Question 1

If the price of a product falls below average total cost in the short run,the firm

Accepted Answer

A) has an economic profit. 
B) cannot cover total fixed costs. 
C) experiences a loss. 
D) must always shut down. 
E) should expand output until MC = MR. 
A) has an economic profit. 
B) cannot cover total fixed costs. 
C) experiences a loss. 
D) must always shut down. 
E) should expand output until MC = MR.

Question 2

In long-run equilibrium,the typical perfectly competitive firm will:

Accepted Answer

A) earn maximum economic profit. 
B) never change plant size in the long run. 
C) change output in the short run. 
D) enter or exit the industry. 
A) earn maximum economic profit. 
B) never change plant size in the long run. 
C) change output in the short run. 
D) enter or exit the industry.

Question 3

If a firm can easily enter and exit the market it operates in which market?

Accepted Answer

A) Perfectly competitive. 
B) Monopolistically competitive. 
C) Monopolistic. 
D) Oligopolistic. 
A) Perfectly competitive. 
B) Monopolistically competitive. 
C) Monopolistic. 
D) Oligopolistic.

Question 4

If ATC = $20,AVC = $12,MR = $15 and MC = $15,then the result for the perfectly competitive firm would be:

Accepted Answer

A) making a short-run loss. 
B) making a short-run profit. 
C) breaking even. 
D) shutting down. 
E) unclear as there is not enough information. 
A) making a short-run loss. 
B) making a short-run profit. 
C) breaking even. 
D) shutting down. 
E) unclear as there is not enough information.

Question 5

The firm in a perfectly competitive market will:

Accepted Answer

A) set the price lower than the variable cost of producing the product or service to gain a market share. 
B) set the price higher than the fixed cost of producing the product or service but lower than variable cost to prevent competition. 
C) set the price as low as possible to prevent competition. 
D) set the price higher than the variable cost of producing the product or service. 
A) set the price lower than the variable cost of producing the product or service to gain a market share. 
B) set the price higher than the fixed cost of producing the product or service but lower than variable cost to prevent competition. 
C) set the price as low as possible to prevent competition. 
D) set the price higher than the variable cost of producing the product or service.

Question 6

If a perfectly competitive industry's long-run supply curve is downward-sloping,what can we conclude about input prices?

Accepted Answer

A) they will increase as industry output increases. 
B) they will decrease as industry output increases. 
C) they will remain constant as industry output increases. 
D) they will decrease as industry output decreases. 
A) they will increase as industry output increases. 
B) they will decrease as industry output increases. 
C) they will remain constant as industry output increases. 
D) they will decrease as industry output decreases.

Question 7

A perfectly competitive firm always set the price:

Accepted Answer

A) equal to market cost of production. 
B) below the equilibrium market price. 
C) above the equilibrium market price. 
D) equal to the equilibrium market price. 
A) equal to market cost of production. 
B) below the equilibrium market price. 
C) above the equilibrium market price. 
D) equal to the equilibrium market price.

Question 8

Perfect competition requires that resources be:

Accepted Answer

A) the highest quality for consumers 
B) fixed over the short run but free over the long run. 
C) completely mobile to freely enter or exit the market. 
D) completely unmovable and enjoy the economies of scale. 
A) the highest quality for consumers 
B) fixed over the short run but free over the long run. 
C) completely mobile to freely enter or exit the market. 
D) completely unmovable and enjoy the economies of scale.

Question 9

The long-run equilibrium condition for perfect competition is:

Accepted Answer

A) P = AVC = MR = MC. 
B) P = ATC = MR = MC. 
C) Q = AVC = MR = MC. 
D) Q = ATC = MR = MC. 
E) TR = ATC = MR = MC. 
A) P = AVC = MR = MC. 
B) P = ATC = MR = MC. 
C) Q = AVC = MR = MC. 
D) Q = ATC = MR = MC. 
E) TR = ATC = MR = MC.

Question 10

A perfectly competitive industry must have a perfectly elastic long-run supply curve.

Accepted Answer

A) True 
 B)False

Question 11

Exhibit 7-7
  
-Refer to Exhibit 7-7.The short-run results for this firm are:

Accepted Answer

A) a positive economic profit. 
B) a normal profit. 
C) a quasi-loss. 
D) such a large loss it should shut down. 
E) indeterminate from the information given. 
A) a positive economic profit. 
B) a normal profit. 
C) a quasi-loss. 
D) such a large loss it should shut down. 
E) indeterminate from the information given.

Question 12

Exhibit 7-5 Short-run profit and loss
  
-According to Exhibit 7-5,a perfectly competitive firm will be making a short-run loss but still keep operating if price drops below:

Accepted Answer

A) $20. 
B) $15. 
C) $13. 
D) $25. 
E) any of these prices. 
A) $20. 
B) $15. 
C) $13. 
D) $25. 
E) any of these prices.

Question 13

A perfectly competitive firm shuts down in the short run when the market price is less than the average variable cost.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not a characteristic of perfect competition?

Accepted Answer

A) Ease of entry and exit. 
B) A few large firms dominate the market. 
C) The product is homogeneous. 
D) There are many buyers. 
E) There is perfect information. 
A) Ease of entry and exit. 
B) A few large firms dominate the market. 
C) The product is homogeneous. 
D) There are many buyers. 
E) There is perfect information.

