Question 1

The demand curve for an individual seller's product in perfect competition is

Accepted Answer

A) the same as market demand. 
B) downward sloping. 
C) vertical. 
D) horizontal. 
A) the same as market demand. 
B) downward sloping. 
C) vertical. 
D) horizontal.

Question 2

In an increasing-cost industry the long-run supply curve is upward sloping.

Accepted Answer

A) True 
 B)False

Question 3

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost,the firm

Accepted Answer

A) is earning a profit. 
B) should shut down. 
C) is incurring a loss. 
D) is breaking even. 
A) is earning a profit. 
B) should shut down. 
C) is incurring a loss. 
D) is breaking even.

Question 4

Fill in the columns in the following table and use the values in the table to determine the profit-maximizing level of output.
 $$\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Total } \
\text { Revenue } \
\text { (RR) }
\end{array} & \begin{array} { c } 
\text { Tatal } \
\text { Cast } \
\text { (TC) }
\end{array} & \text { Prafit } & \begin{array} { c } 
\text { Mar ginal } \
\text { Revenue } \
\text { (MR) }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Cast (MC) }
\end{array} \
\hline 0 & 0 & 3 & & & \
\hline 1 & 5 & 5 & & & \
\hline 2 & 10 & 6 & & & \
\hline 3 & 15 & 8 & & & \
\hline 4 & 20 & 11 & & & \
\hline 5 & 25 & 15 & & & \
\hline 6 & 30 & 21 & & & \
\hline 7 & 35 & 30 & & & \
\hline 8 & 40 & 42 & & & \
\hline 9 & 45 & 60 & & & \
\hline 10 & 50 & 85 & & & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | c | c | c | r | c |

Question 5

Being a price-taker,a perfectly competitive firm cannot receive a producer surplus in the short run.

Accepted Answer

A) True 
 B)False

Question 6

A perfectly competitive firm's marginal revenue curve is downward sloping.

Accepted Answer

A) True 
 B)False

Question 7

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.Which of the following statements is true?

Accepted Answer

A) Jason should produce where MC equals $3 (point d)where he will minimize his losses. 
B) Jason should produce where the distance between MC and his demand curve is greatest (point b). 
C) Jason cannot earn a profit from selling any number of apples. 
D) Jason should produce where MC equals $3 (point d)where he will maximize his profit. 
A) Jason should produce where MC equals $3 (point d)where he will minimize his losses. 
B) Jason should produce where the distance between MC and his demand curve is greatest (point b). 
C) Jason cannot earn a profit from selling any number of apples. 
D) Jason should produce where MC equals $3 (point d)where he will maximize his profit.

Question 8

Which of the following statements is correct?

Accepted Answer

A) Economic profit takes into account all costs involved in producing a product. 
B) Accounting profit is not relevant in preparing the firm's financial statement. 
C) Economic profit always exceeds accounting profit. 
D) Accounting profit is the same as economic profit. 
A) Economic profit takes into account all costs involved in producing a product. 
B) Accounting profit is not relevant in preparing the firm's financial statement. 
C) Economic profit always exceeds accounting profit. 
D) Accounting profit is the same as economic profit.

Question 9

All of the following can be used to compute average profit except

Accepted Answer

A) marginal profit minus marginal cost. 
B) total profit divided by quantity. 
C) average revenue minus average total cost 
D) price minus average total cost. 
A) marginal profit minus marginal cost. 
B) total profit divided by quantity. 
C) average revenue minus average total cost 
D) price minus average total cost.

Question 10

Maximizing average profit is equivalent to maximizing total profit.

Accepted Answer

A) True 
 B)False

Question 11

If a firm shuts down in the short run

Accepted Answer

A) its loss equals zero. 
B) its loss equals its fixed cost. 
C) is makes zero economic profit. 
D) its total revenue is not large enough to cover its fixed cost. 
A) its loss equals zero. 
B) its loss equals its fixed cost. 
C) is makes zero economic profit. 
D) its total revenue is not large enough to cover its fixed cost.

