Question 1

Figure 9-2
  
-Refer to Figure 9-2.What happens if the firm produces more than Q₄ units?

Accepted Answer

A) Its profit increases. 
B) It makes a loss. 
C) Its total revenue is increasing faster than its total cost. 
D) It could make a profit or a loss depending on what happens to demand. 
A) Its profit increases. 
B) It makes a loss. 
C) Its total revenue is increasing faster than its total cost. 
D) It could make a profit or a loss depending on what happens to demand.

Question 2

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 short-run shut down point for the firm.

Accepted Answer

A) a 
B) b 
C) c 
D) d 
A) a 
B) b 
C) c 
D) d

Question 3

If the market price is $40,the average revenue of selling five units is

Accepted Answer

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

Question 4

In perfect competition

Accepted Answer

A)  the market demand curve and the individual's demand are identical. 
B) the market demand curve is perfectly inelastic while demand for an individual seller's product is perfectly elastic. 
C) the market demand curve is perfectly elastic while demand for an individual seller's product is perfectly inelastic. 
D) the market demand curve is downward sloping while demand for an individual seller's product is perfectly elastic. 
A)  the market demand curve and the individual's demand are identical. 
B) the market demand curve is perfectly inelastic while demand for an individual seller's product is perfectly elastic. 
C) the market demand curve is perfectly elastic while demand for an individual seller's product is perfectly inelastic. 
D) the market demand curve is downward sloping while demand for an individual seller's product is perfectly elastic.

Question 5

In the long run,a firm in a perfectly competitive industry will supply output only if its total revenue covers its

Accepted Answer

A) explicit plus its implicit costs. 
B) fixed costs. 
C) implicit costs. 
D) explicit costs. 
A) explicit plus its implicit costs. 
B) fixed costs. 
C) implicit costs. 
D) explicit costs.

Question 6

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.If the market price of each camera case is $8,what is the firm's total revenue?

Accepted Answer

A) $2,400 
B) $3,200 
C) $4000 
D) $4,800 
A) $2,400 
B) $3,200 
C) $4000 
D) $4,800

Question 7

The market demand curve in a perfectly competitive market is downward-sloping.

Accepted Answer

A) True 
 B)False

Question 8

What characteristic of a competitive market has made the "long run pretty short" in the market for iPhone applications?

Accepted Answer

A) few firms in the market 
B) identical products 
C) ease of entry 
D) blocked entry 
A) few firms in the market 
B) identical products 
C) ease of entry 
D) blocked entry

Question 9

A constant-cost industry is an industry in which

Accepted Answer

A) average costs fall as the industry expands output. 
B) average costs rise as the industry expands output. 
C) average costs remain constant as the industry expands output. 
D) input prices rise at a constant rate as firms in the industry use more inputs. 
A) average costs fall as the industry expands output. 
B) average costs rise as the industry expands output. 
C) average costs remain constant as the industry expands output. 
D) input prices rise at a constant rate as firms in the industry use more inputs.

Question 10

If a typical firm in a perfectly competitive industry is incurring losses,then

Accepted Answer

A) all firms will continue to lose money. 
B) some firms will exit in the long run, causing market supply to decrease and market price to rise increasing profits for the remaining firms. 
C) some firms will exit in the long run, causing market supply to decrease and market price to fall increasing losses for the remaining firms. 
D) some firms will enter in the long run, causing market supply to increase and market price to rise increasing profit for all firms. 
A) all firms will continue to lose money. 
B) some firms will exit in the long run, causing market supply to decrease and market price to rise increasing profits for the remaining firms. 
C) some firms will exit in the long run, causing market supply to decrease and market price to fall increasing losses for the remaining firms. 
D) some firms will enter in the long run, causing market supply to increase and market price to rise increasing profit for all firms.

Question 11

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 figure shows the cost structure of a firm in a perfectly competitive market.If the firm's fixed cost increases by $1,000 due to a new environmental regulation,what happens to its profit-maximizing output level?

Accepted Answer

A) It increases. 
B) It decreases. 
C) It remains the same. 
D) It could increase, decrease or remain constant, depending on whether the firm is able to cut costs somewhere else. 
A) It increases. 
B) It decreases. 
C) It remains the same. 
D) It could increase, decrease or remain constant, depending on whether the firm is able to cut costs somewhere else.

Question 12

Figure 9-2
  
-Refer to Figure 9-2.The firm breaks even at an output level of

Accepted Answer

A) Q₁ units. 
B) Q₂ units. 
C) Q₃ units. 
D) Q₄ units. 
A) Q₁ units. 
B) Q₂ units. 
C) Q₃ units. 
D) Q₄ units.

Question 13

To maximize profit,a perfectly competitive firm

Accepted Answer

A) should sell the quantity of output determined by the interaction between industry demand and supply. 
B) should sell the quantity of output that results in a value for total revenue that is equal to total cost. 
C) should produce the quantity of output that results in the greatest difference between total revenue and total cost. 
D) should produce the quantity of output that results in the greatest difference between marginal revenue and marginal cost. 
A) should sell the quantity of output determined by the interaction between industry demand and supply. 
B) should sell the quantity of output that results in a value for total revenue that is equal to total cost. 
C) should produce the quantity of output that results in the greatest difference between total revenue and total cost. 
D) should produce the quantity of output that results in the greatest difference between marginal revenue and marginal cost.

Question 14

Which of the following describes a situation in which a good or service is produced at the lowest possible cost?

Accepted Answer

A) productive efficiency 
B) allocative efficiency 
C) marginal efficiency 
D) profit maximization 
A) productive efficiency 
B) allocative efficiency 
C) marginal efficiency 
D) profit maximization

Question 15

Ted's Pancake Kitchen suffers a short-run loss.When should Ted decide to shut down rather than continue to produce?

