Question 1

If a perfectly competitive firm finds that price is less than its ATC,then the firm

Accepted Answer

A)  will raise its price to increase its economic profit. 
B)  will lower its price to increase its economic profit. 
C)  is making an economic profit. 
D)  is incurring an economic loss. 
E)  is making zero economic profit. 
A)  will raise its price to increase its economic profit. 
B)  will lower its price to increase its economic profit. 
C)  is making an economic profit. 
D)  is incurring an economic loss. 
E)  is making zero economic profit.

Question 2

For a perfectly competitive firm,profit maximization occurs when output is such that

Accepted Answer

A)  total revenue (TR) is maximized. 
B)  total cost (T
C)  is minimized. 
C)  marginal revenue (MR) = marginal cost (M
C) . 
D)  average total cost (AT
C)  is minimized. 
E)  total revenue (TR) equals total cost (T
C) . 
A)  total revenue (TR) is maximized. 
B)  total cost (T
C)  is minimized. 
C)  marginal revenue (MR) = marginal cost (M
C) . 
D)  average total cost (AT
C)  is minimized. 
E)  total revenue (TR) equals total cost (T
C) .

Question 3

Perfect competition is characterized by all of the following EXCEPT

Accepted Answer

A)  a large number of buyers and sellers. 
B)  no restrictions on entry into or exit from the industry. 
C)  considerable advertising by individual firms. 
D)  buyers and sellers are well informed about prices. 
E)  firms produce an identical product. 
A)  a large number of buyers and sellers. 
B)  no restrictions on entry into or exit from the industry. 
C)  considerable advertising by individual firms. 
D)  buyers and sellers are well informed about prices. 
E)  firms produce an identical product.

Question 4

A market is ________ when a small number of firms compete.

Accepted Answer

A)  a monopoly 
B)  perfectly competitive 
C)  monopolistically competitive 
D)  an oligopoly 
E)  either monopolistically competitive or an oligopoly 
A)  a monopoly 
B)  perfectly competitive 
C)  monopolistically competitive 
D)  an oligopoly 
E)  either monopolistically competitive or an oligopoly

Question 5

The rutabaga market is perfectly competitive and the price of a ton of rutabagas rises.As a result,Rudy,a rutabaga farmer,will

Accepted Answer

A)  decrease his output of rutabagas. 
B)  not change his output of rutabagas because Rudy's firm is a price taker. 
C)  increase his output of rutabagas. 
D)  at first decrease and then increase his output of rutabagas. 
E)  probably change his output of rutabagas, but more information is needed about the change in the marginal revenue of a ton of rutabagas. 
A)  decrease his output of rutabagas. 
B)  not change his output of rutabagas because Rudy's firm is a price taker. 
C)  increase his output of rutabagas. 
D)  at first decrease and then increase his output of rutabagas. 
E)  probably change his output of rutabagas, but more information is needed about the change in the marginal revenue of a ton of rutabagas.

Question 6

Pumpkin growing is a perfectly competitive industry.Suppose that pumpkin growers are all incurring an economic loss.What happens as time passes? What is the long-run equilibrium outcome?

Accepted Answer

Because the firms are incurring an econo

Question 7

-The above figure shows three possible average total cost curves.If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC₀,each produces 20 units,and the market price of the good is $16 per unit,then

Accepted Answer

A)  the firms make an economic profit of $8 per unit. 
B)  firms will enter the industry and the number of firms increases. 
C)  the firms' ATC curves will eventually shift to become the same as ATC₁. 
D)  firms will exit the industry and the number of firms decreases. 
E)  Both answers A and B are correct. 
A)  the firms make an economic profit of $8 per unit. 
B)  firms will enter the industry and the number of firms increases. 
C)  the firms' ATC curves will eventually shift to become the same as ATC₁. 
D)  firms will exit the industry and the number of firms decreases. 
E)  Both answers A and B are correct.

Question 8

Suppose that marginal revenue for a perfectly competitive firm is $20 .When the firm produces 10 units,its marginal cost is $20,its average total cost is $22,and its average variable cost is $17.Then to maximize its profit in the short run,the firm

Accepted Answer

A)  should stay open and incur an economic loss of $20. 
B)  must increase its output to increase its profit. 
C)  must decrease its output to increase its profit. 
D)  should shut down. 
E)  should not change its production because it is already maximizing its profit and is making an economic profit. 
A)  should stay open and incur an economic loss of $20. 
B)  must increase its output to increase its profit. 
C)  must decrease its output to increase its profit. 
D)  should shut down. 
E)  should not change its production because it is already maximizing its profit and is making an economic profit.

Question 9

Suppose a perfectly competitive market is in a short-run equilibrium.If some firms exit the market,the profit of the remaining firms ________; if some firms enter the market,the profit of each existing firm ________.

