Question 1

A perfectly competitive firm's supply curve is its

Accepted Answer

A) marginal cost curve. 
B) marginal cost curve above its minimum average total cost. 
C) marginal cost curve above its minimum average variable cost. 
D) marginal cost curve above its minimum average fixed cost. 
A) marginal cost curve. 
B) marginal cost curve above its minimum average total cost. 
C) marginal cost curve above its minimum average variable cost. 
D) marginal cost curve above its minimum average fixed cost.

Question 2

Suppose Veronica sells teapots in the perfectly competitive teapot market.Her output per day and her costs are as follows:
 $\begin{array}{|c|c|}
\hline\text { Output per } & \
\text { Day }& \text { Total Cost } \
\hline 0 & \$ 20 \
\hline 1 & 32 \
\hline 2 & 37 \
\hline 3 & 48 \
\hline 4 & 61 \
\hline 5 & 75 \
\hline 6 & 92 \
\hline 7 & 113 \
\hline 8 & 136 \
\hline
\end{array}$ 
Suppose the current equilibrium price in the teapot market is $10.To maximize profit,how many teapots will Veronica produce,what price will she charge,and how much profit (or loss)will she make? Draw a graph to illustrate your answer.Your graph should include Veronica's demand,ATC,AVC,MC,and MR curves,the price she is charging,the quantity she is producing,and the area representing her profit (or loss).

Accepted Answer

Veronica will produce 2 teapot

Question 3

If,for the last unit of a good produced by a perfectly competitive firm,MR > MC,then in producing it,the firm

Accepted Answer

A) added more to total costs than it added to total revenue. 
B) added more to total revenue than it added to total cost. 
C) is maximizing marginal profit. 
D) has minimized its losses. 
A) added more to total costs than it added to total revenue. 
B) added more to total revenue than it added to total cost. 
C) is maximizing marginal profit. 
D) has minimized its losses.

Question 4

Why are individual buyers and sellers in perfect competition called price takers?

Accepted Answer

They are called price takers b

Question 5

If the long-run average cost curve is U-shaped,the optimal scale of production from society's viewpoint is

Accepted Answer

A) the minimum efficient scale. 
B) where maximum economic profit is earned by producers. 
C) where firm profit is large enough to finance research and development. 
D) one which guarantees economic profit. 
A) the minimum efficient scale. 
B) where maximum economic profit is earned by producers. 
C) where firm profit is large enough to finance research and development. 
D) one which guarantees economic profit.

Question 6

In the short run,if a firm shuts down it avoids its variable cost but not its fixed cost.

Accepted Answer

A) True 
 B)False

Question 7

Table 9-4
 $$\begin{array} { | c | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Average } \
\text { Fixed Cost }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Variable Cost }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Cost }
\end{array} \
\hline 20 & \$ 40 & \$ 18 & \$ 18 \
\hline 40 & 20 & 14 & 10 \
\hline 60 & 13.1 & 16 & 20 \
\hline 80 & 10 & 22 & 40 \
\hline 100 & 8 & 30 & 62 \
\hline 120 & 6.61 & 40 & 90 \
\hline
\end{array}$$ 
Table 9-4 shows the short-run cost data of a perfectly competitive firm.Assume that output can only be increased in batches of 20 units.
-Refer to Table 9-4.If the market price is $45 the firm will produce

Accepted Answer

A) 60 units. 
B) 80 units. 
C) 100 units 
D) 120 units 
A) 60 units. 
B) 80 units. 
C) 100 units 
D) 120 units

Question 8

A firm will break even when

Accepted Answer

A) P = ATC. B) P > ATC. C) P < AVC. D) P = AVC. A) P = ATC. B) P > ATC. C) P < AVC. D) P = AVC.

Question 9

If in a perfectly competitive industry,the market price facing a firm is below its average total cost but above average variable cost at the output where marginal cost equals marginal revenue

Accepted Answer

A) the industry supply will not change. 
B) new firms are attracted to the industry. 
C) some existing firms will exit the industry. 
D) firms are breaking even. 
A) the industry supply will not change. 
B) new firms are attracted to the industry. 
C) some existing firms will exit the industry. 
D) firms are breaking even.

