Question 1

When firms in a perfectly competitive market are earning an economic profit,in the long run

Accepted Answer

A)  no new firms will enter the market. 
B)  new firms will enter the market. 
C)  firms will exit the market. 
D)  the long-run average cost curve shifts downward. 
E)  the initial firms continue to earn an economic profit. 
A)  no new firms will enter the market. 
B)  new firms will enter the market. 
C)  firms will exit the market. 
D)  the long-run average cost curve shifts downward. 
E)  the initial firms continue to earn an economic profit.

Question 2

If a perfectly competitive wheat farmer is maximizing its profit and then increases its output,the farmer's

Accepted Answer

A)  total revenue increases, but total cost rises by more so that the farmer's total profit decreases. 
B)  total revenue decreases and total cost increases, both thereby decreasing the farmer's total profit. 
C)  total revenue does not change but total cost increases, thereby decreasing the farmer's total profit. 
D)  marginal revenue increases, but so does marginal cost, so that the farmer's total profit increases. 
E)  total revenue and total cost both rise, but the effect on the farmer's total profit is uncertain. 
A)  total revenue increases, but total cost rises by more so that the farmer's total profit decreases. 
B)  total revenue decreases and total cost increases, both thereby decreasing the farmer's total profit. 
C)  total revenue does not change but total cost increases, thereby decreasing the farmer's total profit. 
D)  marginal revenue increases, but so does marginal cost, so that the farmer's total profit increases. 
E)  total revenue and total cost both rise, but the effect on the farmer's total profit is uncertain.

Question 3

To increase its profit,a perfectly competitive firm will produce more output when

Accepted Answer

A)  price is greater than average fixed cost. 
B)  price is greater than marginal cost. 
C)  marginal cost is less than average total cost. 
D)  average variable cost is greater than average fixed cost. 
E)  price is greater than average variable cost. 
A)  price is greater than average fixed cost. 
B)  price is greater than marginal cost. 
C)  marginal cost is less than average total cost. 
D)  average variable cost is greater than average fixed cost. 
E)  price is greater than average variable cost.

Question 4

Under what conditions would a perfectly competitive cotton farmer who is incurring an economic loss temporarily stay in business?

Accepted Answer

A)  if the total revenue exceeds the total fixed cost 
B)  if the total revenue exceeds the total variable cost 
C)  if the total revenue is positive 
D)  if the total revenue is increasing 
E)  if the marginal revenue exceeds the price. 
A)  if the total revenue exceeds the total fixed cost 
B)  if the total revenue exceeds the total variable cost 
C)  if the total revenue is positive 
D)  if the total revenue is increasing 
E)  if the marginal revenue exceeds the price.

Question 5

If the market price is $50 for a unit of a good produced in a perfectly competitive market and the firm's minimum average variable cost is $52,then to maximize its profit (or minimize its loss)the firm should

Accepted Answer

A)  definitely produce the unit. 
B)  shut down. 
C)  not produce the unit but remain open. 
D)  not produce the unit. Whether the firm should shut down or remain open cannot be determined without more information. 
E)  produce the unit only if the price exceeds the average fixed cost. 
A)  definitely produce the unit. 
B)  shut down. 
C)  not produce the unit but remain open. 
D)  not produce the unit. Whether the firm should shut down or remain open cannot be determined without more information. 
E)  produce the unit only if the price exceeds the average fixed cost.

Question 6

During the middle of the 2000s,the price of gasoline soared and there was a movement to switch to fuels made from a mixture of gasoline and ethanol.Ethanol can be made from corn.The price of corn skyrocketed and then,after a couple of years,the price decreased.What might have led to these price changes in the corn market?

Accepted Answer

There are thousands upon thousands of co

Question 7

Describe how economic losses are eliminated in a perfectly competitive industry.

Accepted Answer

If firms are incurring economic losses,s

Question 8

A perfectly competitive firm is producing at the quantity where marginal cost is $6 and average total cost is $4.The price of the good is $5.To maximize its profit,this firm should

Accepted Answer

A)  raise its price. 
B)  lower its price. 
C)  increase its output. 
D)  decrease its output. 
E)  increase the price it charges for its product. 
A)  raise its price. 
B)  lower its price. 
C)  increase its output. 
D)  decrease its output. 
E)  increase the price it charges for its product.

Question 9

"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect.

