Question 1

If a competitive firm is losing money then it should:

Accepted Answer

A)  always shut down. 
B)  shut down if its losses are greater than total fixed costs. 
C)  shut down if its total fixed costs are greater than losses. 
D)  raise its price. 
A)  always shut down. 
B)  shut down if its losses are greater than total fixed costs. 
C)  shut down if its total fixed costs are greater than losses. 
D)  raise its price.

Question 2

A competitive firm maximizes its profits (or minimizes is losses) by producing the quantity where the market price equals the firm's:

Accepted Answer

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

Question 3

If resource prices rise and the per-unit cost of producing a product increases as the firms in an industry expand output in response to an increase in demand, the long-run market supply curve for the product will:

Accepted Answer

A)  be perfectly elastic. 
B)  be perfectly inelastic. 
C)  slope upward to the right. 
D)  be more inelastic than the short-run supply curve for the product. 
A)  be perfectly elastic. 
B)  be perfectly inelastic. 
C)  slope upward to the right. 
D)  be more inelastic than the short-run supply curve for the product.

Question 4

Suppose the price of a product is less than its average variable cost. When the firm's fixed obligations are completely ended, it will now most likely:

Accepted Answer

A)  make an economic profit. 
B)  go out of business. 
C)  expand to a bigger operation. 
D)  break even. 
A)  make an economic profit. 
B)  go out of business. 
C)  expand to a bigger operation. 
D)  break even.

Question 5

Suppose a company increases production from a point where marginal cost equals average total cost to a point where marginal revenue and marginal cost are equal. Is it a good idea for the company to do this? Why?

Accepted Answer

A)  No, average total costs have increased which means the company is not minimizing losses. 
B)  Yes, because average variable costs are always less than average total costs. 
C)  No, the previous level of output was the most efficient because it had the lowest average total cost. 
D)  Yes, even though the previous level of output had minimized the average total cost, there was still profit to be earned by producing additional units. 
A)  No, average total costs have increased which means the company is not minimizing losses. 
B)  Yes, because average variable costs are always less than average total costs. 
C)  No, the previous level of output was the most efficient because it had the lowest average total cost. 
D)  Yes, even though the previous level of output had minimized the average total cost, there was still profit to be earned by producing additional units.

Question 6

Above the shutdown point, a competitive firm's supply curve coincides with its:

Accepted Answer

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

If a competitive firm is losing money then it should:

A competitive firm maximizes its profits (or minimizes is losses) by producing the quantity where the market price equals the firm's:

If resource prices rise and the per-unit cost of producing a product increases as the firms in an industry expand output in response to an increase in demand, the long-run market supply curve for the product will:

Suppose the price of a product is less than its average variable cost. When the firm's fixed obligations are completely ended, it will now most likely:

Suppose a company increases production from a point where marginal cost equals average total cost to a point where marginal revenue and marginal cost are equal. Is it a good idea for the company to do this? Why?

Above the shutdown point, a competitive firm's supply curve coincides with its:

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Understanding Direct and Inverse Relationships between Variables

Filters

Exam 8: Perfect Competition

If a competitive firm is losing money then it should:

A competitive firm maximizes its profits (or minimizes is losses) by producing the quantity where the market price equals the firm's:

If resource prices rise and the per-unit cost of producing a product increases as the firms in an industry expand output in response to an increase in demand, the long-run market supply curve for the product will:

Suppose the price of a product is less than its average variable cost. When the firm's fixed obligations are completely ended, it will now most likely:

Suppose a company increases production from a point where marginal cost equals average total cost to a point where marginal revenue and marginal cost are equal. Is it a good idea for the company to do this? Why?

Above the shutdown point, a competitive firm's supply curve coincides with its:

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Understanding Direct and Inverse Relationships between Variables

Filters