Question 12

In the long run,a perfectly competitive market will

Accepted Answer

A) produce only the quantity of output that yields a long-run profit for the typical firm. 
B) supply whatever amount consumers will buy at a price which earns the market an economic profit. 
C) supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve. 
D) generate a long-run equilibrium where the typical firm operates at a loss. 
A) produce only the quantity of output that yields a long-run profit for the typical firm. 
B) supply whatever amount consumers will buy at a price which earns the market an economic profit. 
C) supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve. 
D) generate a long-run equilibrium where the typical firm operates at a loss.

Question 13

Which of the following is a characteristic of an oligopolistic market structure?

Accepted Answer

A) There are few dominant sellers. 
B) Each firm sells a unique product. 
C) It is easy for new firms to enter the industry. 
D) Each firm need not react to the actions of rivals. 
A) There are few dominant sellers. 
B) Each firm sells a unique product. 
C) It is easy for new firms to enter the industry. 
D) Each firm need not react to the actions of rivals.

Question 14

Figure 9-15
  
-Refer to Figure 9-15.Suppose a typical firm in a perfectly competitive market is earning economic profits in the short run.Which of the diagrams in the figure depicts what happens to in the industry as it transitions to along 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 15

Figure 9-14
  
-Refer to Figure 9-14.Consider a typical firm in a perfectly competitive industry which is incurring short-run losses.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 16

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 P₁

Accepted Answer

A) The firm will experience a loss and raise its price to P₂.The firm will then break even. 
B) The firm will break even by producing a quantity of Q₂. 
C) The firm will experience a loss since price is less than ATC. 
D) The firm may make a profit if it can increase the demand for its product. 
A) The firm will experience a loss and raise its price to P₂.The firm will then break even. 
B) The firm will break even by producing a quantity of Q₂. 
C) The firm will experience a loss since price is less than ATC. 
D) The firm may make a profit if it can increase the demand for its product.

Question 17

Both buyers and sellers are price takers in a perfectly competitive market because

Accepted Answer

A) the price is determined by government intervention and dictated to buyers and sellers. 
B) each buyer and seller knows it is illegal to conspire to affect price. 
C) both buyers and sellers in a perfectly competitive market are concerned for the welfare of others. 
D) each buyer and seller is too small relative to others to independently affect the market price. 
A) the price is determined by government intervention and dictated to buyers and sellers. 
B) each buyer and seller knows it is illegal to conspire to affect price. 
C) both buyers and sellers in a perfectly competitive market are concerned for the welfare of others. 
D) each buyer and seller is too small relative to others to independently affect the market price.

Question 18

In August 2008,Ethan Nicholas developed the iShoot application for the apple iPhone 3G,and within five months had earned $800,000 from this program.By May 2009,Nicholas had dropped the price from $4.99 to $1.99 in an attempt to maintain sales.This example indicates that in a competitive market

Accepted Answer

A) earning an economic profit in the long run is extremely easy. 
B) earning an economic profit in the long run is extremely difficult. 
C) it is impossible to earn an economic profit in either the short run or the long run. 
D) economic profits are only earned in the long run. 
A) earning an economic profit in the long run is extremely easy. 
B) earning an economic profit in the long run is extremely difficult. 
C) it is impossible to earn an economic profit in either the short run or the long run. 
D) economic profits are only earned in the long run.

Question 19

When plasma television sets were first introduced prices were high and few firms were in the market.Later,economic profits attracted new firms and the price of plasma televisions fell.This example illustrates

Accepted Answer

A) a decreasing-cost industry. 
B) that consumers receive this new technology "free of charge" in the sense that they only have to pay a price for plasma televisions equal to the lowest production cost. 
C) an industry with a low minimum efficient scale. 
D) how fickle consumer demands are. 
A) a decreasing-cost industry. 
B) that consumers receive this new technology "free of charge" in the sense that they only have to pay a price for plasma televisions equal to the lowest production cost. 
C) an industry with a low minimum efficient scale. 
D) how fickle consumer demands are.

