Question 1

Firm Y's lowest average variable cost of its product is $4, and its lowest average total cost is $9. What price would make firm Y shut down in the short run?

Accepted Answer

A)  $3 
B)  $4.50 
C)  $5 
D)  $8 
A)  $3 
B)  $4.50 
C)  $5 
D)  $8

Question 2

Daisy Enterprises has revenues of $400,000, fixed costs of $100,000, and variable costs of $500,000. Daisy Enterprises:

Accepted Answer

A)  should shut down in the long run but stay open in the short run. 
B)  should shut down immediately. 
C)  can cover all of its costs. 
D)  cannot be a price taker. 
A)  should shut down in the long run but stay open in the short run. 
B)  should shut down immediately. 
C)  can cover all of its costs. 
D)  cannot be a price taker.

Question 3

If a firm's price covers some of its fixed costs but all of its variable cost, it:

Accepted Answer

A)  should shut down immediately. 
B)  is maximizing its losses. 
C)  has a marginal revenue that is greater than its marginal cost. 
D)  should produce the quantity where marginal cost is equal to marginal revenue. 
A)  should shut down immediately. 
B)  is maximizing its losses. 
C)  has a marginal revenue that is greater than its marginal cost. 
D)  should produce the quantity where marginal cost is equal to marginal revenue.

Question 4

Which of the following is NOT a feature of a perfectly competitive market?

Accepted Answer

A)  differentiated products 
B)  easy entry and easy exit 
C)  many buyers and sellers 
D)  full information 
A)  differentiated products 
B)  easy entry and easy exit 
C)  many buyers and sellers 
D)  full information

Question 5

If a firm is earning revenues that cover all of its variable costs and some, but not all, of its total cost, then it:

Accepted Answer

A)  should produce in the short run even though it makes a loss. 
B)  should produce in the short run, and it will make a profit. 
C)  should shut down immediately. 
D)  is in an industry in long-run equilibrium. 
A)  should produce in the short run even though it makes a loss. 
B)  should produce in the short run, and it will make a profit. 
C)  should shut down immediately. 
D)  is in an industry in long-run equilibrium.

Question 6

In the market for Halloween pumpkins, there are many buyers and sellers, the pumpkin market is easy to enter, and all pumpkins sold are identical. One seller of pumpkins is on a main highway, and buyers don't know that many more sellers are located nearby. What feature of perfectly competitive markets is violated here?

Accepted Answer

A)  many buyers 
B)  product standardization 
C)  easy entry and exit 
D)  full information 
A)  many buyers 
B)  product standardization 
C)  easy entry and exit 
D)  full information

Question 7

In the market for shalanamags, there are many buyers and sellers, and every firm that sells shalanamags also sells an identical product. The market is easy for firms to enter, and buyers and sellers have perfect information. What kind of market is the market for shalanamags?

Accepted Answer

A)  monopoly 
B)  oligopoly 
C)  monopolist competition 
D)  perfect competition 
A)  monopoly 
B)  oligopoly 
C)  monopolist competition 
D)  perfect competition

Question 8

A perfectly competitive market is in long-run equilibrium. If the market demand curve shifts to the left, what do we expect to occur in this market?

Accepted Answer

A)  Negative economic profits will cause firms to exit the market, decreasing price until price equals average total cost. 
B)  Positive economic profits will attract new firms to the market, decreasing price until price equals average total cost. 
C)  Negative economic profits will cause firms to exit the market, increasing price until price equals average total cost. 
D)  Negative economic profits will attract new firms to the market, decreasing price until price equals average variable cost. 
A)  Negative economic profits will cause firms to exit the market, decreasing price until price equals average total cost. 
B)  Positive economic profits will attract new firms to the market, decreasing price until price equals average total cost. 
C)  Negative economic profits will cause firms to exit the market, increasing price until price equals average total cost. 
D)  Negative economic profits will attract new firms to the market, decreasing price until price equals average variable cost.

Question 9

A perfectly competitive market is in long-run equilibrium. If the market demand curve shifts to the right, what do we expect to occur in this market?

Accepted Answer

A)  Negative economic profits will attract new firms to the market, decreasing price until price equals average total cost. 
B)  Positive economic profits will attract new firms to the market, decreasing price until price equals average total cost. 
C)  Positive economic profits will attract new firms to the market, increasing price until price equals average total cost. 
D)  Positive economic profits will attract new firms to the market, decreasing price until price equals average variable cost. 
A)  Negative economic profits will attract new firms to the market, decreasing price until price equals average total cost. 
B)  Positive economic profits will attract new firms to the market, decreasing price until price equals average total cost. 
C)  Positive economic profits will attract new firms to the market, increasing price until price equals average total cost. 
D)  Positive economic profits will attract new firms to the market, decreasing price until price equals average variable cost.