Question 10

Figure 9-6
   
Figure 9-6 shows the demand, marginal cost (MC)and average total cost (ATC)curves for Jason's House of Apples.
-Refer to Figure 9-6.Jason is currently producing 20 thousand pounds of apples.To maximize his profit Jason should

Accepted Answer

A) keep production at 20 thousand pounds. 
B) increase production to the output rate indicated by point d. 
C) increase production to the output rate indicated by point e. 
D) decrease production to the output rate indicated by point a. 
A) keep production at 20 thousand pounds. 
B) increase production to the output rate indicated by point d. 
C) increase production to the output rate indicated by point e. 
D) decrease production to the output rate indicated by point a.

Question 11

Figure 9-18
  
-Use the figure above to answer the following questions.
a.How can you determine that the figure represents a graph of a perfectly competitive firm? Be specific; indicate which curve gives you the information and how you use this information to arrive at your conclusion.
b.What is the market price?
c.What is the profit-maximizing output?
d.What is total revenue at the profit-maximizing output?
e.What is the total cost at the profit-maximizing output?
f.What is the profit or loss at the profit-maximizing output?
g.What is the firm's total fixed cost?
h.What is the total variable cost?
i.Identify the firm's short-run supply curve.
j.Is the industry in a long-run equilibrium?
k.If it is not in long-run equilibrium,what will happen in this industry to restore long-run equilibrium?
l.In long-run equilibrium,what is the firm's profit maximizing quantity?

Accepted Answer

a. The perfectly competitive firm is a p

Question 12

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.The firm's manager suggests that the firm's goal should be to maximize average profit.If the firm does this,what is the amount of profit that it will earn?

Accepted Answer

A) $6,600 
B) $6,750 
C) $12,150 
D) $36,000 
A) $6,600 
B) $6,750 
C) $12,150 
D) $36,000

Question 13

Which of the following is not a characteristic of a perfectly competitive market structure?

Accepted Answer

A) There are a very large number of firms that are small compared to the market. 
B) All firms sell identical products. 
C) There are no restrictions to entry by new firms. 
D) There are restrictions on exit of firms. 
A) There are a very large number of firms that are small compared to the market. 
B) All firms sell identical products. 
C) There are no restrictions to entry by new firms. 
D) There are restrictions on exit of firms.

Question 14

Figure 9-10
  
-Refer to Figure 9-10.The total cost at the profit-maximizing output level equals

Accepted Answer

A) $4,800. 
B) $3,300. 
C) $2,500. 
D) $1,800. 
A) $4,800. 
B) $3,300. 
C) $2,500. 
D) $1,800.

Question 15

Figure 9-9
   
Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 9-9.Identify the firm's short-run supply curve.

Accepted Answer

A) the marginal cost curve 
B) the marginal cost curve from a and above 
C) the marginal cost curve from b and above 
D) the marginal cost curve from d and above 
A) the marginal cost curve 
B) the marginal cost curve from a and above 
C) the marginal cost curve from b and above 
D) the marginal cost curve from d and above

Question 16

Table 9-1
 $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Total Cost } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Variable Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & \$ 1,000 & \$ 0 \
\hline 100 & 1,360 & 360 \
\hline 200 & 1,560 & 560 \
\hline 300 & 1,960 & 960 \
\hline 400 & 2,760 & 1,760 \
\hline 500 & 4,000 & 3,000 \
\hline 600 & 5,800 & 4,800 \
\hline
\end{array}$$ 
Table 9-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
-Refer to Table 9-1.Suppose the fixed cost of production rises by $500 and the price per unit is still $8.What happens to the firm's profit-maximizing output level?

Accepted Answer

A) It must fall. 
B) It must rise to offset the increased cost. 
C) It will remain the same. 
D) The firm will shut down. 
A) It must fall. 
B) It must rise to offset the increased cost. 
C) It will remain the same. 
D) The firm will shut down.

Question 17

Which of the following is not true for a firm in perfect competition?

Accepted Answer

A) Profit equals total revenue minus total cost. 
B) Price equals average revenue. 
C) Average revenue is greater than marginal revenue. 
D) Marginal revenue equals the change in total revenue from selling one more unit. 
A) Profit equals total revenue minus total cost. 
B) Price equals average revenue. 
C) Average revenue is greater than marginal revenue. 
D) Marginal revenue equals the change in total revenue from selling one more unit.