Accepted Answer

A) if his Kitchen's revenue is less than its variable costs 
B) if his Kitchen's revenue is less than its fixed costs 
C) if his Kitchen's revenue is less than its explicit costs 
D) if his Kitchen's revenue is less than its total costs 
A) if his Kitchen's revenue is less than its variable costs 
B) if his Kitchen's revenue is less than its fixed costs 
C) if his Kitchen's revenue is less than its explicit costs 
D) if his Kitchen's revenue is less than its total costs

Question 16

Assume that the medical screening industry is perfectly competitive.Consider a typical firm that is making short-run losses.Suppose the medical screening industry runs an effective advertising campaign which convinces a large number of people that yearly CT scans are critical for good health.How will this affect a typical firm that remains in the industry?

Accepted Answer

A) The firm's supply curve shifts right and its marginal revenue curve shifts upwards as the market price rises and ultimately the firm starts making profits. 
B) The firm's marginal revenue curve and average cost curve shift upwards in response to the increase in market price and advertising expenditure.The firm increases output until it starts breaking even. 
C) The marginal revenue curve shifts upwards, the firm's output increases along its marginal cost curve, it expands production and eventually starts making profits. 
D) The marginal revenue curve shifts upwards, the firm's output increases along its marginal cost curve, it expands production until it breaks even. 
A) The firm's supply curve shifts right and its marginal revenue curve shifts upwards as the market price rises and ultimately the firm starts making profits. 
B) The firm's marginal revenue curve and average cost curve shift upwards in response to the increase in market price and advertising expenditure.The firm increases output until it starts breaking even. 
C) The marginal revenue curve shifts upwards, the firm's output increases along its marginal cost curve, it expands production and eventually starts making profits. 
D) The marginal revenue curve shifts upwards, the firm's output increases along its marginal cost curve, it expands production until it breaks even.

Question 17

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit,then

Accepted Answer

A) marginal revenue is less than price. 
B) average total cost is at a minimum. 
C) total revenue equals total cost. 
D) price exceeds average total cost. 
A) marginal revenue is less than price. 
B) average total cost is at a minimum. 
C) total revenue equals total cost. 
D) price exceeds average total cost.

Question 18

Assume that firms in a perfectly competitive market are earning economic profits.Which of the following statements describes the change in market price and output as a result of the entry of new firms into this market?

Accepted Answer

A) The market demand curve shifts to the right, causing price to rise and market output to increase. 
B) The market demand curve shifts to the left, causing price to fall and market output to decrease. 
C) The short-run market supply curve shifts to the right, causing price to fall and total market output to increase. 
D) The short-run market supply curve shifts to the left, causing price to rise and total market output to decrease. 
A) The market demand curve shifts to the right, causing price to rise and market output to increase. 
B) The market demand curve shifts to the left, causing price to fall and market output to decrease. 
C) The short-run market supply curve shifts to the right, causing price to fall and total market output to increase. 
D) The short-run market supply curve shifts to the left, causing price to rise and total market output to decrease.

Question 19

The minimum point on the average variable cost curve is called the loss-minimizing point.

Accepted Answer

A) True 
 B)False

Question 20

The price of a seller's product in perfect competition is determined by

Accepted Answer

A) the individual seller. 
B) a few of the sellers. 
C) market demand and market supply. 
D) the individual demander. 
A) the individual seller. 
B) a few of the sellers. 
C) market demand and market supply. 
D) the individual demander.

Figure 9-2 -Refer to Figure 9-2.What happens if the firm produces more than Q₄ units?

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 short-run shut down point for the firm.

If the market price is $40,the average revenue of selling five units is

In perfect competition

In the long run,a firm in a perfectly competitive industry will supply output only if its total revenue covers its

The market demand curve in a perfectly competitive market is downward-sloping.

What characteristic of a competitive market has made the "long run pretty short" in the market for iPhone applications?

A constant-cost industry is an industry in which

If a typical firm in a perfectly competitive industry is incurring losses,then

Figure 9-2 -Refer to Figure 9-2.The firm breaks even at an output level of

To maximize profit,a perfectly competitive firm

Which of the following describes a situation in which a good or service is produced at the lowest possible cost?

Ted's Pancake Kitchen suffers a short-run loss.When should Ted decide to shut down rather than continue to produce?

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit,then

Assume that firms in a perfectly competitive market are earning economic profits.Which of the following statements describes the change in market price and output as a result of the entry of new firms into this market?

The minimum point on the average variable cost curve is called the loss-minimizing point.

The price of a seller's product in perfect competition is determined by

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

Figure 9-2 -Refer to Figure 9-2.What happens if the firm produces more than Q₄ units?

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 short-run shut down point for the firm.

If the market price is $40,the average revenue of selling five units is

In perfect competition

In the long run,a firm in a perfectly competitive industry will supply output only if its total revenue covers its

The market demand curve in a perfectly competitive market is downward-sloping.

What characteristic of a competitive market has made the "long run pretty short" in the market for iPhone applications?

A constant-cost industry is an industry in which

If a typical firm in a perfectly competitive industry is incurring losses,then

Figure 9-2 -Refer to Figure 9-2.The firm breaks even at an output level of

To maximize profit,a perfectly competitive firm

Which of the following describes a situation in which a good or service is produced at the lowest possible cost?

Ted's Pancake Kitchen suffers a short-run loss.When should Ted decide to shut down rather than continue to produce?

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit,then

Assume that firms in a perfectly competitive market are earning economic profits.Which of the following statements describes the change in market price and output as a result of the entry of new firms into this market?

The minimum point on the average variable cost curve is called the loss-minimizing point.

The price of a seller's product in perfect competition is determined by

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