Question 1

A firm in perfect competition is a price taker because

Accepted Answer

A)  there are no good substitutes for its good. 
B)  many other firms produce identical products. 
C)  it is very large. 
D)  its demand curves are downward sloping. 
E)  its demand curve is vertical at the profit-maximizing quantity. 
A)  there are no good substitutes for its good. 
B)  many other firms produce identical products. 
C)  it is very large. 
D)  its demand curves are downward sloping. 
E)  its demand curve is vertical at the profit-maximizing quantity.

Question 2

If the market price is lower than a perfectly competitive firm's average total cost,the firm will

Accepted Answer

A)  immediately shut down. 
B)  continue to produce if the price exceeds the average fixed cost. 
C)  continue to produce if the price exceeds the average variable cost. 
D)  shut down if the price exceeds the average fixed cost. 
E)  shut down if the price is less than the average fixed cost. 
A)  immediately shut down. 
B)  continue to produce if the price exceeds the average fixed cost. 
C)  continue to produce if the price exceeds the average variable cost. 
D)  shut down if the price exceeds the average fixed cost. 
E)  shut down if the price is less than the average fixed cost.

Question 3

For a syrup producer in central Vermont,profit is maximized at the level of output for which total

Accepted Answer

A)  revenue exceeds total cost by the largest amount. 
B)  revenue exceeds total cost by the smallest amount. 
C)  revenue is maximized. 
D)  cost is minimized. 
E)  revenue equals total cost. 
A)  revenue exceeds total cost by the largest amount. 
B)  revenue exceeds total cost by the smallest amount. 
C)  revenue is maximized. 
D)  cost is minimized. 
E)  revenue equals total cost.

Question 4

Henry,a perfectly competitive lime grower in Southern California,notices that the market price of limes is greater than his marginal cost.What should Henry do?

Accepted Answer

A)  expand his output to increase profits 
B)  shut down and incur a loss equal to his total fixed cost 
C)  advertise his limes to be able to sell more output 
D)  look for the output level where marginal revenue minus marginal cost is maximized 
E)  shut down and earn no profit but also incur no loss 
A)  expand his output to increase profits 
B)  shut down and incur a loss equal to his total fixed cost 
C)  advertise his limes to be able to sell more output 
D)  look for the output level where marginal revenue minus marginal cost is maximized 
E)  shut down and earn no profit but also incur no loss

Question 5

Suppose that each of 10,000 perfectly competitive firm in an industry produces 1,000 units of a good and earns an economic profit when the price of the good is $10.In the long run,definitely

Accepted Answer

A)  each firm increases its production above 1,000 units. 
B)  the number of firms is more than 10,000. 
C)  consumer surplus decreases. 
D)  producer surplus increases. 
E)  the number of firms is less than 10,000. 
A)  each firm increases its production above 1,000 units. 
B)  the number of firms is more than 10,000. 
C)  consumer surplus decreases. 
D)  producer surplus increases. 
E)  the number of firms is less than 10,000.

Question 6

Suppose that a perfectly competitive firm's marginal revenue equals $12 when it sells 10 units of output.If the marginal cost of producing the 10th unit is $14,to maximize its profit the firm should

Accepted Answer

A)  do nothing because it is already maximizing its profit. 
B)  decrease its production. 
C)  increase its production. 
D)  shut down. 
E)  increase the price it charges for its product. 
A)  do nothing because it is already maximizing its profit. 
B)  decrease its production. 
C)  increase its production. 
D)  shut down. 
E)  increase the price it charges for its product.

Question 7

$\begin{array}{l}
\text { Average }\
\begin{array}{ccc}
\begin{array}{c}
\text { Quantity } \
\text { (units) }
\end{array} & \begin{array}{c}
\text { variable cost } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Marginal cost } \
\text { (dollars) }
\end{array} \
\hline 1 & 8.00 & \
2 & 7.00 & 6.00 \
3 & 6.00 & 4.00 \
4 & 5.00 & 2.00 \
5 & 4.80 & 4.00 \
6 & 5.00 & 6.00 \
7 & 5.40 & 7.80 \
8 & 6.50 & 14.20 \
9 & 8.40 & 23.60 \
10 & 11.20 & 36.40
\end{array}
\end{array}$

-Acme is a perfectly competitive firm.It has the cost schedules given in the above table and has a fixed cost of $12.00.The price of Acme's product is $14.20.What is Acme's most profitable amount of output? What is Acme's total economic profit or loss?

Accepted Answer

The profit maximizing level of output is

Question 8

Suppose that each of 8,000 firms in a perfectly competitive industry produces 1,000 units of a good and maximizes profits when the price of the good is $10.If there is a permanent increase in demand,in the short run each firm produces ________ 1,000 units and in the long run the number of firms is ________ 8,000.

