when the price is minimum average total cost, makes an economic profit when the price is minimum average total cost, and incurs an economic loss when the price is minimum average total cost.

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 perfect competition, restrictions on entry into an market

In perfect competition, the elasticity of demand for the product of a single firm is

If the price received by a perfectly competitive firm is less than its average variable cost, what will the firm do in the short run? Why?

If a perfectly competitive firm is producing an amount of output such that MR > MC and P > AVC, to maximize its profit the firm will

Suppose some firms in a perfectly competitive market are incurring an economic loss. As a result,

-The figure above shows the costs for a grower in the perfectly competitive turnip market. If the price is $1,200 for a ton of turnips, the firm is

When a perfectly competitive market is in its long-run equilibrium, the fact that the firms make zero economic profit will

Describe how economic losses are eliminated in a perfectly competitive industry.

-If the price is $12 per pizza, the perfectly competitive firm in the above figure is

-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 $12.50 and if Archibald's does NOT shut down, what is the firm's profit-maximizing output?

-In the above figure, at any price between $8 per unit to $12 per unit, how many units will a profit-maximizing perfectly competitive firm produce?

Consumer surplus

-The feature of the above figure that indicates that the firm is a perfectly competitive firm is the

As long as it does NOT shut down, a perfectly competitive firm earns the maximum profit as long as it operates so that

-Tammy sells woolen hats in a perfectly competitive market. The marginal cost of producing 1 hat is $24. The marginal cost of producing a second hat is $26 and the marginal cost of producing a third hat is $28. The market price of a hat is $26. To maximize profit, Tammy produces ________ per day.

Jane's Copy Services is in perfect competition. Jane currently charges 10 cents per page, which is the going market price. Jane thinks that she can increase her profit if she lowers her price to 8 cents per page to increase the demand for her service. Is Jane right? Why or why not?

When a perfectly competitive firm is in long-run equilibrium, what is the relationship between the firm's marginal cost, average total cost, marginal revenue, and price?

-In the above figure, the line represented by the "1" is the

-The figure above shows a perfectly competitive firm. When the firm maximizes its profit, its economic profit

In the short run, the firm makes zero economic profit when the price is ________ minimum average total cost, makes an economic profit when the price is ________ minimum average total cost, and incurs an economic loss when the price is ________ minimum average total cost.

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 short run, the firm makes zero economic profit when the price is minimum average total cost, makes an economic profit when the price is minimum average total cost, and incurs an economic loss when the price is minimum average total cost.