Question 1

An individual seller in perfect competition will not sell at a price lower than the market price because

Accepted Answer

A) demand for the product will exceed supply. 
B) the seller would start a price war. 
C) the seller can sell any quantity she wants at the prevailing market price. 
D) demand is perfectly inelastic. 
A) demand for the product will exceed supply. 
B) the seller would start a price war. 
C) the seller can sell any quantity she wants at the prevailing market price. 
D) demand is perfectly inelastic.

Question 2

Table 12-1
   
Table 12-1 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 12-1.If the market price of each camera case is $8 and the firm maximizes profit, what is the amount of the firm's profit or loss?

Accepted Answer

A) $0 (it breaks even) 
B) loss of $1,000 
C) profit of $440 
D) loss of $440 
A) $0 (it breaks even) 
B) loss of $1,000 
C) profit of $440 
D) loss of $440

Question 3

Assuming a market price of $4, fill in the columns in the following table.What is the profit-maximizing level of production? What are the two ways to determine the profit-maximizing level of production?

Accepted Answer

@#IMG-DLM& The profit-maximizing level of producti

Question 4

Figure 12-15
  
-Refer to Figure 12-15.Assume that the medical screening industry is perfectly competitive and that some firms are 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.Which of the diagrams in the figure best describes what happens in the industry?

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 5

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 6

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

Accepted Answer

A) Restaurants do not sell identical products. 
B) Restaurants compete in small market areas-neighborhoods and cities-rather than in regional or national markets. Therefore, restaurants are not small relative to their market size. 
C) Restaurants usually have entry barriers in the form of zoning restrictions and health regulations. 
D) Restaurants have significant liability costs that perfectly competitive firms do not have; for example, customers may sue if they suffer from food poisoning. 
A) Restaurants do not sell identical products. 
B) Restaurants compete in small market areas-neighborhoods and cities-rather than in regional or national markets. Therefore, restaurants are not small relative to their market size. 
C) Restaurants usually have entry barriers in the form of zoning restrictions and health regulations. 
D) Restaurants have significant liability costs that perfectly competitive firms do not have; for example, customers may sue if they suffer from food poisoning.

Question 7

Table 12-2
   
Table 12-2 lists the various pounds (lbs.)of apples that Margie Stattler can sell. Assume that Margie operates in a perfectly competitive market.
-Refer to Table 12-2.How many pounds of apples should Margie sell to maximize her profit?

Accepted Answer

A) 300 pounds 
B) 400 pounds 
C) This cannot be determined without knowing Margie's total or marginal production costs. 
D) This can be determined only when all of the values for market price, total revenue, average revenue and marginal revenue are given. 
A) 300 pounds 
B) 400 pounds 
C) This cannot be determined without knowing Margie's total or marginal production costs. 
D) This can be determined only when all of the values for market price, total revenue, average revenue and marginal revenue are given.

Question 8

A perfectly competitive firm's marginal revenue

Accepted Answer

A) is greater than its price. 
B) is less than price because a firm must lower its price to sell more. 
C) is equal to its price. 
D) may be either greater or less than its price, depending on the quantity sold. 
A) is greater than its price. 
B) is less than price because a firm must lower its price to sell more. 
C) is equal to its price. 
D) may be either greater or less than its price, depending on the quantity sold.

Question 9

Assume that the tuna fishing industry is perfectly competitive.Which of the following best characterizes the industry if, as demand for tuna increases, fishing boats have to go farther into the ocean to harvest tuna?

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 10

The long-run supply curve for a perfectly competitive, constant-cost industry

Accepted Answer

A) is upward-sloping. 
B) is horizontal. 
C) is downward-sloping. 
D) is found by adding up the marginal cost curves for all firms in the industry. 
A) is upward-sloping. 
B) is horizontal. 
C) is downward-sloping. 
D) is found by adding up the marginal cost curves for all firms in the industry.

Question 11

Figure 12-4
   
Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
-Refer to Figure 12-4.What is the amount of its total fixed cost?

Accepted Answer

A) $1,080 
B) $1,440 
C) $2,520 
D) It cannot be determined. 
A) $1,080 
B) $1,440 
C) $2,520 
D) It cannot be determined.

Question 12

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 13

Fill in the columns in the following table and use the values in the table to determine the profit-maximizing level of output.

Accepted Answer

@#IMG-DLM& The profit-maximizi

Question 14

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 15

Ben's Peanut Shoppe suffers a short-run loss.Ben will not choose to shut down if

Accepted Answer

A) his Peanut Shoppe's total revenue exceeds his fixed cost. 
B) his Peanut Shoppe's total revenue exceeds his variable cost. 
C) his Peanut Shoppe's total revenue exceeds his implicit costs. 
D) his Peanut Shoppe's total revenue exceeds his capital costs. 
A) his Peanut Shoppe's total revenue exceeds his fixed cost. 
B) his Peanut Shoppe's total revenue exceeds his variable cost. 
C) his Peanut Shoppe's total revenue exceeds his implicit costs. 
D) his Peanut Shoppe's total revenue exceeds his capital costs.

Question 16

If, for a perfectly competitive firm, price exceeds the marginal cost of production, the firm should

Accepted Answer

A) increase its output. 
B) reduce its output. 
C) keep output constant and enjoy the above normal profit. 
D) lower the price. 
A) increase its output. 
B) reduce its output. 
C) keep output constant and enjoy the above normal profit. 
D) lower the price.

Question 17

For a given quantity, the total profit of a perfectly competitive firm is equal to the vertical distance between the firm's total revenue curve and its total cost curve.

Accepted Answer

A) True 
 B)False

Question 18

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 19

Firms that are price takers

Accepted Answer

A) must lower their prices to increase sales. 
B) are able to sell a fixed quantity of output at the market price. 
C) can raise their prices as a result of a successful advertising campaign. 
D) are able to sell all their output at the market price. 
A) must lower their prices to increase sales. 
B) are able to sell a fixed quantity of output at the market price. 
C) can raise their prices as a result of a successful advertising campaign. 
D) are able to sell all their output at the market price.

Question 20

Table 12-1
   
Table 12-1 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 12-1.If the market price of each camera case is $8, what is the firm's total revenue when the profit-maximizing quantity is found at the output where MR = MC?

Accepted Answer

A) $2,400 
B) $3,200 
C) $4,000 
D) $4,800 
A) $2,400 
B) $3,200 
C) $4,000 
D) $4,800

An individual seller in perfect competition will not sell at a price lower than the market price because

Assuming a market price of $4, fill in the columns in the following table.What is the profit-maximizing level of production? What are the two ways to determine the profit-maximizing level of production?

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

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

Table 12-2 Table 12-2 lists the various pounds (lbs.)of apples that Margie Stattler can sell. Assume that Margie operates in a perfectly competitive market. -Refer to Table 12-2.How many pounds of apples should Margie sell to maximize her profit?

A perfectly competitive firm's marginal revenue

Assume that the tuna fishing industry is perfectly competitive.Which of the following best characterizes the industry if, as demand for tuna increases, fishing boats have to go farther into the ocean to harvest tuna?

The long-run supply curve for a perfectly competitive, constant-cost industry

Figure 12-4 Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. -Refer to Figure 12-4.What is the amount of its total fixed cost?

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

Fill in the columns in the following table and use the values in the table to determine the profit-maximizing level of output.

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.

Ben's Peanut Shoppe suffers a short-run loss.Ben will not choose to shut down if

If, for a perfectly competitive firm, price exceeds the marginal cost of production, the firm should

For a given quantity, the total profit of a perfectly competitive firm is equal to the vertical distance between the firm's total revenue curve and its total cost curve.

What is productive efficiency?

Firms that are price takers

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

An individual seller in perfect competition will not sell at a price lower than the market price because

Assuming a market price of $4, fill in the columns in the following table.What is the profit-maximizing level of production? What are the two ways to determine the profit-maximizing level of production?

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

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

Table 12-2 Table 12-2 lists the various pounds (lbs.)of apples that Margie Stattler can sell. Assume that Margie operates in a perfectly competitive market. -Refer to Table 12-2.How many pounds of apples should Margie sell to maximize her profit?

A perfectly competitive firm's marginal revenue

Assume that the tuna fishing industry is perfectly competitive.Which of the following best characterizes the industry if, as demand for tuna increases, fishing boats have to go farther into the ocean to harvest tuna?

The long-run supply curve for a perfectly competitive, constant-cost industry

Figure 12-4 Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. -Refer to Figure 12-4.What is the amount of its total fixed cost?

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

Fill in the columns in the following table and use the values in the table to determine the profit-maximizing level of output.

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.

Ben's Peanut Shoppe suffers a short-run loss.Ben will not choose to shut down if

If, for a perfectly competitive firm, price exceeds the marginal cost of production, the firm should

For a given quantity, the total profit of a perfectly competitive firm is equal to the vertical distance between the firm's total revenue curve and its total cost curve.

What is productive efficiency?

Firms that are price takers

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