Accepted Answer

A)  more than; more than 
B)  less than; more than 
C)  less than; less than 
D)  more than; less than 
E)  exactly; more than 
A)  more than; more than 
B)  less than; more than 
C)  less than; less than 
D)  more than; less than 
E)  exactly; more than

Question 9

Firms exit a competitive market when they incur an economic loss.In the long run,this exit means that the economic losses of the surviving firms

Accepted Answer

A)  increase. 
B)  decrease until they equal zero. 
C)  decrease until economic profits are earned. 
D)  do not change. 
E)  might change but more information is needed about what happens to the price of the good as the firms exit. 
A)  increase. 
B)  decrease until they equal zero. 
C)  decrease until economic profits are earned. 
D)  do not change. 
E)  might change but more information is needed about what happens to the price of the good as the firms exit.

Question 10

Mark owns a cattle ranch near Hugo,Oklahoma.Mark is currently producing beef at an output level where marginal revenue exceeds marginal cost.In order to maximize his profit,Mark should

Accepted Answer

A)  not change his output. 
B)  decrease his output. 
C)  increase his output. 
D)  shut down his ranch. 
E)  probably change his output, but more information is needed to determine if he should increase, decrease, or not change it. 
A)  not change his output. 
B)  decrease his output. 
C)  increase his output. 
D)  shut down his ranch. 
E)  probably change his output, but more information is needed to determine if he should increase, decrease, or not change it.

Question 11

A market with a large number of sellers

Accepted Answer

A)  can only be a perfectly competitive market. 
B)  might be an oligopoly or a perfectly competitive market. 
C)  might be a monopolistically competitive or a perfectly competitive market. 
D)  might be a perfectly competitive, monopolistically competitive, oligopoly, or monopoly market. 
E)  can only be a monopolistically competitive market. 
A)  can only be a perfectly competitive market. 
B)  might be an oligopoly or a perfectly competitive market. 
C)  might be a monopolistically competitive or a perfectly competitive market. 
D)  might be a perfectly competitive, monopolistically competitive, oligopoly, or monopoly market. 
E)  can only be a monopolistically competitive market.

Question 12

In the long run,new firms enter a perfectly competitive market when

Accepted Answer

A)  normal profit is greater than zero. 
B)  economic profit is equal to zero. 
C)  normal profit is equal to zero. 
D)  economic profit is greater than zero. 
E)  the existing firms are weak because they are incurring economic losses. 
A)  normal profit is greater than zero. 
B)  economic profit is equal to zero. 
C)  normal profit is equal to zero. 
D)  economic profit is greater than zero. 
E)  the existing firms are weak because they are incurring economic losses.

Question 13

If the market price is less than a perfectly competitive firm's average total cost,what sort of profit or loss is the firm earning?

Accepted Answer

If the price is less

Question 14

The figure above shows some of a firm's cost curves and its marginal revenue curve.
-The firm in the figure above has a total revenue equal to ________.

Accepted Answer

A)  $5.10 × 10 
B)  $8.00 × 10 
C)  ($5.10 - $8.00) × 10 
D)  ($8.00 - $5.10) × 10 
E)  None of the above answers is correct because more information is needed. 
A)  $5.10 × 10 
B)  $8.00 × 10 
C)  ($5.10 - $8.00) × 10 
D)  ($8.00 - $5.10) × 10 
E)  None of the above answers is correct because more information is needed.

Question 15

The demand curve faced by a perfectly competitive firm is

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  upward sloping. 
E)  U-shaped. 
A)  horizontal. 
B)  vertical. 
C)  downward sloping. 
D)  upward sloping. 
E)  U-shaped.

Question 16

When firms in a perfectly competitive market incur economic losses,exit by some firms means the market supply will

Accepted Answer

A)  increase. 
B)  decrease. 
C)  not change. 
D)  become vertical. 
E)  become the same as the individual producers' supplies. 
A)  increase. 
B)  decrease. 
C)  not change. 
D)  become vertical. 
E)  become the same as the individual producers' supplies.

Question 17

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

Accepted Answer

If the demand for wheat decreases,the pr

Question 18

If the market supply curve and market demand curve for a good intersect at 600,000 units and there are 10,000 identical firms in the market,then each firm is producing

Accepted Answer

A)  600,000 units. 
B)  60,000,000,000 units. 
C)  60,000 units. 
D)  60 units. 
E)  10,000 units. 
A)  600,000 units. 
B)  60,000,000,000 units. 
C)  60,000 units. 
D)  60 units. 
E)  10,000 units.