Question 10

Use the table Costs for a Perfectly Competitive Firm. If this firm can get a market price of $18, is this market in long-run equilibrium? Explain.
​

Accepted Answer

No, this market is not in long-run equil

Question 11

Which of the following is true when a firm in a perfectly competitive market is earning zero economic profits?

Accepted Answer

A)  Price is less than average total cost. 
B)  Business owners are earning as much income as their next best alternative. 
C)  Firms will exit the market, driving up price until remaining firms earn positive economic profits. 
D)  Business owners are earning no income. 
A)  Price is less than average total cost. 
B)  Business owners are earning as much income as their next best alternative. 
C)  Firms will exit the market, driving up price until remaining firms earn positive economic profits. 
D)  Business owners are earning no income.

Question 12

Why does standardization of products contribute to a firm having to sell its product at the market price in a perfectly competitive market?

Accepted Answer

A)  It limits consumer information. 
B)  It limits seller information about competitors. 
C)  One firm's product is a perfect substitute for another firm's product. 
D)  There are a limited number of firms selling the product. 
A)  It limits consumer information. 
B)  It limits seller information about competitors. 
C)  One firm's product is a perfect substitute for another firm's product. 
D)  There are a limited number of firms selling the product.

Question 13

The demand curve for an individual firm's product in a perfectly competitive market is:

Accepted Answer

A)  upward sloping. 
B)  vertical. 
C)  downward sloping. 
D)  horizontal. 
A)  upward sloping. 
B)  vertical. 
C)  downward sloping. 
D)  horizontal.

Question 14

Which of the following is NOT true in the long-run equilibrium in a perfectly competitive market?

Accepted Answer

A)  No entrepreneur in the market can earn any more money doing something else. 
B)  Price is equal to the minimum average total cost of a firm. 
C)  Firms have an incentive to exit the market. 
D)  Accounting profits may still be positive. 
A)  No entrepreneur in the market can earn any more money doing something else. 
B)  Price is equal to the minimum average total cost of a firm. 
C)  Firms have an incentive to exit the market. 
D)  Accounting profits may still be positive.

Question 15

Calini's sells empanadas in a perfectly competitive market. Calini's is currently producing 500 empanadas, and the marginal cost of the 500th empanada produced is $2.95. If the market price of an empanadas is $4, which of the following statements is true?

Accepted Answer

A)  Calini's should increase the quantity of empanadas that it produces. 
B)  Calini's should decrease the quantity of empanadas that it produces. 
C)  Calini's should charge a price of $2.95. 
D)  Calini's should continue to produce 500 empanadas. 
A)  Calini's should increase the quantity of empanadas that it produces. 
B)  Calini's should decrease the quantity of empanadas that it produces. 
C)  Calini's should charge a price of $2.95. 
D)  Calini's should continue to produce 500 empanadas.

Question 16

In order for a market to be perfectly competitive so that no firm can charge a price higher than the market price, there must be many buyers and sellers, standardized product, easy entry and exit, and:

Accepted Answer

A)  full faith and credit. 
B)  full information. 
C)  cost maximization. 
D)  inefficient scale. 
A)  full faith and credit. 
B)  full information. 
C)  cost maximization. 
D)  inefficient scale.

Question 17

If a firm is earning revenue that cannot cover its fixed cost or its variable cost, then it:

Accepted Answer

A)  must be in a perfectly competitive industry. 
B)  is in an industry in long-run equilibrium. 
C)  should operate at a loss in the short run. 
D)  should shut down immediately. 
A)  must be in a perfectly competitive industry. 
B)  is in an industry in long-run equilibrium. 
C)  should operate at a loss in the short run. 
D)  should shut down immediately.

Question 18

When a perfectly competitive market is in long-run equilibrium, a firm in that market produces the quantity where _____ is lowest.

Accepted Answer

A)  marginal cost 
B)  average variable cost 
C)  average total cost 
D)  marginal revenue 
A)  marginal cost 
B)  average variable cost 
C)  average total cost 
D)  marginal revenue

Question 19

Beta LLC's marginal cost curve intersects its average variable cost curve at $4 and intersects its average total cost curve at $10. What price will cause Beta LLC to shut down immediately?

Accepted Answer

A)  $2 
B)  $5 
C)  $6 
D)  $10 
A)  $2 
B)  $5 
C)  $6 
D)  $10

Question 20

Firms in perfectly competitive markets can achieve _____ because they produce only the units that buyers value and no more.

Accepted Answer

A)  efficiency in allocation 
B)  long-run profits 
C)  utility maximization 
D)  a price higher than its marginal cost 
A)  efficiency in allocation 
B)  long-run profits 
C)  utility maximization 
D)  a price higher than its marginal cost

Firm Y's lowest average variable cost of its product is $4, and its lowest average total cost is $9. What price would make firm Y shut down in the short run?

Daisy Enterprises has revenues of $400,000, fixed costs of $100,000, and variable costs of $500,000. Daisy Enterprises:

If a firm's price covers some of its fixed costs but all of its variable cost, it:

Which of the following is NOT a feature of a perfectly competitive market?

If a firm is earning revenues that cover all of its variable costs and some, but not all, of its total cost, then it:

In the market for shalanamags, there are many buyers and sellers, and every firm that sells shalanamags also sells an identical product. The market is easy for firms to enter, and buyers and sellers have perfect information. What kind of market is the market for shalanamags?

A perfectly competitive market is in long-run equilibrium. If the market demand curve shifts to the left, what do we expect to occur in this market?

A perfectly competitive market is in long-run equilibrium. If the market demand curve shifts to the right, what do we expect to occur in this market?

Use the table Costs for a Perfectly Competitive Firm. If this firm can get a market price of $18, is this market in long-run equilibrium? Explain.

Which of the following is true when a firm in a perfectly competitive market is earning zero economic profits?

Why does standardization of products contribute to a firm having to sell its product at the market price in a perfectly competitive market?

The demand curve for an individual firm's product in a perfectly competitive market is:

Which of the following is NOT true in the long-run equilibrium in a perfectly competitive market?

Calini's sells empanadas in a perfectly competitive market. Calini's is currently producing 500 empanadas, and the marginal cost of the 500th empanada produced is $2.95. If the market price of an empanadas is $4, which of the following statements is true?

In order for a market to be perfectly competitive so that no firm can charge a price higher than the market price, there must be many buyers and sellers, standardized product, easy entry and exit, and:

If a firm is earning revenue that cannot cover its fixed cost or its variable cost, then it:

When a perfectly competitive market is in long-run equilibrium, a firm in that market produces the quantity where _____ is lowest.

Beta LLC's marginal cost curve intersects its average variable cost curve at $4 and intersects its average total cost curve at $10. What price will cause Beta LLC to shut down immediately?

Firms in perfectly competitive markets can achieve _____ because they produce only the units that buyers value and no more.

Foundations of Economics

Extension: Understanding Graphs

Markets and Economies

Demand

Supply

Market Equilibrium

Elasticity

Consumer Behavior

Production Costs

Market Power

Factor Markets

Market Failure and Government Failure

Measuring an Economys Performance

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money and Banking

Monetary Policy

Economic Growth and Development

International Trade and Finance

Filters

Exam 9: Perfect Competition

Firm Y's lowest average variable cost of its product is $4, and its lowest average total cost is $9. What price would make firm Y shut down in the short run?

Daisy Enterprises has revenues of $400,000, fixed costs of $100,000, and variable costs of $500,000. Daisy Enterprises:

If a firm's price covers some of its fixed costs but all of its variable cost, it:

Which of the following is NOT a feature of a perfectly competitive market?

If a firm is earning revenues that cover all of its variable costs and some, but not all, of its total cost, then it:

In the market for shalanamags, there are many buyers and sellers, and every firm that sells shalanamags also sells an identical product. The market is easy for firms to enter, and buyers and sellers have perfect information. What kind of market is the market for shalanamags?

A perfectly competitive market is in long-run equilibrium. If the market demand curve shifts to the left, what do we expect to occur in this market?

A perfectly competitive market is in long-run equilibrium. If the market demand curve shifts to the right, what do we expect to occur in this market?

Use the table Costs for a Perfectly Competitive Firm. If this firm can get a market price of $18, is this market in long-run equilibrium? Explain. ​

Which of the following is true when a firm in a perfectly competitive market is earning zero economic profits?

Why does standardization of products contribute to a firm having to sell its product at the market price in a perfectly competitive market?

The demand curve for an individual firm's product in a perfectly competitive market is:

Which of the following is NOT true in the long-run equilibrium in a perfectly competitive market?

Calini's sells empanadas in a perfectly competitive market. Calini's is currently producing 500 empanadas, and the marginal cost of the 500th empanada produced is $2.95. If the market price of an empanadas is $4, which of the following statements is true?

In order for a market to be perfectly competitive so that no firm can charge a price higher than the market price, there must be many buyers and sellers, standardized product, easy entry and exit, and:

If a firm is earning revenue that cannot cover its fixed cost or its variable cost, then it:

When a perfectly competitive market is in long-run equilibrium, a firm in that market produces the quantity where _____ is lowest.

Beta LLC's marginal cost curve intersects its average variable cost curve at $4 and intersects its average total cost curve at $10. What price will cause Beta LLC to shut down immediately?

Firms in perfectly competitive markets can achieve _____ because they produce only the units that buyers value and no more.

Foundations of Economics

Extension: Understanding Graphs

Markets and Economies

Demand

Supply

Market Equilibrium

Elasticity

Consumer Behavior

Production Costs

Market Power

Factor Markets

Market Failure and Government Failure

Measuring an Economys Performance

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money and Banking

Monetary Policy

Economic Growth and Development

International Trade and Finance

Filters

Use the table Costs for a Perfectly Competitive Firm. If this firm can get a market price of $18, is this market in long-run equilibrium? Explain.