Question 20

New York Times writer Michael Lewis wrote that "The sad truth,for investors,seems to be that most of the benefits....are passed through to consumers free of charge." To which of the following did Lewis refer?

Accepted Answer

A) apple farming in New York State 
B) the Enron accounting scandal 
C) the medical screening industry 
D) new technologies developed in the 1990s 
A) apple farming in New York State 
B) the Enron accounting scandal 
C) the medical screening industry 
D) new technologies developed in the 1990s

The demand curve for an individual seller's product in perfect competition is

In an increasing-cost industry the long-run supply curve is upward sloping.

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost,the firm

Being a price-taker,a perfectly competitive firm cannot receive a producer surplus in the short run.

A perfectly competitive firm's marginal revenue curve is downward sloping.

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.Which of the following statements is true?

Which of the following statements is correct?

All of the following can be used to compute average profit except

Maximizing average profit is equivalent to maximizing total profit.

If a firm shuts down in the short run

In the long run,a perfectly competitive market will

Which of the following is a characteristic of an oligopolistic market structure?

Figure 9-15 -Refer to Figure 9-15.Suppose a typical firm in a perfectly competitive market is earning economic profits in the short run.Which of the diagrams in the figure depicts what happens to in the industry as it transitions to along run equilibrium?

Figure 9-14 -Refer to Figure 9-14.Consider a typical firm in a perfectly competitive industry which is incurring short-run losses.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

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 P₁

Both buyers and sellers are price takers in a perfectly competitive market because

In August 2008,Ethan Nicholas developed the iShoot application for the apple iPhone 3G,and within five months had earned $800,000 from this program.By May 2009,Nicholas had dropped the price from $4.99 to $1.99 in an attempt to maintain sales.This example indicates that in a competitive market

When plasma television sets were first introduced prices were high and few firms were in the market.Later,economic profits attracted new firms and the price of plasma televisions fell.This example illustrates

New York Times writer Michael Lewis wrote that "The sad truth,for investors,seems to be that most of the benefits....are passed through to consumers free of charge." To which of the following did Lewis refer?

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

Exam 9: Firms in Perfectly Competitive Markets

The demand curve for an individual seller's product in perfect competition is

In an increasing-cost industry the long-run supply curve is upward sloping.

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost,the firm

Being a price-taker,a perfectly competitive firm cannot receive a producer surplus in the short run.

A perfectly competitive firm's marginal revenue curve is downward sloping.

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.Which of the following statements is true?

Which of the following statements is correct?

All of the following can be used to compute average profit except

Maximizing average profit is equivalent to maximizing total profit.

If a firm shuts down in the short run

In the long run,a perfectly competitive market will

Which of the following is a characteristic of an oligopolistic market structure?

Figure 9-15 -Refer to Figure 9-15.Suppose a typical firm in a perfectly competitive market is earning economic profits in the short run.Which of the diagrams in the figure depicts what happens to in the industry as it transitions to along run equilibrium?

Figure 9-14 -Refer to Figure 9-14.Consider a typical firm in a perfectly competitive industry which is incurring short-run losses.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

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 P₁

Both buyers and sellers are price takers in a perfectly competitive market because

In August 2008,Ethan Nicholas developed the iShoot application for the apple iPhone 3G,and within five months had earned $800,000 from this program.By May 2009,Nicholas had dropped the price from $4.99 to $1.99 in an attempt to maintain sales.This example indicates that in a competitive market

When plasma television sets were first introduced prices were high and few firms were in the market.Later,economic profits attracted new firms and the price of plasma televisions fell.This example illustrates

New York Times writer Michael Lewis wrote that "The sad truth,for investors,seems to be that most of the benefits....are passed through to consumers free of charge." To which of the following did Lewis refer?

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