Accepted Answer

The statement is incorrect.Perfectly com

Question 10

One part of a perfectly competitive trout farm's supply curve is its

Accepted Answer

A)  marginal cost curve below the shutdown point. 
B)  entire marginal cost curve. 
C)  marginal cost curve above the shutdown point. 
D)  average variable cost curve above the shutdown point. 
E)  marginal revenue curve above the demand curve. 
A)  marginal cost curve below the shutdown point. 
B)  entire marginal cost curve. 
C)  marginal cost curve above the shutdown point. 
D)  average variable cost curve above the shutdown point. 
E)  marginal revenue curve above the demand curve.

Question 11

In a market undergoing technological change,firms that

Accepted Answer

A)  adopt the new technology temporarily incur an economic loss. 
B)  adopt the new technology temporarily make an economic profit. 
C)  do not adopt the new technology temporarily make an economic profit. 
D)  do not adopt the new technology increase their market share. 
E)  do not adopt the new technology continue to make a normal profit. 
A)  adopt the new technology temporarily incur an economic loss. 
B)  adopt the new technology temporarily make an economic profit. 
C)  do not adopt the new technology temporarily make an economic profit. 
D)  do not adopt the new technology increase their market share. 
E)  do not adopt the new technology continue to make a normal profit.

Question 12

Which of the following is the best example of a perfectly competitive market?

Accepted Answer

A)  farming 
B)  diamonds 
C)  athletic shoes 
D)  soft drinks 
E)  electricity distribution 
A)  farming 
B)  diamonds 
C)  athletic shoes 
D)  soft drinks 
E)  electricity distribution

Question 13

John keeps beehives and sells 100 quarts of honey per month.The honey market is perfectly competitive,and the price of a quart of honey is $10.John has an average variable cost of $5 and an average fixed cost of $3.At 100 quarts per month,John's marginal cost is $10.
a.Is John maximizing his profit? If not,what should John do?
b.Calculate John's total revenue,total cost,and total economic profit or economic loss when he produces 100 quarts of honey.

Accepted Answer

a.Yes,John is maximizing his profit beca

Question 14

The figure above shows some of a firm's cost curves and its marginal revenue curve.
-Suppose the price of a can was $5.10.In this case,to maximize its profit,the firm illustrated in the figure above would

Accepted Answer

A)  decrease its production and would make an economic profit. 
B)  not change its production and would make zero economic profit. 
C)  not change its production and would make an economic profit. 
D)  decrease its production and would incur an economic loss. 
E)  not change its production and would incur an economic loss. 
A)  decrease its production and would make an economic profit. 
B)  not change its production and would make zero economic profit. 
C)  not change its production and would make an economic profit. 
D)  decrease its production and would incur an economic loss. 
E)  not change its production and would incur an economic loss.

Question 15

In the long run,a perfectly competitive firm makes

Accepted Answer

A)  a positive economic profit. 
B)  zero economic profit. 
C)  negative economic profit, that is, an economic loss. 
D)  zero accounting profit. 
E)  either a positive economic profit or a normal profit. 
A)  a positive economic profit. 
B)  zero economic profit. 
C)  negative economic profit, that is, an economic loss. 
D)  zero accounting profit. 
E)  either a positive economic profit or a normal profit.

Question 16

Marginal revenue is

Accepted Answer

A)  the change in total revenue from a one-unit increase in the quantity sold. 
B)  another name for total revenue. 
C)  the change in total cost from producing an additional unit of output. 
D)  the economic profit from producing an additional unit of output. 
E)  less than price for a perfectly competitive firm. 
A)  the change in total revenue from a one-unit increase in the quantity sold. 
B)  another name for total revenue. 
C)  the change in total cost from producing an additional unit of output. 
D)  the economic profit from producing an additional unit of output. 
E)  less than price for a perfectly competitive firm.

Question 17

A firm that is a price taker faces

Accepted Answer

A)  an elastic supply curve. 
B)  an inelastic supply curve. 
C)  a perfectly elastic demand curve. 
D)  a perfectly inelastic demand curve. 
E)  an elastic but not perfectly elastic demand curve. 
A)  an elastic supply curve. 
B)  an inelastic supply curve. 
C)  a perfectly elastic demand curve. 
D)  a perfectly inelastic demand curve. 
E)  an elastic but not perfectly elastic demand curve.

Question 18

If a perfectly competitive seller is maximizing profit and is making zero economic profit,which of the following will this seller do?