Accepted Answer

A)  decreases; is unchanged 
B)  increases; decreases 
C)  increases; is unchanged 
D)  is unchanged; is unchanged 
E)  decreases; increases 
A)  decreases; is unchanged 
B)  increases; decreases 
C)  increases; is unchanged 
D)  is unchanged; is unchanged 
E)  decreases; increases

Question 10

A perfectly competitive market arises when

Accepted Answer

A)  the market demand is small relative to the output of a firm. 
B)  there are many buyers but few sellers. 
C)  the market demand is very large relative to the output of one seller. 
D)  a firm has control over a unique resource. 
E)  each of the many firms produces a slightly different product. 
A)  the market demand is small relative to the output of a firm. 
B)  there are many buyers but few sellers. 
C)  the market demand is very large relative to the output of one seller. 
D)  a firm has control over a unique resource. 
E)  each of the many firms produces a slightly different product.

Question 11

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.

Question 12

-The above table has the total revenue and total cost schedule for Omar,a perfectly competitive grower of rutabagas.When Omar produces 2 bushels of rutabagas,his total profit equals

Accepted Answer

A)  $0. 
B)  $20. 
C)  $28. 
D)  -$8. 
E)  $48. 
A)  $0. 
B)  $20. 
C)  $28. 
D)  -$8. 
E)  $48.

Question 13

The above figure shows some a firm's cost curves and its marginal revenue curve.
-The price for the shutdown point ________.

Accepted Answer

A)  $5.14 
B)  between $3.01 and $5.13 
C)  $3.00 
D)  between $0 and $2.99 
E)  greater than $5.15 
A)  $5.14 
B)  between $3.01 and $5.13 
C)  $3.00 
D)  between $0 and $2.99 
E)  greater than $5.15

Question 14

The figure above shows some of a firm's cost curves and its marginal revenue curve.
-The firm in the figure above has a total revenue equal to ________.

Accepted Answer

A)  $5.10 × 10 
B)  $8.00 × 10 
C)  ($5.10 - $8.00) × 10 
D)  ($8.00 - $5.10) × 10 
E)  None of the above answers are correct because more information is needed. 
A)  $5.10 × 10 
B)  $8.00 × 10 
C)  ($5.10 - $8.00) × 10 
D)  ($8.00 - $5.10) × 10 
E)  None of the above answers are correct because more information is needed.

Question 15

In the short run,a perfectly competitive firm ________ make an economic profit and ________ incur an economic loss.

Accepted Answer

A)  might; will never 
B)  will never; might 
C)  might; might 
D)  will never; will never 
E)  will definitely; will never 
A)  might; will never 
B)  will never; might 
C)  might; might 
D)  will never; will never 
E)  will definitely; will never

Question 16

A perfectly competitive firm maximizes its profit by producing at the point where

Accepted Answer

A)  total revenue equals total cost. 
B)  marginal revenue is equal to marginal cost. 
C)  total revenue is equal to marginal revenue. 
D)  total cost is at its minimum. 
E)  total revenue is at its maximum. 
A)  total revenue equals total cost. 
B)  marginal revenue is equal to marginal cost. 
C)  total revenue is equal to marginal revenue. 
D)  total cost is at its minimum. 
E)  total revenue is at its maximum.

Question 17

The market supply in the short run for the perfectly competitive industry is

Accepted Answer

A)  the same as each producer's supply. 
B)  the sum of the supply schedules of all firms. 
C)  divided up according to each firm's selling price. 
D)  set at the maximum price a buyer will pay for one unit. 
E)  equal to the average of each firm's supply schedule. 
A)  the same as each producer's supply. 
B)  the sum of the supply schedules of all firms. 
C)  divided up according to each firm's selling price. 
D)  set at the maximum price a buyer will pay for one unit. 
E)  equal to the average of each firm's supply schedule.

Question 18

If there are 1,000 identical rice farmers who are each willing to supply 200 bushels of rice at $2 per bushel,what price and quantity combination is a point on the market supply curve for rice?

Accepted Answer

A)  $2 and 200 bushels 
B)  $2 and 200,000 bushels 
C)  $2,000 and 200,000 bushels 
D)  $2,000 and 1,000 bushels 
E)  $2 and 1,000 farmers 
A)  $2 and 200 bushels 
B)  $2 and 200,000 bushels 
C)  $2,000 and 200,000 bushels 
D)  $2,000 and 1,000 bushels 
E)  $2 and 1,000 farmers

Question 19

A perfectly competitive firm is producing 50 units of output,which it sells at the market price of $23 per unit.The firm's average total cost is $20.What is the firm's total revenue?

Accepted Answer

A)  $23 
B)  $150 
C)  $1,000 
D)  $1,150 
E)  $20 
A)  $23 
B)  $150 
C)  $1,000 
D)  $1,150 
E)  $20

Question 20

Elsie is a perfectly competitive dairy farmer.The market price of milk was $2.40 but just fell to $2.20 a gallon.Elsie

Accepted Answer

A)  can sell as much milk as she wants at $2.20 a gallon. 
B)  will have to charge some customers $2.40 a gallon to stay in business. 
C)  will produce the same amount of milk at both prices. 
D)  can sell more at the lower price because the quantity demanded is higher at lower prices. 
E)  will be able to charge her initial customers $2.40 a gallon. 
A)  can sell as much milk as she wants at $2.20 a gallon. 
B)  will have to charge some customers $2.40 a gallon to stay in business. 
C)  will produce the same amount of milk at both prices. 
D)  can sell more at the lower price because the quantity demanded is higher at lower prices. 
E)  will be able to charge her initial customers $2.40 a gallon.

If a perfectly competitive firm finds that price is less than its ATC,then the firm

For a perfectly competitive firm,profit maximization occurs when output is such that

Perfect competition is characterized by all of the following EXCEPT

A market is ________ when a small number of firms compete.

The rutabaga market is perfectly competitive and the price of a ton of rutabagas rises.As a result,Rudy,a rutabaga farmer,will

Pumpkin growing is a perfectly competitive industry.Suppose that pumpkin growers are all incurring an economic loss.What happens as time passes? What is the long-run equilibrium outcome?

-The above figure shows three possible average total cost curves.If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC₀,each produces 20 units,and the market price of the good is $16 per unit,then

Suppose that marginal revenue for a perfectly competitive firm is $20 .When the firm produces 10 units,its marginal cost is $20,its average total cost is $22,and its average variable cost is $17.Then to maximize its profit in the short run,the firm

Suppose a perfectly competitive market is in a short-run equilibrium.If some firms exit the market,the profit of the remaining firms ; if some firms enter the market,the profit of each existing firm .

A perfectly competitive market arises when

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

-The above table has the total revenue and total cost schedule for Omar,a perfectly competitive grower of rutabagas.When Omar produces 2 bushels of rutabagas,his total profit equals

The above figure shows some a firm's cost curves and its marginal revenue curve. -The price for the shutdown point ________.

The figure above shows some of a firm's cost curves and its marginal revenue curve. -The firm in the figure above has a total revenue equal to ________.

In the short run,a perfectly competitive firm make an economic profit and incur an economic loss.

A perfectly competitive firm maximizes its profit by producing at the point where

The market supply in the short run for the perfectly competitive industry is

If there are 1,000 identical rice farmers who are each willing to supply 200 bushels of rice at $2 per bushel,what price and quantity combination is a point on the market supply curve for rice?

A perfectly competitive firm is producing 50 units of output,which it sells at the market price of $23 per unit.The firm's average total cost is $20.What is the firm's total revenue?

Elsie is a perfectly competitive dairy farmer.The market price of milk was $2.40 but just fell to $2.20 a gallon.Elsie

Getting Started

The Usand 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

If a perfectly competitive firm finds that price is less than its ATC,then the firm

For a perfectly competitive firm,profit maximization occurs when output is such that

Perfect competition is characterized by all of the following EXCEPT

A market is ________ when a small number of firms compete.

The rutabaga market is perfectly competitive and the price of a ton of rutabagas rises.As a result,Rudy,a rutabaga farmer,will

Pumpkin growing is a perfectly competitive industry.Suppose that pumpkin growers are all incurring an economic loss.What happens as time passes? What is the long-run equilibrium outcome?

-The above figure shows three possible average total cost curves.If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC₀,each produces 20 units,and the market price of the good is $16 per unit,then

Suppose that marginal revenue for a perfectly competitive firm is $20 .When the firm produces 10 units,its marginal cost is $20,its average total cost is $22,and its average variable cost is $17.Then to maximize its profit in the short run,the firm

Suppose a perfectly competitive market is in a short-run equilibrium.If some firms exit the market,the profit of the remaining firms ________; if some firms enter the market,the profit of each existing firm ________.

A perfectly competitive market arises when

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

-The above table has the total revenue and total cost schedule for Omar,a perfectly competitive grower of rutabagas.When Omar produces 2 bushels of rutabagas,his total profit equals

The above figure shows some a firm's cost curves and its marginal revenue curve. -The price for the shutdown point ________.

The figure above shows some of a firm's cost curves and its marginal revenue curve. -The firm in the figure above has a total revenue equal to ________.

In the short run,a perfectly competitive firm ________ make an economic profit and ________ incur an economic loss.

A perfectly competitive firm maximizes its profit by producing at the point where

The market supply in the short run for the perfectly competitive industry is

If there are 1,000 identical rice farmers who are each willing to supply 200 bushels of rice at $2 per bushel,what price and quantity combination is a point on the market supply curve for rice?

A perfectly competitive firm is producing 50 units of output,which it sells at the market price of $23 per unit.The firm's average total cost is $20.What is the firm's total revenue?

Elsie is a perfectly competitive dairy farmer.The market price of milk was $2.40 but just fell to $2.20 a gallon.Elsie

Getting Started

The Usand 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 a short-run equilibrium.If some firms exit the market,the profit of the remaining firms ; if some firms enter the market,the profit of each existing firm .

In the short run,a perfectly competitive firm make an economic profit and incur an economic loss.