Question 19

Pineapple growing is a perfectly competitive industry.How does the market demand curve for pineapples compare to the demand curve for an individual pineapple grower?

Accepted Answer

The market demand curve for pineapples i

Question 20

-The above figure shows three possible average total cost curves.If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC₂,each produces 40 units,and the market price of the good is $20 per unit,then

Accepted Answer

A)  the firms incur an economic loss of $12 per unit. 
B)  firms will enter the industry and the number of firms increases. 
C)  the firms' ATC curves will eventually shift to become the same as ATC₁. 
D)  firms will exit the industry and the number of firms decreases. 
E)  Both answers A and D are correct. 
A)  the firms incur an economic loss of $12 per unit. 
B)  firms will enter the industry and the number of firms increases. 
C)  the firms' ATC curves will eventually shift to become the same as ATC₁. 
D)  firms will exit the industry and the number of firms decreases. 
E)  Both answers A and D are correct.

A firm in perfect competition is a price taker because

If the market price is lower than a perfectly competitive firm's average total cost,the firm will

For a syrup producer in central Vermont,profit is maximized at the level of output for which total

Henry,a perfectly competitive lime grower in Southern California,notices that the market price of limes is greater than his marginal cost.What should Henry do?

Suppose that each of 10,000 perfectly competitive firm in an industry produces 1,000 units of a good and earns an economic profit when the price of the good is $10.In the long run,definitely

Suppose that a perfectly competitive firm's marginal revenue equals $12 when it sells 10 units of output.If the marginal cost of producing the 10th unit is $14,to maximize its profit the firm should

Suppose that each of 8,000 firms in a perfectly competitive industry produces 1,000 units of a good and maximizes profits when the price of the good is $10.If there is a permanent increase in demand,in the short run each firm produces 1,000 units and in the long run the number of firms is 8,000.

Firms exit a competitive market when they incur an economic loss.In the long run,this exit means that the economic losses of the surviving firms

Mark owns a cattle ranch near Hugo,Oklahoma.Mark is currently producing beef at an output level where marginal revenue exceeds marginal cost.In order to maximize his profit,Mark should

A market with a large number of sellers

In the long run,new firms enter a perfectly competitive market when

If the market price is less than a perfectly competitive firm's average total cost,what sort of profit or loss is the firm earning?

The figure above shows some of a firm's cost curves and its marginal revenue curve. -The firm in the figure above has a total revenue equal to ________.

The demand curve faced by a perfectly competitive firm is

When firms in a perfectly competitive market incur economic losses,exit by some firms means the market supply will

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

If the market supply curve and market demand curve for a good intersect at 600,000 units and there are 10,000 identical firms in the market,then each firm is producing

Pineapple growing is a perfectly competitive industry.How does the market demand curve for pineapples compare to the demand curve for an individual pineapple grower?

-The above figure shows three possible average total cost curves.If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC₂,each produces 40 units,and the market price of the good is $20 per unit,then

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 15: Perfect Competition

A firm in perfect competition is a price taker because

If the market price is lower than a perfectly competitive firm's average total cost,the firm will

For a syrup producer in central Vermont,profit is maximized at the level of output for which total

Henry,a perfectly competitive lime grower in Southern California,notices that the market price of limes is greater than his marginal cost.What should Henry do?

Suppose that each of 10,000 perfectly competitive firm in an industry produces 1,000 units of a good and earns an economic profit when the price of the good is $10.In the long run,definitely

Suppose that a perfectly competitive firm's marginal revenue equals $12 when it sells 10 units of output.If the marginal cost of producing the 10th unit is $14,to maximize its profit the firm should

Firms exit a competitive market when they incur an economic loss.In the long run,this exit means that the economic losses of the surviving firms

Mark owns a cattle ranch near Hugo,Oklahoma.Mark is currently producing beef at an output level where marginal revenue exceeds marginal cost.In order to maximize his profit,Mark should

A market with a large number of sellers

In the long run,new firms enter a perfectly competitive market when

If the market price is less than a perfectly competitive firm's average total cost,what sort of profit or loss is the firm earning?

The figure above shows some of a firm's cost curves and its marginal revenue curve. -The firm in the figure above has a total revenue equal to ________.

The demand curve faced by a perfectly competitive firm is

When firms in a perfectly competitive market incur economic losses,exit by some firms means the market supply will

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

If the market supply curve and market demand curve for a good intersect at 600,000 units and there are 10,000 identical firms in the market,then each firm is producing

Pineapple growing is a perfectly competitive industry.How does the market demand curve for pineapples compare to the demand curve for an individual pineapple grower?

-The above figure shows three possible average total cost curves.If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC₂,each produces 40 units,and the market price of the good is $20 per unit,then

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters