Question 1

If a firm decreases output when MR

Accepted Answer

A)  profit will equal zero. 
B)  profit will increase. 
C)  profit will decrease. 
D)  profit will remain the same. 
E)  the firm is minimizing losses. 
A)  profit will equal zero. 
B)  profit will increase. 
C)  profit will decrease. 
D)  profit will remain the same. 
E)  the firm is minimizing losses.

Question 2

In long-run equilibrium, a perfectly competitive firm's short-run marginal cost curve crosses the long-run average cost curve at the lowest point on the long-run average cost curve.

Accepted Answer

A) True 
 B)False

Question 3

Exhibit 7-10  Price and cost data for a firm   In Exhibit 7-10, the maximum possible total profit is:

Accepted Answer

A)  $36. 
B)  $24. 
C)  $20. 
D)  $12. 
E)  $8. 
A)  $36. 
B)  $24. 
C)  $20. 
D)  $12. 
E)  $8.

Question 4

In long-run equilibrium, a competitive firm produces the level of output at which:

Accepted Answer

A)  marginal cost is at a minimum. 
B)  short-run average total cost and long-run average cost are at a minimum. 
C)  total revenue is at a maximum. 
D)  diseconomies of scale end. 
A)  marginal cost is at a minimum. 
B)  short-run average total cost and long-run average cost are at a minimum. 
C)  total revenue is at a maximum. 
D)  diseconomies of scale end.

Question 5

In the short run, a firm should shut down if its economic loss from operating exceeds its total fixed cost.

Accepted Answer

A) True 
 B)False

Question 6

In long-run equilibrium for a perfectly competitive firm, price equals which of the following?

Accepted Answer

A)  Economies of scale. 
B)  Minimum short-run average total cost. 
C)  The sum of each short-run marginal cost curve. 
D)  All of the above. 
A)  Economies of scale. 
B)  Minimum short-run average total cost. 
C)  The sum of each short-run marginal cost curve. 
D)  All of the above.

Question 7

If marginal revenue exceeds marginal cost in the short run, total revenue for the perfectly competitive firm is greater than total cost.

Accepted Answer

A) True 
 B)False

Question 8

If at some output level for a firm price exceeds average total cost, then the firm is earning an economic profit.

Accepted Answer

A) True 
 B)False

Question 9

What are the characteristics of the perfectly competitive market?

Accepted Answer

The perfectly competitive market is char

Question 10

A perfectly competitive firm shuts down in the short-run when the market price is less than the average variable cost.

Accepted Answer

A) True 
 B)False

Question 11

Exhibit 7-14  Total cost and total revenue curves   In Exhibit 7-14, if output is at 200 units per week, total economic profit for the firm is:

Accepted Answer

A)  zero. 
B)  positive. 
C)  negative. 
D)  none of the above. 
A)  zero. 
B)  positive. 
C)  negative. 
D)  none of the above.

Question 12

Which of the following is a key characteristic of the long-run competitive equilibrium that distinguishes it from the short-run competitive equilibrium?

Accepted Answer

A)  Free entry to reduce short-run profits, or free exit to reduce short-run losses. 
B)  Economic profits are positive, but cannot be negative. 
C)  Marginal revenue is greater than marginal cost. 
D)  Average revenue is less than average cost. 
A)  Free entry to reduce short-run profits, or free exit to reduce short-run losses. 
B)  Economic profits are positive, but cannot be negative. 
C)  Marginal revenue is greater than marginal cost. 
D)  Average revenue is less than average cost.

Question 13

Exhibit 7-10  Price and cost data for a firm   In Exhibit 7-10, following the rule regarding MR and MC, the most profitable output level is:

Accepted Answer

A)  0. 
B)  1. 
C)  2. 
D)  3. 
E)  4. 
A)  0. 
B)  1. 
C)  2. 
D)  3. 
E)  4.

Question 14

When the marginal cost of a price-taker firm is more than the market price of its product, the firm should:

Accepted Answer

A)  expand output. 
B)  reduce output. 
C)  maintain output. 
D)  charge more than the market price. 
A)  expand output. 
B)  reduce output. 
C)  maintain output. 
D)  charge more than the market price.

Question 15

Total profit can be calculated by:

Accepted Answer

A)  c and e. 
B)  subtracting total revenue from total costs. 
C)  subtracting total costs from total revenue. 
D)  finding the product of the difference between average profit and average total cost and the quantity produced. 
E)  quantity produced times the difference between average revenue and average total cost. 
A)  c and e. 
B)  subtracting total revenue from total costs. 
C)  subtracting total costs from total revenue. 
D)  finding the product of the difference between average profit and average total cost and the quantity produced. 
E)  quantity produced times the difference between average revenue and average total cost.

Question 16

A perfectly competitive industry must have a perfectly elastic long-run supply curve.

Accepted Answer

A) True 
 B)False

Question 17

If marginal revenue equals marginal cost in the short run, the perfectly competitive firm earns zero profits.

Accepted Answer

A) True 
 B)False

Question 18

In long-run equilibrium for a perfectly competitive firm, price equals which of the following?

Accepted Answer

A)  Economies of real cost. 
B)  Maximum total revenue. 
C)  Diseconomies of scale cost. 
D)  Minimum point on the long-run average cost curve. 
A)  Economies of real cost. 
B)  Maximum total revenue. 
C)  Diseconomies of scale cost. 
D)  Minimum point on the long-run average cost curve.

Question 19

Exhibit 7-15  Short-run cost curves for E-Z Care lawn mowing company   In Exhibit 7-15, what market price would cause E-Z-Care to just beak even?

Accepted Answer

A)  $6 per lawn. 
B)  $8 per lawn. 
C)  $12 per lawn. 
D)  $16 per lawn. 
A)  $6 per lawn. 
B)  $8 per lawn. 
C)  $12 per lawn. 
D)  $16 per lawn.

Question 20

A sandwich shop owner has the following information: P = MR = $4, ATC = $2, AVC = $1, MC = 4, and Q = 500. From this, she can determine:

Accepted Answer

A)  her profits are not being maximized. 
B)  she has earned zero economic profits. 
C)  she has earned economic profits of $1,000. 
D)  she has earned economic profits of $1,500. 
E)  she should sell fewer sandwiches. 
A)  her profits are not being maximized. 
B)  she has earned zero economic profits. 
C)  she has earned economic profits of $1,000. 
D)  she has earned economic profits of $1,500. 
E)  she should sell fewer sandwiches.

Exam 7: Perfect Competition

If a firm decreases output when MR

In long-run equilibrium, a perfectly competitive firm's short-run marginal cost curve crosses the long-run average cost curve at the lowest point on the long-run average cost curve.

Exhibit 7-10 Price and cost data for a firm In Exhibit 7-10, the maximum possible total profit is:

In long-run equilibrium, a competitive firm produces the level of output at which:

In the short run, a firm should shut down if its economic loss from operating exceeds its total fixed cost.

In long-run equilibrium for a perfectly competitive firm, price equals which of the following?

If marginal revenue exceeds marginal cost in the short run, total revenue for the perfectly competitive firm is greater than total cost.

If at some output level for a firm price exceeds average total cost, then the firm is earning an economic profit.

What are the characteristics of the perfectly competitive market?

A perfectly competitive firm shuts down in the short-run when the market price is less than the average variable cost.

Exhibit 7-14 Total cost and total revenue curves In Exhibit 7-14, if output is at 200 units per week, total economic profit for the firm is:

Which of the following is a key characteristic of the long-run competitive equilibrium that distinguishes it from the short-run competitive equilibrium?

Exhibit 7-10 Price and cost data for a firm In Exhibit 7-10, following the rule regarding MR and MC, the most profitable output level is:

When the marginal cost of a price-taker firm is more than the market price of its product, the firm should:

Total profit can be calculated by:

A perfectly competitive industry must have a perfectly elastic long-run supply curve.

If marginal revenue equals marginal cost in the short run, the perfectly competitive firm earns zero profits.

In long-run equilibrium for a perfectly competitive firm, price equals which of the following?

Exhibit 7-15 Short-run cost curves for E-Z Care lawn mowing company In Exhibit 7-15, what market price would cause E-Z-Care to just beak even?

A sandwich shop owner has the following information: P = MR = $4, ATC = $2, AVC = $1, MC = 4, and Q = 500. From this, she can determine:

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

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