Question 1

A perfectly competitive industry achieves allocative efficiency when

Accepted Answer

A) goods and services are produced at the lowest possible cost. 
B) goods and services are produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it. 
C) it produces where market price equals marginal production cost. 
D) firms carry production surpluses. 
A) goods and services are produced at the lowest possible cost. 
B) goods and services are produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it. 
C) it produces where market price equals marginal production cost. 
D) firms carry production surpluses.

Question 2

A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000.The price of each bushel is $50.Calculate the firm's short-run profit or loss.

Accepted Answer

A) loss of $14,000 
B) profit of $14,000 
C) profit of $50,000 
D) There is insufficient information to answer the question. 
A) loss of $14,000 
B) profit of $14,000 
C) profit of $50,000 
D) There is insufficient information to answer the question.

Question 3

A perfectly competitive firm's short-run supply curve is

Accepted Answer

A) upward sloping and is the portion of the marginal cost curve that lies above the average total cost curve. 
B) upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve. 
C) perfectly elastic at the market price. 
D) horizontal at the minimum average total cost. 
A) upward sloping and is the portion of the marginal cost curve that lies above the average total cost curve. 
B) upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve. 
C) perfectly elastic at the market price. 
D) horizontal at the minimum average total cost.

Question 4

When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell

Accepted Answer

A) the output where marginal revenue equals marginal cost. 
B) any positive output the entrepreneur decides upon because all of it can be sold. 
C) nothing at all; the firm shuts down. 
D) the output where average total cost equals price. 
A) the output where marginal revenue equals marginal cost. 
B) any positive output the entrepreneur decides upon because all of it can be sold. 
C) nothing at all; the firm shuts down. 
D) the output where average total cost equals price.

Question 5

In the long run, the entry of new firms in an industry

Accepted Answer

A) harms consumers by forcing prices up above the level of average cost 
B) benefits consumers by forcing prices down to the level of total cost. 
C) harms consumers by forcing prices up above the level of total cost 
D) benefits consumers by forcing prices down to the level of average cost. 
A) harms consumers by forcing prices up above the level of average cost 
B) benefits consumers by forcing prices down to the level of total cost. 
C) harms consumers by forcing prices up above the level of total cost 
D) benefits consumers by forcing prices down to the level of average cost.

Question 6

Figure 12-7
   
Figure 12-7 illustrates the cost curves of a perfectly competitive firm.
-Refer to Figure 12-7.If the market price is P₃, the firm

Accepted Answer

A) will break even. 
B) will make a profit. 
C) will earn enough revenue to cover its variable costs but not its fixed costs. 
D) will produce a quantity of Q₁. 
A) will break even. 
B) will make a profit. 
C) will earn enough revenue to cover its variable costs but not its fixed costs. 
D) will produce a quantity of Q₁.

Question 7

If in the long run a firm makes zero economic profit, it should exit the industry.

Accepted Answer

A) True 
 B)False

Question 8

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

Accepted Answer

A) implicit costs. 
B) capital costs. 
C) nonmonetary opportunity costs. 
D) sunk costs. 
A) implicit costs. 
B) capital costs. 
C) nonmonetary opportunity costs. 
D) sunk costs.

Question 9

In a graph with output on the horizontal axis and total revenue on the vertical axis, what is the shape of the total revenue curve for a perfectly competitive seller?

Accepted Answer

A) U-shaped 
B) inverted U-shaped 
C) a horizontal line 
D) a ray from the origin 
A) U-shaped 
B) inverted U-shaped 
C) a horizontal line 
D) a ray from the origin

Question 10

Figure 12-5
   
Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 12-5.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 11

Figure 12-8
  
-Refer to Figure 12-8.Suppose the firm produces 4,000 units.What does the shaded area labeled A represent?

Accepted Answer

A) total variable cost 
B) profit 
C) total fixed cost 
D) total revenue 
A) total variable cost 
B) profit 
C) total fixed cost 
D) total revenue

Question 12

The delivery of first-class mail by the U.S.Postal Service is an example of

Accepted Answer

A) a monopoly. 
B) perfect competition because consumers have access to other methods of written communication, for example, email and text messaging. 
C) monopolistic competition because mail delivery is a differentiated product provided by many firms. 
D) an oligopoly because a few other firms provide delivery of letters and packages. 
A) a monopoly. 
B) perfect competition because consumers have access to other methods of written communication, for example, email and text messaging. 
C) monopolistic competition because mail delivery is a differentiated product provided by many firms. 
D) an oligopoly because a few other firms provide delivery of letters and packages.

Question 13

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

Accepted Answer

A) firms are breaking even. 
B) new firms are attracted to the industry. 
C) existing firms will exit the industry. 
D) market supply will remain constant. 
A) firms are breaking even. 
B) new firms are attracted to the industry. 
C) existing firms will exit the industry. 
D) market supply will remain constant.

Question 14

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 15

For a perfectly competitive firm, at profit maximization,

Accepted Answer

A) market price exceeds marginal cost. 
B) total revenue is maximized. 
C) marginal revenue equals marginal cost. 
D) production must occur where average cost is minimized. 
A) market price exceeds marginal cost. 
B) total revenue is maximized. 
C) marginal revenue equals marginal cost. 
D) production must occur where average cost is minimized.

Question 16

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 17

Figure 12-8
  
-Refer to Figure 12-8.Suppose the market price is $120.Which of the following is true?

Accepted Answer

A) The firm earns a profit equal to the area A. 
B) The firm earns a profit equal to the area A + B. 
C) The firm suffers a loss equal to the area A. 
D) The firm will break even. 
A) The firm earns a profit equal to the area A. 
B) The firm earns a profit equal to the area A + B. 
C) The firm suffers a loss equal to the area A. 
D) The firm will break even.

Question 18

Figure 12-16
  
-Refer to Figure 12-16.Which panel best represents the perfectly competitive organic produce market in which some firms are experiencing short-run losses, and consumers are displaying an increased preference for organic produce?

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 19

Figure 12-9
   
Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9.At price P₄, the firm would produce

Accepted Answer

A) Q₃ units. 
B) Q₄ units. 
C) Q₅ units. 
D) Q₆ units. 
A) Q₃ units. 
B) Q₄ units. 
C) Q₅ units. 
D) Q₆ units.

Question 20

Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney.The lease has five years remaining and requires a monthly payment of $4,000.The lease

Accepted Answer

A) is a fixed cost of operating the tattoo parlor. 
B) is a variable cost of operating the tattoo parlor. 
C) is an implicit cost of operating the tattoo parlor. 
D) is part of the marginal cost of operating the tattoo parlor. 
A) is a fixed cost of operating the tattoo parlor. 
B) is a variable cost of operating the tattoo parlor. 
C) is an implicit cost of operating the tattoo parlor. 
D) is part of the marginal cost of operating the tattoo parlor.

A perfectly competitive industry achieves allocative efficiency when

A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000.The price of each bushel is $50.Calculate the firm's short-run profit or loss.

A perfectly competitive firm's short-run supply curve is

When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell

In the long run, the entry of new firms in an industry

Figure 12-7 Figure 12-7 illustrates the cost curves of a perfectly competitive firm. -Refer to Figure 12-7.If the market price is P₃, the firm

If in the long run a firm makes zero economic profit, it should exit the industry.

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

In a graph with output on the horizontal axis and total revenue on the vertical axis, what is the shape of the total revenue curve for a perfectly competitive seller?

Figure 12-8 -Refer to Figure 12-8.Suppose the firm produces 4,000 units.What does the shaded area labeled A represent?

The delivery of first-class mail by the U.S.Postal Service is an example of

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

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

For a perfectly competitive firm, at profit maximization,

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

Figure 12-8 -Refer to Figure 12-8.Suppose the market price is $120.Which of the following is true?

Figure 12-16 -Refer to Figure 12-16.Which panel best represents the perfectly competitive organic produce market in which some firms are experiencing short-run losses, and consumers are displaying an increased preference for organic produce?

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₄, the firm would produce

Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney.The lease has five years remaining and requires a monthly payment of $4,000.The lease

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters

Exam 12: Firms in Perfectly Competitive Markets

A perfectly competitive industry achieves allocative efficiency when

A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000.The price of each bushel is $50.Calculate the firm's short-run profit or loss.

A perfectly competitive firm's short-run supply curve is

When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell

In the long run, the entry of new firms in an industry

Figure 12-7 Figure 12-7 illustrates the cost curves of a perfectly competitive firm. -Refer to Figure 12-7.If the market price is P₃, the firm

If in the long run a firm makes zero economic profit, it should exit the industry.

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

In a graph with output on the horizontal axis and total revenue on the vertical axis, what is the shape of the total revenue curve for a perfectly competitive seller?

Figure 12-8 -Refer to Figure 12-8.Suppose the firm produces 4,000 units.What does the shaded area labeled A represent?

The delivery of first-class mail by the U.S.Postal Service is an example of

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

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

For a perfectly competitive firm, at profit maximization,

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

Figure 12-8 -Refer to Figure 12-8.Suppose the market price is $120.Which of the following is true?

Figure 12-16 -Refer to Figure 12-16.Which panel best represents the perfectly competitive organic produce market in which some firms are experiencing short-run losses, and consumers are displaying an increased preference for organic produce?

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₄, the firm would produce

Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney.The lease has five years remaining and requires a monthly payment of $4,000.The lease

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Monopolistic Competition: the Competitive Model in a

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters