Question 1

Exhibit 7-4  Marginal cost and revenue for a firm   In Exhibit 7-4, this firm is currently producing 14 units of output. What would you advise this firm to do?

Accepted Answer

A)  Decrease output to 13. 
B)  Increase output to 15. 
C)  Remain at 14 units of output. 
D)  Increase output to 16. 
E)  Increase output to 17. 
A)  Decrease output to 13. 
B)  Increase output to 15. 
C)  Remain at 14 units of output. 
D)  Increase output to 16. 
E)  Increase output to 17.

Question 2

If ABC Printing is producing an output level of 100, where MR is $5 and MC is $3, then the firm is:

Accepted Answer

A)  maximizing total profit. 
B)  making too much profit. 
C)  making $200 total profit. 
D)  making $200 total loss. 
E)  making an unknown amount of profit or loss. 
A)  maximizing total profit. 
B)  making too much profit. 
C)  making $200 total profit. 
D)  making $200 total loss. 
E)  making an unknown amount of profit or loss.

Question 3

Exhibit 7-17  Marginal revenue and cost per unit curves   As shown in Exhibit 7-17, if the product price is either $10, $15, $20, or $40, the firm's economic profit is maximum at an output of:

Accepted Answer

A)  20 units per day. 
B)  40 units per day. 
C)  60 units per day. 
D)  80 units per day. 
A)  20 units per day. 
B)  40 units per day. 
C)  60 units per day. 
D)  80 units per day.

Question 4

In the short run, a perfectly competitive firm is producing at a price below average total cost, its economic profit is:

Accepted Answer

A)  positive. 
B)  zero. 
C)  negative. 
D)  normal. 
A)  positive. 
B)  zero. 
C)  negative. 
D)  normal.

Question 5

Exhibit 7-12  Marginal revenue and cost per unit curves   If price is equal to OD for the firm shown in Exhibit 7-12, total profit is maximized when:

Accepted Answer

A)  output is X. 
B)  output is Y. 
C)  output is Z. 
D)  output is greater than Z. 
A)  output is X. 
B)  output is Y. 
C)  output is Z. 
D)  output is greater than Z.

Question 6

Exhibit 7-12  Marginal revenue and cost per unit curves   As shown in Exhibit 7-12, the price that will yield zero economic profit is:

Accepted Answer

A)  OA. 
B)  OB. 
C)  OC. 
D)  OD. 
A)  OA. 
B)  OB. 
C)  OC. 
D)  OD.

Question 7

The supply curve of a price-taker firm in the short run is the:

Accepted Answer

A)  firm's average variable cost curve. 
B)  portion of the firm's average total cost curve that lies above average variable cost curve. 
C)  portion of the firm's marginal cost curve that lies above average variable cost curve. 
D)  firm's marginal revenue curve. 
A)  firm's average variable cost curve. 
B)  portion of the firm's average total cost curve that lies above average variable cost curve. 
C)  portion of the firm's marginal cost curve that lies above average variable cost curve. 
D)  firm's marginal revenue curve.

Question 8

Suppose that you have returned from your fishing expedition with 20,000 fish. The market price is $3 per fish. Your average fixed cost was $1 and your total variable cost was $5,000. If the price jumps to $3.50 before you sell your first fish, how much extra profit, if any, do you earn?

Accepted Answer

A)  $10,000. 
B)  $25,000. 
C)  $30,000. 
D)  $45,000. 
E)  $70,000. 
A)  $10,000. 
B)  $25,000. 
C)  $30,000. 
D)  $45,000. 
E)  $70,000.

Question 9

A perfectly competitive market is characterized by highly advertised goods.

Accepted Answer

A) True 
 B)False

Question 10

In long-run equilibrium, which of the following is not equal to price for a perfectly competitive firm?

Accepted Answer

A)  Short-run average variable cost. 
B)  Long-run average total cost. 
C)  Short-run marginal cost. 
D)  Short-run average total cost. 
A)  Short-run average variable cost. 
B)  Long-run average total cost. 
C)  Short-run marginal cost. 
D)  Short-run average total cost.

Question 11

A perfectly competitive firm's short-run supply curve is the:

Accepted Answer

A)  average total cost curve. 
B)  demand curve above the marginal revenue curve. 
C)  same as the market supply curve. 
D)  marginal cost curve above the average variable cost curve. 
A)  average total cost curve. 
B)  demand curve above the marginal revenue curve. 
C)  same as the market supply curve. 
D)  marginal cost curve above the average variable cost curve.

Question 12

Exhibit 7-18  A typical firm in a perfectly competitive market   As shown in Exhibit 7-18, the perfectly competitive firm is in long-run equilibrium at a price of:

Accepted Answer

A)  $100. 
B)  $200. 
C)  $300. 
D)  $400. 
A)  $100. 
B)  $200. 
C)  $300. 
D)  $400.

Question 13

Exhibit 7-12  Marginal revenue and cost per unit curves   As shown in Exhibit 7-12, if the price is OD, the firm's total revenue at its most profitable level of output is:

Accepted Answer

A)  OZID. 
B)  OYHD. 
C)  OXLD. 
D)  OYFB. 
A)  OZID. 
B)  OYHD. 
C)  OXLD. 
D)  OYFB.

Question 14

Which of the following is a characteristic of a competitive price-taker market?

Accepted Answer

A)  Profit maximizing firms in the market will expand output until price equals average variable cost. 
B)  The market demand curve for the product is a horizontal line. 
C)  There are many firms in the market, each producing a small share of total market output. 
D)  The product produced by each of the firms is differentiated. 
A)  Profit maximizing firms in the market will expand output until price equals average variable cost. 
B)  The market demand curve for the product is a horizontal line. 
C)  There are many firms in the market, each producing a small share of total market output. 
D)  The product produced by each of the firms is differentiated.

Question 15

The price-taker firm should discontinue production immediately if:

Accepted Answer

A)  the market price exceeds the firm's average total costs. 
B)  the market price is less than the firm's average variable costs. 
C)  the market price is less than the firm's average total costs, but greater than its average variable cost. 
D)  its accounting statement indicates that it is suffering losses. 
A)  the market price exceeds the firm's average total costs. 
B)  the market price is less than the firm's average variable costs. 
C)  the market price is less than the firm's average total costs, but greater than its average variable cost. 
D)  its accounting statement indicates that it is suffering losses.

Question 16

Which of the following best illustrates a perfectly competitive market?

Accepted Answer

A)  Soft drinks. 
B)  Automobiles. 
C)  Electric power. 
D)  Soybean farmers. 
A)  Soft drinks. 
B)  Automobiles. 
C)  Electric power. 
D)  Soybean farmers.

Question 17

Assume that a firm's marginal revenue just barely exceeds marginal cost. Under these conditions the firm should:

Accepted Answer

A)  expand output. 
B)  contract output. 
C)  maintain output. 
D)  There is insufficient information to answer the question. 
A)  expand output. 
B)  contract output. 
C)  maintain output. 
D)  There is insufficient information to answer the question.

Question 18

Exhibit 7-13  Price and cost per unit curves   In Exhibit 7-13, if the price is P3, total economic profit is maximized or economic loss minimized at the output:

Accepted Answer

A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Q4. 
E)  Q5. 
A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Q4. 
E)  Q5.

Question 19

A perfectly competitive firm sells its output for $100 per unit and marginal cost is $100 per unit. To maximize short-run profit, the firm should:

Accepted Answer

A)  increase output. 
B)  decrease output. 
C)  maintain its current output. 
D)  shut down. 
A)  increase output. 
B)  decrease output. 
C)  maintain its current output. 
D)  shut down.

Question 20

In the short run, a firm will stay in business as long as:

Accepted Answer

A)  price equals average revenue. 
B)  marginal revenue is greater than or equal to marginal cost. 
C)  price exceeds average variable cost. 
D)  price is less than average variable cost. 
A)  price equals average revenue. 
B)  marginal revenue is greater than or equal to marginal cost. 
C)  price exceeds average variable cost. 
D)  price is less than average variable cost.

Exam 7: Perfect Competition

Exhibit 7-4 Marginal cost and revenue for a firm In Exhibit 7-4, this firm is currently producing 14 units of output. What would you advise this firm to do?

If ABC Printing is producing an output level of 100, where MR is $5 and MC is $3, then the firm is:

Exhibit 7-17 Marginal revenue and cost per unit curves As shown in Exhibit 7-17, if the product price is either $10, $15, $20, or $40, the firm's economic profit is maximum at an output of:

In the short run, a perfectly competitive firm is producing at a price below average total cost, its economic profit is:

Exhibit 7-12 Marginal revenue and cost per unit curves If price is equal to OD for the firm shown in Exhibit 7-12, total profit is maximized when:

Exhibit 7-12 Marginal revenue and cost per unit curves As shown in Exhibit 7-12, the price that will yield zero economic profit is:

The supply curve of a price-taker firm in the short run is the:

Suppose that you have returned from your fishing expedition with 20,000 fish. The market price is $3 per fish. Your average fixed cost was $1 and your total variable cost was $5,000. If the price jumps to $3.50 before you sell your first fish, how much extra profit, if any, do you earn?

A perfectly competitive market is characterized by highly advertised goods.

In long-run equilibrium, which of the following is not equal to price for a perfectly competitive firm?

A perfectly competitive firm's short-run supply curve is the:

Exhibit 7-18 A typical firm in a perfectly competitive market As shown in Exhibit 7-18, the perfectly competitive firm is in long-run equilibrium at a price of:

Exhibit 7-12 Marginal revenue and cost per unit curves As shown in Exhibit 7-12, if the price is OD, the firm's total revenue at its most profitable level of output is:

Which of the following is a characteristic of a competitive price-taker market?

The price-taker firm should discontinue production immediately if:

Which of the following best illustrates a perfectly competitive market?

Assume that a firm's marginal revenue just barely exceeds marginal cost. Under these conditions the firm should:

Exhibit 7-13 Price and cost per unit curves In Exhibit 7-13, if the price is P3, total economic profit is maximized or economic loss minimized at the output:

A perfectly competitive firm sells its output for $100 per unit and marginal cost is $100 per unit. To maximize short-run profit, the firm should:

In the short run, a firm will stay in business as long as:

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters

Exhibit 7-13 Price and cost per unit curves In Exhibit 7-13, if the price is P₃, total economic profit is maximized or economic loss minimized at the output: