Question 1

Consider a short-run equilibrium in a perfectly competitive market.Suppose that the firms' average total cost and marginal cost schedules differ.In the short run,

Accepted Answer

A)  all firms in the market must be able to make an economic profit. 
B)  all firms produce equal amounts of output. 
C)  some firms might incur an economic loss, but still produce output. 
D)  some firms might make an economic profit and, as a result, shut down. 
E)  all firms in the market must be able to make either positive or zero economic profit. 
A)  all firms in the market must be able to make an economic profit. 
B)  all firms produce equal amounts of output. 
C)  some firms might incur an economic loss, but still produce output. 
D)  some firms might make an economic profit and, as a result, shut down. 
E)  all firms in the market must be able to make either positive or zero economic profit.

Question 2

A perfectly competitive firm definitely makes an economic profit in the short run if price is

Accepted Answer

A)  equal to marginal cost. 
B)  equal to average total cost. 
C)  greater than average total cost. 
D)  greater than marginal cost. 
E)  greater than average variable cost. 
A)  equal to marginal cost. 
B)  equal to average total cost. 
C)  greater than average total cost. 
D)  greater than marginal cost. 
E)  greater than average variable cost.

Question 3

Suppose the bobby pin industry is perfectly competitive.The price of a packet of bobby pins is $2.00.Pins and Needles,Inc.is a firm in this industry and is producing 1,000 packets of bobby pins per day at the point where the MC = MR.The average cost of production at this output level is $1.50 per packet.
a.What is the marginal cost of the 1,000th packet?
b.Is this firm making an economic profit,zero economic profit,or an economic loss? How much?
c.Is the firm in long-run equilibrium? Why or why not?

Accepted Answer

a.The price per packet is $2,which is al

Question 4

Normal profit is

Accepted Answer

A)  the same thing as economic profit. 
B)  the return to entrepreneurship. 
C)  total revenue minus the total opportunity cost of production. 
D)  the point of profit when total revenue is maximized. 
E)  part of the firm's total revenue. 
A)  the same thing as economic profit. 
B)  the return to entrepreneurship. 
C)  total revenue minus the total opportunity cost of production. 
D)  the point of profit when total revenue is maximized. 
E)  part of the firm's total revenue.

Question 5

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Quantity Total cost } \
\text { (units) }
\end{array} & \text { (dollars) } \
\hline 0 & 3 \
1 & 6 \
2 & 12 \
3 & 21 \
4 & 33 \
5 & 49
\end{array}$$
-The above table gives the quantity of output and the total cost for a perfectly competitive firm that can sell all of its output at $9 per unit.
a.Find the profit maximizing level of output for this firm.
b.How much economic profit is the firm making?

Accepted Answer

\[\begin{array}{l}
\text { Quantity Tota

Question 6

-The above figure shows a perfectly competitive firm.If the market price is $15 per unit,the firm

Accepted Answer

A)  will definitely shut down to minimize its losses. 
B)  will stay open to produce and will make zero economic profit. 
C)  will stay open to produce and will incur an economic loss. 
D)  will stay open to produce and will make an economic profit. 
E)  might shut down but more information is needed about the fixed cost. 
A)  will definitely shut down to minimize its losses. 
B)  will stay open to produce and will make zero economic profit. 
C)  will stay open to produce and will incur an economic loss. 
D)  will stay open to produce and will make an economic profit. 
E)  might shut down but more information is needed about the fixed cost.

Question 7

A perfectly competitive firm will maximize profit when the quantity produced is such that the

Accepted Answer

A)  firm's total revenue is equal to total cost. 
B)  firm's marginal revenue is equal to the price. 
C)  firm's marginal revenue is equal to its marginal cost. 
D)  price exceeds the firm's marginal cost by as much as possible. 
E)  firm's marginal revenue exceeds its marginal cost by the maximum amount possible. 
A)  firm's total revenue is equal to total cost. 
B)  firm's marginal revenue is equal to the price. 
C)  firm's marginal revenue is equal to its marginal cost. 
D)  price exceeds the firm's marginal cost by as much as possible. 
E)  firm's marginal revenue exceeds its marginal cost by the maximum amount possible.

Question 8

Suppose a farmer raising beef is making a normal profit.Then,because of a scare about mad cow disease,the demand for beef decreases drastically.What happens to the profits of the beef farmer in the short run and in the long run?

Accepted Answer

In the short run,the fall in beef prices

Question 9

Suppose a perfectly competitive market is in long-run equilibrium with a price of $12.Then there is a permanent increase in demand.As a result,in the short run the market price ________ and in the long run the number of firms ________ and the price is ________ the price was in the short run.

Accepted Answer

A)  rises; does not change; is equal to 
B)  rises; increases; higher than 
C)  rises; does not change; lower than 
D)  falls; decreases; is equal to 
E)  rises; increases; lower than 
A)  rises; does not change; is equal to 
B)  rises; increases; higher than 
C)  rises; does not change; lower than 
D)  falls; decreases; is equal to 
E)  rises; increases; lower than

Question 10

If firms in a perfectly competitive market are incurring economic losses,then as time passes firms ________ and the market ________.

Accepted Answer

A)  enter; demand curve shifts leftward 
B)  enter; supply curve shifts rightward 
C)  exit; demand curve shifts leftward 
D)  exit; supply curve shifts rightward 
E)  exit; supply curve shifts leftward 
A)  enter; demand curve shifts leftward 
B)  enter; supply curve shifts rightward 
C)  exit; demand curve shifts leftward 
D)  exit; supply curve shifts rightward 
E)  exit; supply curve shifts leftward

Question 11

The price charged by a perfectly competitive firm is

Accepted Answer

A)  the same as the market price. 
B)  different than the price charged by competing firms. 
C)  lower the more the firm produces. 
D)  higher the more the firm produces. 
E)  indeterminate. 
A)  the same as the market price. 
B)  different than the price charged by competing firms. 
C)  lower the more the firm produces. 
D)  higher the more the firm produces. 
E)  indeterminate.

Question 12

The above figure shows some a firm's cost curves and its marginal revenue curve.
-Based on the figure above,if the firm produces 7 cans per day,the firm ________ maximizing its profit and is ________.

Accepted Answer

A)  is; incurring an economic loss 
B)  is; making zero economic profit 
C)  is; making an economic profit 
D)  is not; incurring an economic loss 
E)  is not; making zero economic profit 
A)  is; incurring an economic loss 
B)  is; making zero economic profit 
C)  is; making an economic profit 
D)  is not; incurring an economic loss 
E)  is not; making zero economic profit

Question 13

In a perfectly competitive market,the type of decision a firm has to make is different in the short run than in the long run.Which of the following is an example of a perfectly competitive firm's short-run decision?

Accepted Answer

A)  the profit-maximizing level of output 
B)  how much to spend on advertising and sales promotion 
C)  what price to charge buyers for the product 
D)  whether or not to enter or exit an industry 
E)  whether or not to change its plant size 
A)  the profit-maximizing level of output 
B)  how much to spend on advertising and sales promotion 
C)  what price to charge buyers for the product 
D)  whether or not to enter or exit an industry 
E)  whether or not to change its plant size

Question 14

A perfectly competitive firm should shut down in the short-run if price falls below the minimum of

Accepted Answer

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

Question 15

$\begin{array}{l}
\text { Quantity }\
\begin{array}{ccc}
\text { (bushels of } \
\text { rutabagas) } & \begin{array}{c}
\text { Total revenue } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Total cost } \
\text { (dollars) }
\end{array} \
\hline 0 & 0 & 12 \
1 & 10 & 22 \
2 & 20 & 28 \
3 & 30 & 30 \
4 & 40 & 31 \
5 & 50 & 34 \
6 & 60 & 45 \
7 & 70 & 59 \
8 & 80 & 80
\end{array}
\end{array}$

-The above table has the total revenue and total cost schedule for Omar,a perfectly competitive grower of rutabagas.When Omar maximizes his profit,Omar's profit equals

Accepted Answer

A)  $80. 
B)  $11. 
C)  $30. 
D)  $16. 
E)  $105. 
A)  $80. 
B)  $11. 
C)  $30. 
D)  $16. 
E)  $105.

Question 16

________ a large number of firms competing by making similar but slightly different products.

Accepted Answer

A)  Monopoly requires 
B)  Perfect competition requires 
C)  Monopolistic competition requires 
D)  Oligopoly requires 
E)  Both perfect competition and monopolistic competition require 
A)  Monopoly requires 
B)  Perfect competition requires 
C)  Monopolistic competition requires 
D)  Oligopoly requires 
E)  Both perfect competition and monopolistic competition require

Question 17

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 18

-The above figure shows a perfectly competitive firm.If the market price is $10,the firm

Accepted Answer

A)  is incurring an economic loss. 
B)  is making an economic profit. 
C)  is making zero economic profit. 
D)  will immediately shut down. 
E)  might shut down but more information is needed about the AVC. 
A)  is incurring an economic loss. 
B)  is making an economic profit. 
C)  is making zero economic profit. 
D)  will immediately shut down. 
E)  might shut down but more information is needed about the AVC.

Question 19

The largest loss a profit-maximizing perfectly competitive firm can incur in the short run equals its

Accepted Answer

A)  average variable cost multiplied by output. 
B)  total fixed cost. 
C)  marginal cost multiplied by the number of units produced. 
D)  average total cost multiplied by the number of units produced. 
E)  total variable cost. 
A)  average variable cost multiplied by output. 
B)  total fixed cost. 
C)  marginal cost multiplied by the number of units produced. 
D)  average total cost multiplied by the number of units produced. 
E)  total variable cost.

Question 20

Cynthia is an Oklahoma wheat farmer.The demand for her wheat is

Accepted Answer

A)  perfectly inelastic. 
B)  inelastic but not perfectly inelastic. 
C)  elastic but not perfectly elastic. 
D)  perfectly elastic. 
E)  unit elastic. 
A)  perfectly inelastic. 
B)  inelastic but not perfectly inelastic. 
C)  elastic but not perfectly elastic. 
D)  perfectly elastic. 
E)  unit elastic.

Consider a short-run equilibrium in a perfectly competitive market.Suppose that the firms' average total cost and marginal cost schedules differ.In the short run,

A perfectly competitive firm definitely makes an economic profit in the short run if price is

Normal profit is

-The above figure shows a perfectly competitive firm.If the market price is $15 per unit,the firm

A perfectly competitive firm will maximize profit when the quantity produced is such that the

Suppose a farmer raising beef is making a normal profit.Then,because of a scare about mad cow disease,the demand for beef decreases drastically.What happens to the profits of the beef farmer in the short run and in the long run?

Suppose a perfectly competitive market is in long-run equilibrium with a price of $12.Then there is a permanent increase in demand.As a result,in the short run the market price and in the long run the number of firms and the price is the price was in the short run.

If firms in a perfectly competitive market are incurring economic losses,then as time passes firms and the market .

The price charged by a perfectly competitive firm is

The above figure shows some a firm's cost curves and its marginal revenue curve. -Based on the figure above,if the firm produces 7 cans per day,the firm maximizing its profit and is .

In a perfectly competitive market,the type of decision a firm has to make is different in the short run than in the long run.Which of the following is an example of a perfectly competitive firm's short-run decision?

A perfectly competitive firm should shut down in the short-run if price falls below the minimum of

________ a large number of firms competing by making similar but slightly different products.

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?

-The above figure shows a perfectly competitive firm.If the market price is $10,the firm

The largest loss a profit-maximizing perfectly competitive firm can incur in the short run equals its

Cynthia is an Oklahoma wheat farmer.The demand for her wheat is

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

Consider a short-run equilibrium in a perfectly competitive market.Suppose that the firms' average total cost and marginal cost schedules differ.In the short run,

A perfectly competitive firm definitely makes an economic profit in the short run if price is

Normal profit is

-The above figure shows a perfectly competitive firm.If the market price is $15 per unit,the firm

A perfectly competitive firm will maximize profit when the quantity produced is such that the

Suppose a farmer raising beef is making a normal profit.Then,because of a scare about mad cow disease,the demand for beef decreases drastically.What happens to the profits of the beef farmer in the short run and in the long run?

Suppose a perfectly competitive market is in long-run equilibrium with a price of $12.Then there is a permanent increase in demand.As a result,in the short run the market price ________ and in the long run the number of firms ________ and the price is ________ the price was in the short run.

If firms in a perfectly competitive market are incurring economic losses,then as time passes firms ________ and the market ________.

The price charged by a perfectly competitive firm is

The above figure shows some a firm's cost curves and its marginal revenue curve. -Based on the figure above,if the firm produces 7 cans per day,the firm ________ maximizing its profit and is ________.

In a perfectly competitive market,the type of decision a firm has to make is different in the short run than in the long run.Which of the following is an example of a perfectly competitive firm's short-run decision?

A perfectly competitive firm should shut down in the short-run if price falls below the minimum of

________ a large number of firms competing by making similar but slightly different products.

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?

-The above figure shows a perfectly competitive firm.If the market price is $10,the firm

The largest loss a profit-maximizing perfectly competitive firm can incur in the short run equals its

Cynthia is an Oklahoma wheat farmer.The demand for her wheat is

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

Suppose a perfectly competitive market is in long-run equilibrium with a price of $12.Then there is a permanent increase in demand.As a result,in the short run the market price and in the long run the number of firms and the price is the price was in the short run.

If firms in a perfectly competitive market are incurring economic losses,then as time passes firms and the market .

The above figure shows some a firm's cost curves and its marginal revenue curve. -Based on the figure above,if the firm produces 7 cans per day,the firm maximizing its profit and is .