Accepted Answer

A)  go to work in the next-best earning opportunity 
B)  shut down, with a loss equal to total fixed cost 
C)  continue at the current output, making zero economic profit 
D)  increase production in order to make an economic profit 
E)  remain open but decrease production in order to make an economic profit 
A)  go to work in the next-best earning opportunity 
B)  shut down, with a loss equal to total fixed cost 
C)  continue at the current output, making zero economic profit 
D)  increase production in order to make an economic profit 
E)  remain open but decrease production in order to make an economic profit

Question 19

-The above figure illustrates a perfectly competitive firm.If the market price is $40 a unit,to maximize its profit (or minimize its loss)the firm should

Accepted Answer

A)  shut down. 
B)  produce more than 10 and less than 30 units. 
C)  produce 30 units. 
D)  produce more than 30 units and less than 40 units.. 
E)  produce 40 units. 
A)  shut down. 
B)  produce more than 10 and less than 30 units. 
C)  produce 30 units. 
D)  produce more than 30 units and less than 40 units.. 
E)  produce 40 units.

Question 20

Suppose a perfectly competitive market is in long-run equilibrium and then there is a permanent increase in the demand for that product.The new long-run equilibrium will have

Accepted Answer

A)  fewer firms in the market. 
B)  more firms in the market. 
C)  the same number of firms in the market. 
D)  probably a different number of firms, but it is not possible to determine if there will be more or fewer firms. 
E)  a permanent decrease in supply. 
A)  fewer firms in the market. 
B)  more firms in the market. 
C)  the same number of firms in the market. 
D)  probably a different number of firms, but it is not possible to determine if there will be more or fewer firms. 
E)  a permanent decrease in supply.

When firms in a perfectly competitive market are earning an economic profit,in the long run

If a perfectly competitive wheat farmer is maximizing its profit and then increases its output,the farmer's

To increase its profit,a perfectly competitive firm will produce more output when

Under what conditions would a perfectly competitive cotton farmer who is incurring an economic loss temporarily stay in business?

If the market price is $50 for a unit of a good produced in a perfectly competitive market and the firm's minimum average variable cost is $52,then to maximize its profit (or minimize its loss)the firm should

Describe how economic losses are eliminated in a perfectly competitive industry.

A perfectly competitive firm is producing at the quantity where marginal cost is $6 and average total cost is $4.The price of the good is $5.To maximize its profit,this firm should

"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect.

One part of a perfectly competitive trout farm's supply curve is its

In a market undergoing technological change,firms that

Which of the following is the best example of a perfectly competitive market?

The figure above shows some of a firm's cost curves and its marginal revenue curve. -Suppose the price of a can was $5.10.In this case,to maximize its profit,the firm illustrated in the figure above would

In the long run,a perfectly competitive firm makes

Marginal revenue is

A firm that is a price taker faces

If a perfectly competitive seller is maximizing profit and is making zero economic profit,which of the following will this seller do?

-The above figure illustrates a perfectly competitive firm.If the market price is $40 a unit,to maximize its profit (or minimize its loss)the firm should

Suppose a perfectly competitive market is in long-run equilibrium and then there is a permanent increase in the demand for that product.The new long-run equilibrium will have

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

When firms in a perfectly competitive market are earning an economic profit,in the long run

If a perfectly competitive wheat farmer is maximizing its profit and then increases its output,the farmer's

To increase its profit,a perfectly competitive firm will produce more output when

Under what conditions would a perfectly competitive cotton farmer who is incurring an economic loss temporarily stay in business?

If the market price is $50 for a unit of a good produced in a perfectly competitive market and the firm's minimum average variable cost is $52,then to maximize its profit (or minimize its loss)the firm should

Describe how economic losses are eliminated in a perfectly competitive industry.

A perfectly competitive firm is producing at the quantity where marginal cost is $6 and average total cost is $4.The price of the good is $5.To maximize its profit,this firm should

"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect.

One part of a perfectly competitive trout farm's supply curve is its

In a market undergoing technological change,firms that

Which of the following is the best example of a perfectly competitive market?

The figure above shows some of a firm's cost curves and its marginal revenue curve. -Suppose the price of a can was $5.10.In this case,to maximize its profit,the firm illustrated in the figure above would

In the long run,a perfectly competitive firm makes

Marginal revenue is

A firm that is a price taker faces

If a perfectly competitive seller is maximizing profit and is making zero economic profit,which of the following will this seller do?

-The above figure illustrates a perfectly competitive firm.If the market price is $40 a unit,to maximize its profit (or minimize its loss)the firm should

Suppose a perfectly competitive market is in long-run equilibrium and then there is a permanent increase in the demand for that product.The new long-run equilibrium will have

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