Question 1

Assume that the market equilibrium is 100 units at the price of $70.What is the price each firm can charge if each produces 10 units of output?

Accepted Answer

A) $7 
B) $0.7 
C) $70 
D) $700 
A) $7 
B) $0.7 
C) $70 
D) $700

Question 2

If ATC = $20,AVC = $15,AFC = $5,MC = $15 and MR = $15,then a perfectly competitive firm should:

Accepted Answer

A) decrease output because MR> AFC. 
B) increase output because ATC > MR. 
C) shut down if the price will be below $15. 
D) maximize its profit because MR = MC. 
A) decrease output because MR> AFC. 
B) increase output because ATC > MR. 
C) shut down if the price will be below $15. 
D) maximize its profit because MR = MC.

Question 3

Suppose that,in the long run,the price of feature films rises as the movie production industry expands.We can conclude that movie production is a/an:

Accepted Answer

A) increasing-cost industry. 
B) constant-cost industry. 
C) decreasing-cost industry. 
D) marginal-cost industry. 
A) increasing-cost industry. 
B) constant-cost industry. 
C) decreasing-cost industry. 
D) marginal-cost industry.

Question 4

A constant-cost industry is an industry in which expansion of total output results in higher prices to consumers

Accepted Answer

A) True 
 B)False

Question 5

A firm in a perfectly competitive market faces:

Accepted Answer

A) its own upward-sloping demand curve. 
B) its own downward-sloping demand curve. 
C) a market demand curve. 
D) a perfectly elastic demand curve. 
A) its own upward-sloping demand curve. 
B) its own downward-sloping demand curve. 
C) a market demand curve. 
D) a perfectly elastic demand curve.

Question 6

The long-run supply curve in a perfectly competitive increasing-cost industry is upward-sloping.

Accepted Answer

A) True 
 B)False

Question 7

Exhibit 7-6
  
-Refer to Exhibit 7-6.If market price is $22,the firm should:

Accepted Answer

A) increase the price. 
B) increase the output. 
C) decrease the output. 
D) shut down. 
E) continue to operate. 
A) increase the price. 
B) increase the output. 
C) decrease the output. 
D) shut down. 
E) continue to operate.

Question 8

Perfectly competitive markets are characterised by:

Accepted Answer

A) a large number of small producers. 
B) very strong barriers to entry and exit. 
C) firms selling a quality product. 
D) many different products. 
A) a large number of small producers. 
B) very strong barriers to entry and exit. 
C) firms selling a quality product. 
D) many different products.

Question 9

If a competitive firm cannot cover all of its costs,then it should shut down in the short run.

Accepted Answer

A) True 
 B)False

Question 10

Under perfect competition,which of the following are the same (equal)at all levels of output?

Accepted Answer

A) Market price and marginal cost. 
B) Market price and marginal revenue. 
C) Marginal cost and marginal revenue. 
D) Total cost and total revenue. 
A) Market price and marginal cost. 
B) Market price and marginal revenue. 
C) Marginal cost and marginal revenue. 
D) Total cost and total revenue.

Question 11

Exhibit 7-7
  
-According to Exhibit 7-7,given the short-run equilibrium of this firm,we would expect in the long run:

Accepted Answer

A) the market supply curve to shift to the left. 
B) the price to increase. 
C) firms to exit the industry. 
D) new firms to enter the industry. 
A) the market supply curve to shift to the left. 
B) the price to increase. 
C) firms to exit the industry. 
D) new firms to enter the industry.

Question 12

Because a competitive firm is a price taker,it:

Accepted Answer

A) can set its own prices. 
B) faces a demand curve that is relatively inelastic. 
C) enjoys high barriers to entry. 
D) faces a demand curve that is perfectly elastic. 
A) can set its own prices. 
B) faces a demand curve that is relatively inelastic. 
C) enjoys high barriers to entry. 
D) faces a demand curve that is perfectly elastic.

Question 13

Exhibit 7-10 Long-run perfectly competitive industry
  
-Refer to Exhibit 7-10 and assume that a perfectly competitive industry is in long-run equilibrium at point A,and the demand curve shifts from D₁ to D₂.Which of the following is a part of the industry-adjustment process?

Accepted Answer

A) The price will temporarily rise at point C 
B) New firms will charge less. 
C) Firms will temporarily make positive economic profits. 
D) New firms will exit the industry. 
A) The price will temporarily rise at point C 
B) New firms will charge less. 
C) Firms will temporarily make positive economic profits. 
D) New firms will exit the industry.

Question 14

Assume the short-run average total cost for a perfectly competitive industry remains constant as the output of the industry expands.In the long run,the industry supply curve will:

Accepted Answer

A) have a positive slope. 
B) have a negative slope. 
C) be perfectly horizontal. 
D) be perfectly vertical. 
A) have a positive slope. 
B) have a negative slope. 
C) be perfectly horizontal. 
D) be perfectly vertical.

Question 15

How long will the state of short-run equilibrium remain unchanged?

Accepted Answer

A) Forever. 
B) Until some factors change. 
C) Six months. 
D) One year. 
A) Forever. 
B) Until some factors change. 
C) Six months. 
D) One year.

Question 16

In the short run,if a perfectly competitive firm is producing at a price above average total cost,its economic profit must be:

Accepted Answer

A) positive. 
B) zero. 
C) negative. 
D) normal. 
A) positive. 
B) zero. 
C) negative. 
D) normal.

Question 17

If a firm's MR currently equals MC and product price = $24,AVC = $22 and ATC = $26,then in the long run this firm:

Accepted Answer

A) will continue to operate at a loss. 
B) will earn a positive profit. 
C) will go out of business. 
D) should increase output. 
E) should decrease price. 
A) will continue to operate at a loss. 
B) will earn a positive profit. 
C) will go out of business. 
D) should increase output. 
E) should decrease price.

Question 18

In a constant-cost industry,input prices remain constant as:

Accepted Answer

A) the supply of inputs fluctuates. 
B) firms encounter diseconomies of scale. 
C) workers become more experienced. 
D) firms enter and exit the industry. 
A) the supply of inputs fluctuates. 
B) firms encounter diseconomies of scale. 
C) workers become more experienced. 
D) firms enter and exit the industry.

Question 19

A firm operating in a perfectly competitive market is a price taker because:

Accepted Answer

A) the firm has a significant market share. 
B) every firm sells slightly different product. 
C) it can set a price higher than the average market price. 
D) it cannot influence the price. 
A) the firm has a significant market share. 
B) every firm sells slightly different product. 
C) it can set a price higher than the average market price. 
D) it cannot influence the price.

Question 20

Exhibit 7-2 Cost per unit curves
  
-As shown in Exhibit 7-2,the price at which the firm earns zero economic profit in the short run is:

Accepted Answer

A) $1 per unit. 
B) $1.50 per unit. 
C) $4 per unit. 
D) more than $2 per unit. 
E) $2 per unit. 
A) $1 per unit. 
B) $1.50 per unit. 
C) $4 per unit. 
D) more than $2 per unit. 
E) $2 per unit.

Assume that the market equilibrium is 100 units at the price of $70.What is the price each firm can charge if each produces 10 units of output?

If ATC = $20,AVC = $15,AFC = $5,MC = $15 and MR = $15,then a perfectly competitive firm should:

Suppose that,in the long run,the price of feature films rises as the movie production industry expands.We can conclude that movie production is a/an:

A constant-cost industry is an industry in which expansion of total output results in higher prices to consumers

A firm in a perfectly competitive market faces:

The long-run supply curve in a perfectly competitive increasing-cost industry is upward-sloping.

Exhibit 7-6 -Refer to Exhibit 7-6.If market price is $22,the firm should:

Perfectly competitive markets are characterised by:

If a competitive firm cannot cover all of its costs,then it should shut down in the short run.

Under perfect competition,which of the following are the same (equal)at all levels of output?

Exhibit 7-7 -According to Exhibit 7-7,given the short-run equilibrium of this firm,we would expect in the long run:

Because a competitive firm is a price taker,it:

Exhibit 7-10 Long-run perfectly competitive industry -Refer to Exhibit 7-10 and assume that a perfectly competitive industry is in long-run equilibrium at point A,and the demand curve shifts from D₁ to D₂.Which of the following is a part of the industry-adjustment process?

Assume the short-run average total cost for a perfectly competitive industry remains constant as the output of the industry expands.In the long run,the industry supply curve will:

How long will the state of short-run equilibrium remain unchanged?

In the short run,if a perfectly competitive firm is producing at a price above average total cost,its economic profit must be:

If a firm's MR currently equals MC and product price = $24,AVC = $22 and ATC = $26,then in the long run this firm:

In a constant-cost industry,input prices remain constant as:

A firm operating in a perfectly competitive market is a price taker because:

Exhibit 7-2 Cost per unit curves -As shown in Exhibit 7-2,the price at which the firm earns zero economic profit in the short run is:

Thinking like an economist

Production possibilities and opportunity cost

Market demand and supply

Markets in action

Elasticity of demand and supply

Production costs

Monopoly

Monopolistic competition and oligopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

A simple model of the macro economy

The monetary and financial system

Macroeconomic policy I: monetary policy

Macroeconomic policy II: fiscal policy

International trade and finance

Applying graphs to economics

Filters

Exam 7: Perfect competition

Assume that the market equilibrium is 100 units at the price of $70.What is the price each firm can charge if each produces 10 units of output?

If ATC = $20,AVC = $15,AFC = $5,MC = $15 and MR = $15,then a perfectly competitive firm should:

Suppose that,in the long run,the price of feature films rises as the movie production industry expands.We can conclude that movie production is a/an:

A constant-cost industry is an industry in which expansion of total output results in higher prices to consumers

A firm in a perfectly competitive market faces:

The long-run supply curve in a perfectly competitive increasing-cost industry is upward-sloping.

Exhibit 7-6 -Refer to Exhibit 7-6.If market price is $22,the firm should:

Perfectly competitive markets are characterised by:

If a competitive firm cannot cover all of its costs,then it should shut down in the short run.

Under perfect competition,which of the following are the same (equal)at all levels of output?

Exhibit 7-7 -According to Exhibit 7-7,given the short-run equilibrium of this firm,we would expect in the long run:

Because a competitive firm is a price taker,it:

Exhibit 7-10 Long-run perfectly competitive industry -Refer to Exhibit 7-10 and assume that a perfectly competitive industry is in long-run equilibrium at point A,and the demand curve shifts from D₁ to D₂.Which of the following is a part of the industry-adjustment process?

Assume the short-run average total cost for a perfectly competitive industry remains constant as the output of the industry expands.In the long run,the industry supply curve will:

How long will the state of short-run equilibrium remain unchanged?

In the short run,if a perfectly competitive firm is producing at a price above average total cost,its economic profit must be:

If a firm's MR currently equals MC and product price = $24,AVC = $22 and ATC = $26,then in the long run this firm:

In a constant-cost industry,input prices remain constant as:

A firm operating in a perfectly competitive market is a price taker because:

Exhibit 7-2 Cost per unit curves -As shown in Exhibit 7-2,the price at which the firm earns zero economic profit in the short run is:

Thinking like an economist

Production possibilities and opportunity cost

Market demand and supply

Markets in action

Elasticity of demand and supply

Production costs

Monopoly

Monopolistic competition and oligopoly

Policy issues: resource taxes and climate change

Measuring the size of the economy

Business cycles and economic growth

Inflation and unemployment

A simple model of the macro economy

The monetary and financial system

Macroeconomic policy I: monetary policy

Macroeconomic policy II: fiscal policy

International trade and finance

Applying graphs to economics

Filters