Question 1

What is productive efficiency?

Accepted Answer

A) a situation in which resources are allocated to their highest profit use 
B) a situation in which resources are allocated such that goods can be produced at their lowest possible average cost 
C) a situation in which resources are allocated such the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it 
D) a situation in which firms produce as much as possible 
A) a situation in which resources are allocated to their highest profit use 
B) a situation in which resources are allocated such that goods can be produced at their lowest possible average cost 
C) a situation in which resources are allocated such the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it 
D) a situation in which firms produce as much as possible

Question 2

Firms in perfectly competitive industries are unable to control the prices of the products they sell and earn a profit in the long run.Which of the following is one reason for this?

Accepted Answer

A) Owners of perfectly competitive firms realize that their short-run profits are temporary.Therefore, they either sell their businesses or develop other products that will earn short-run profits. 
B) Firms in perfectly competitive industries can use advertising in the short run to persuade consumers that their products are better than those of other firms.But eventually consumers realize that all of the firms sell virtually identical products. 
C) Firms from other countries are able to produce similar products at lower costs. 
D) Firms in these industries sell identical products. 
A) Owners of perfectly competitive firms realize that their short-run profits are temporary.Therefore, they either sell their businesses or develop other products that will earn short-run profits. 
B) Firms in perfectly competitive industries can use advertising in the short run to persuade consumers that their products are better than those of other firms.But eventually consumers realize that all of the firms sell virtually identical products. 
C) Firms from other countries are able to produce similar products at lower costs. 
D) Firms in these industries sell identical products.

Question 3

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is a characteristic of a firm in a perfectly competitive market?

Accepted Answer

A) The firm cannot make a profit in the short run because it is too small a part of the total market. 
B) The firm can make a profit in the long run but not in the short run. 
C) The firm can sell as much as it wants without having to lower its price. 
D) The firm must lower its price in order to increase quantity demanded. 
A) The firm cannot make a profit in the short run because it is too small a part of the total market. 
B) The firm can make a profit in the long run but not in the short run. 
C) The firm can sell as much as it wants without having to lower its price. 
D) The firm must lower its price in order to increase quantity demanded.

Question 5

Figure 9-10
  
-Refer to Figure 9-10.Total revenue at the profit-maximizing level of output is

Accepted Answer

A) $1,200. 
B) $2,500. 
C) $4,800. 
D) $6,000. 
A) $1,200. 
B) $2,500. 
C) $4,800. 
D) $6,000.

Question 6

Figure 9-12
  
-Refer to Figure 9-12.Consider a typical firm in a perfectly competitive industry that makes short-run profits.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Accepted Answer

A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D 
A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D

Question 7

Figure 9-4
   
Figure 9-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
-Refer to Figure 9-4.If the market price is $30,the firm's profit-maximizing output level is

Accepted Answer

A) 0. 
B) 130. 
C) 180. 
D) 240. 
A) 0. 
B) 130. 
C) 180. 
D) 240.

Question 8

If the market price is $40 in a perfectly competitive market,the marginal revenue from selling the fifth unit is

Accepted Answer

A) $8. 
B) $20. 
C) $40. 
D) $200. 
A) $8. 
B) $20. 
C) $40. 
D) $200.

Question 9

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

Accepted Answer

A) a corn farmer in Illinois 
B) a Taco Bell restaurant 
C) the Ford Motor Company 
D) the United Parcel Service (UPS) 
A) a corn farmer in Illinois 
B) a Taco Bell restaurant 
C) the Ford Motor Company 
D) the United Parcel Service (UPS)

Question 10

Figure 9-2
  
-Refer to Figure 9-2.Suppose the firm is currently producing Q₂ units.What happens if it expands output to Q₃ units?

Accepted Answer

A) Its profit increases by the size of the vertical distance df. 
B)  It makes less profit. 
C) It incurs a loss. 
D) It will be moving toward its profit maximizing output. 
A) Its profit increases by the size of the vertical distance df. 
B)  It makes less profit. 
C) It incurs a loss. 
D) It will be moving toward its profit maximizing output.

Question 11

Competition has driven the economic profits in the video rental business to zero.Surya Bacha,who owns a video rental business,would be better off leaving the industry for another alternative.

Accepted Answer

A) True 
 B)False

Question 12

A perfectly competitive wheat farmer in a constant-cost industry produces 3,000 bushels of wheat at a total cost of $36,000.The prevailing market price is $15.What will happen to the market price of wheat in the long run?

Accepted Answer

A) The price remains constant at $15. 
B) The price falls to $12. 
C) The price rises above $15. 
D)  There is insufficient information to answer the question. 
A) The price remains constant at $15. 
B) The price falls to $12. 
C) The price rises above $15. 
D)  There is insufficient information to answer the question.

Question 13

For a perfectly competitive firm,average revenue is equal to

Accepted Answer

A) marginal cost. 
B) the market price. 
C) total revenue. 
D) average fixed cost. 
A) marginal cost. 
B) the market price. 
C) total revenue. 
D) average fixed cost.

Question 14

Consider the market for wheat which is a perfectly competitive market.Is the market demand curve the same as the demand curve facing an individual producer? If not,explain how and why they are different? Illustrate your answer graphically.

Accepted Answer

The market demand is downward sloping wh

Question 15

Assume that the personal computer industry is perfectly competitive.The fact that the price of personal computers over the last decade has fallen despite increases in demand signifies that the industry is a decreasing-cost industry.

Accepted Answer

A) True 
 B)False

Question 16

Figure 9-9
   
Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 9-9.At price P₄,the firm would

Accepted Answer

A) lose an amount equal to its fixed cost. 
B) make a profit. 
C) lose an amount less than fixed cost. 
D) make a normal profit. 
A) lose an amount equal to its fixed cost. 
B) make a profit. 
C) lose an amount less than fixed cost. 
D) make a normal profit.