Question 18

When firms exit a perfectly competitive industry,the market supply curve shifts to the left.

Accepted Answer

A) True 
 B)False

Question 19

Article Summary
According to the Department of Agriculture, net farm income will grow to a record high of $120.6 billion in 2013, up from the previous high mark in 2011 and after adjusting for inflation, its second highest level since 1973.Net cash income, however, is expected to fall by 10 percent due to unsold inventories.Exports of chickens and milk are expected to rise by 3 percent and 17 percent, respectively.
Source: Ros Krasny, "Farm income poised for record 2013: USDA," Reuters, August 27, 2013.
-Refer to the Article Summary.All else equal,the increase in demand for chicken and milk exports will ________ the market prices for these exports and ________ economic profit in these markets.

Accepted Answer

A) increase; decrease 
B) decrease; increase 
C) increase; increase 
D) decrease; decrease 
A) increase; decrease 
B) decrease; increase 
C) increase; increase 
D) decrease; decrease

Question 20

Figure 9-7
   
Figure 9-7 illustrates the cost curves of a perfectly competitive firm.
-Refer to Figure 9-7.If the market price is P₂ the firm

Accepted Answer

A) will break even and produce a quantity of Q₂. 
B) will make a profit and produce a quantity of Q₂. 
C) will make a profit and produce a quantity of Q₁. 
D) will make a profit and produce a quantity of Q₃. 
A) will break even and produce a quantity of Q₂. 
B) will make a profit and produce a quantity of Q₂. 
C) will make a profit and produce a quantity of Q₁. 
D) will make a profit and produce a quantity of Q₃.

A perfectly competitive firm's supply curve is its

If,for the last unit of a good produced by a perfectly competitive firm,MR > MC,then in producing it,the firm

Why are individual buyers and sellers in perfect competition called price takers?

If the long-run average cost curve is U-shaped,the optimal scale of production from society's viewpoint is

In the short run,if a firm shuts down it avoids its variable cost but not its fixed cost.

A firm will break even when

If in a perfectly competitive industry,the market price facing a firm is below its average total cost but above average variable cost at the output where marginal cost equals marginal revenue

Figure 9-6 Figure 9-6 shows the demand, marginal cost (MC)and average total cost (ATC)curves for Jason's House of Apples. -Refer to Figure 9-6.Jason is currently producing 20 thousand pounds of apples.To maximize his profit Jason should

Which of the following is not a characteristic of a perfectly competitive market structure?

Figure 9-10 -Refer to Figure 9-10.The total cost at the profit-maximizing output level equals

Figure 9-9 Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 9-9.Identify the firm's short-run supply curve.

Which of the following is not true for a firm in perfect competition?

When firms exit a perfectly competitive industry,the market supply curve shifts to the left.

Figure 9-7 Figure 9-7 illustrates the cost curves of a perfectly competitive firm. -Refer to Figure 9-7.If the market price is P₂ the firm

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

A perfectly competitive firm's supply curve is its

If,for the last unit of a good produced by a perfectly competitive firm,MR > MC,then in producing it,the firm

Why are individual buyers and sellers in perfect competition called price takers?

If the long-run average cost curve is U-shaped,the optimal scale of production from society's viewpoint is

In the short run,if a firm shuts down it avoids its variable cost but not its fixed cost.

A firm will break even when

If in a perfectly competitive industry,the market price facing a firm is below its average total cost but above average variable cost at the output where marginal cost equals marginal revenue

Figure 9-6 Figure 9-6 shows the demand, marginal cost (MC)and average total cost (ATC)curves for Jason's House of Apples. -Refer to Figure 9-6.Jason is currently producing 20 thousand pounds of apples.To maximize his profit Jason should

Which of the following is not a characteristic of a perfectly competitive market structure?

Figure 9-10 -Refer to Figure 9-10.The total cost at the profit-maximizing output level equals

Figure 9-9 Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 9-9.Identify the firm's short-run supply curve.

Which of the following is not true for a firm in perfect competition?

When firms exit a perfectly competitive industry,the market supply curve shifts to the left.

Figure 9-7 Figure 9-7 illustrates the cost curves of a perfectly competitive firm. -Refer to Figure 9-7.If the market price is P₂ the firm

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