Question 15

Exhibit 7-1 Total revenue and total cost graph
  
-In Exhibit 7-1,if output is between 100 and 200 units per week,economic profit for the firm is:

Accepted Answer

A) zero. 
B) negative or zero. 
C) at its maximum. 
D) positive or zero. 
A) zero. 
B) negative or zero. 
C) at its maximum. 
D) positive or zero.

Question 16

If marginal revenue exceeds marginal cost in the short run,the perfectly competitive firm earns an economic profit in the short run.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A)  A to B then back to A. 
B)  A to D then back to A. 
C)  A to D then to C. 
D)  A to B then to C. 
A)  A to B then back to A. 
B)  A to D then back to A. 
C)  A to D then to C. 
D)  A to B then to C.

Question 18

If the market price is equal to the average variable cost,the firm should:

Accepted Answer

A) keep operating or shut down. 
B) increase the output. 
C) change fixed inputs. 
D) increase the price. 
A) keep operating or shut down. 
B) increase the output. 
C) change fixed inputs. 
D) increase the price.

Question 19

Which of the following is true of a perfectly competitive market?

Accepted Answer

A) If economic profits are earned then the price will fall over time. B) In long-run equilibrium P > MR = SRMC < SRATC = LRAC. C) A constant-cost industry exists when the entry of new firms has a significant effect on their cost curves. D) If the input prices rise the long-run supply curve is downward sloping. A) If economic profits are earned then the price will fall over time. B) In long-run equilibrium P > MR = SRMC < SRATC = LRAC. C) A constant-cost industry exists when the entry of new firms has a significant effect on their cost curves. D) If the input prices rise the long-run supply curve is downward sloping.

Question 20

Exhibit 7-1 Total revenue and total cost graph
  
-In Exhibit 7-1,the firm will produce at which level of output:

Accepted Answer

A) zero. 
B) 150. 
C) 350. 
D) 250. 
A) zero. 
B) 150. 
C) 350. 
D) 250.

If the price of a product falls below average total cost in the short run,the firm

In long-run equilibrium,the typical perfectly competitive firm will:

If a firm can easily enter and exit the market it operates in which market?

If ATC = $20,AVC = $12,MR = $15 and MC = $15,then the result for the perfectly competitive firm would be:

The firm in a perfectly competitive market will:

If a perfectly competitive industry's long-run supply curve is downward-sloping,what can we conclude about input prices?

A perfectly competitive firm always set the price:

Perfect competition requires that resources be:

The long-run equilibrium condition for perfect competition is:

A perfectly competitive industry must have a perfectly elastic long-run supply curve.

Exhibit 7-7 -Refer to Exhibit 7-7.The short-run results for this firm are:

Exhibit 7-5 Short-run profit and loss -According to Exhibit 7-5,a perfectly competitive firm will be making a short-run loss but still keep operating if price drops below:

A perfectly competitive firm shuts down in the short run when the market price is less than the average variable cost.

Which of the following is not a characteristic of perfect competition?

Exhibit 7-1 Total revenue and total cost graph -In Exhibit 7-1,if output is between 100 and 200 units per week,economic profit for the firm is:

If marginal revenue exceeds marginal cost in the short run,the perfectly competitive firm earns an economic profit in the short run.

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

If the market price is equal to the average variable cost,the firm should:

Which of the following is true of a perfectly competitive market?

Exhibit 7-1 Total revenue and total cost graph -In Exhibit 7-1,the firm will produce at which level of output:

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

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Exam 7: Perfect competition

If the price of a product falls below average total cost in the short run,the firm

In long-run equilibrium,the typical perfectly competitive firm will:

If a firm can easily enter and exit the market it operates in which market?

If ATC = $20,AVC = $12,MR = $15 and MC = $15,then the result for the perfectly competitive firm would be:

The firm in a perfectly competitive market will:

If a perfectly competitive industry's long-run supply curve is downward-sloping,what can we conclude about input prices?

A perfectly competitive firm always set the price:

Perfect competition requires that resources be:

The long-run equilibrium condition for perfect competition is:

A perfectly competitive industry must have a perfectly elastic long-run supply curve.

Exhibit 7-7 -Refer to Exhibit 7-7.The short-run results for this firm are:

Exhibit 7-5 Short-run profit and loss -According to Exhibit 7-5,a perfectly competitive firm will be making a short-run loss but still keep operating if price drops below:

A perfectly competitive firm shuts down in the short run when the market price is less than the average variable cost.

Which of the following is not a characteristic of perfect competition?

Exhibit 7-1 Total revenue and total cost graph -In Exhibit 7-1,if output is between 100 and 200 units per week,economic profit for the firm is:

If marginal revenue exceeds marginal cost in the short run,the perfectly competitive firm earns an economic profit in the short run.

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

If the market price is equal to the average variable cost,the firm should:

Which of the following is true of a perfectly competitive market?

Exhibit 7-1 Total revenue and total cost graph -In Exhibit 7-1,the firm will produce at which level of output:

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