Question 17

Figure 9-5
   
Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 9-5.If the market price is $20,what is the firm's profit-maximizing output?

Accepted Answer

A) 750 units 
B) 1,100 units 
C) 1,350 units 
D) 1,800 units 
A) 750 units 
B) 1,100 units 
C) 1,350 units 
D) 1,800 units

Question 18

If,as a perfectly competitive industry expands,it can supply larger quantities only at a higher long-run equilibrium price,it is

Accepted Answer

A) a constant-cost industry. 
B) an increasing-cost industry. 
C) a decreasing-cost industry. 
D) a fixed-cost industry. 
A) a constant-cost industry. 
B) an increasing-cost industry. 
C) a decreasing-cost industry. 
D) a fixed-cost industry.

Question 19

Figure 9-5
   
Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 9-5.What is the minimum price the firm requires to produce output?

Accepted Answer

A) $20 
B) $14 
C) $5 
D) It cannot be determined 
A) $20 
B) $14 
C) $5 
D) It cannot be determined

Question 20

Figure 9-1
  
-Refer to Figure 9-1.If the firm is producing 700 units,

Accepted Answer

A) it is making a profit. 
B)  it is making a loss. 
C) it should cut back its output to maximize profit. 
D) it should increase its output to maximize profit. 
A) it is making a profit. 
B)  it is making a loss. 
C) it should cut back its output to maximize profit. 
D) it should increase its output to maximize profit.

What is productive efficiency?

Firms in perfectly competitive industries are unable to control the prices of the products they sell and earn a profit in the long run.Which of the following is one reason for this?

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

Which of the following is a characteristic of a firm in a perfectly competitive market?

Figure 9-10 -Refer to Figure 9-10.Total revenue at the profit-maximizing level of output is

Figure 9-12 -Refer to Figure 9-12.Consider a typical firm in a perfectly competitive industry that makes short-run profits.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Figure 9-4 Figure 9-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. -Refer to Figure 9-4.If the market price is $30,the firm's profit-maximizing output level is

If the market price is $40 in a perfectly competitive market,the marginal revenue from selling the fifth unit is

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

Figure 9-2 -Refer to Figure 9-2.Suppose the firm is currently producing Q₂ units.What happens if it expands output to Q₃ units?

Competition has driven the economic profits in the video rental business to zero.Surya Bacha,who owns a video rental business,would be better off leaving the industry for another alternative.

A perfectly competitive wheat farmer in a constant-cost industry produces 3,000 bushels of wheat at a total cost of $36,000.The prevailing market price is $15.What will happen to the market price of wheat in the long run?

For a perfectly competitive firm,average revenue is equal to

Consider the market for wheat which is a perfectly competitive market.Is the market demand curve the same as the demand curve facing an individual producer? If not,explain how and why they are different? Illustrate your answer graphically.

Assume that the personal computer industry is perfectly competitive.The fact that the price of personal computers over the last decade has fallen despite increases in demand signifies that the industry is a decreasing-cost industry.

Figure 9-9 Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 9-9.At price P₄,the firm would

Figure 9-5 Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 9-5.If the market price is $20,what is the firm's profit-maximizing output?

If,as a perfectly competitive industry expands,it can supply larger quantities only at a higher long-run equilibrium price,it is

Figure 9-5 Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 9-5.What is the minimum price the firm requires to produce output?

Figure 9-1 -Refer to Figure 9-1.If the firm is producing 700 units,

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

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Exam 9: Firms in Perfectly Competitive Markets

What is productive efficiency?

Firms in perfectly competitive industries are unable to control the prices of the products they sell and earn a profit in the long run.Which of the following is one reason for this?

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

Which of the following is a characteristic of a firm in a perfectly competitive market?

Figure 9-10 -Refer to Figure 9-10.Total revenue at the profit-maximizing level of output is

Figure 9-12 -Refer to Figure 9-12.Consider a typical firm in a perfectly competitive industry that makes short-run profits.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Figure 9-4 Figure 9-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. -Refer to Figure 9-4.If the market price is $30,the firm's profit-maximizing output level is

If the market price is $40 in a perfectly competitive market,the marginal revenue from selling the fifth unit is

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

Figure 9-2 -Refer to Figure 9-2.Suppose the firm is currently producing Q₂ units.What happens if it expands output to Q₃ units?

Competition has driven the economic profits in the video rental business to zero.Surya Bacha,who owns a video rental business,would be better off leaving the industry for another alternative.

A perfectly competitive wheat farmer in a constant-cost industry produces 3,000 bushels of wheat at a total cost of $36,000.The prevailing market price is $15.What will happen to the market price of wheat in the long run?

For a perfectly competitive firm,average revenue is equal to

Consider the market for wheat which is a perfectly competitive market.Is the market demand curve the same as the demand curve facing an individual producer? If not,explain how and why they are different? Illustrate your answer graphically.

Assume that the personal computer industry is perfectly competitive.The fact that the price of personal computers over the last decade has fallen despite increases in demand signifies that the industry is a decreasing-cost industry.

Figure 9-9 Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 9-9.At price P₄,the firm would

Figure 9-5 Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 9-5.If the market price is $20,what is the firm's profit-maximizing output?

If,as a perfectly competitive industry expands,it can supply larger quantities only at a higher long-run equilibrium price,it is

Figure 9-5 Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 9-5.What is the minimum price the firm requires to produce output?

Figure 9-1 -Refer to Figure 9-1.If the firm is producing 700 units,

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters