Question 1

Figure 12-10
  
-Refer to Figure 12-10.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 2

The short-run supply curve for a perfectly competitive firm is that part of the firm's marginal cost curve that lies above the minimum point of its average variable cost curve.

Accepted Answer

A) True 
 B)False

Question 3

Assume that the 4K and OLED television sets industry is perfectly competitive.Suppose a producer develops a successful innovation that enables it to lower its cost of production.What happens in the short run and in the long run?

Accepted Answer

A) Initially, the firm will be able to increase its profit significantly, but in the long run its profits will still be greater than zero but lower than its short-run profits because other firms would also innovate. 
B) The firm will probably incur losses temporarily because of the high cost of the innovation, but in the long run it will start earning positive profits. 
C) This firm will be able to earn above normal profits indefinitely if it obtains a patent for its innovation. 
D) The firm will be able to increase its economic profits temporarily, but in the long run its economic profits will be eliminated as other firms copy the innovation. 
A) Initially, the firm will be able to increase its profit significantly, but in the long run its profits will still be greater than zero but lower than its short-run profits because other firms would also innovate. 
B) The firm will probably incur losses temporarily because of the high cost of the innovation, but in the long run it will start earning positive profits. 
C) This firm will be able to earn above normal profits indefinitely if it obtains a patent for its innovation. 
D) The firm will be able to increase its economic profits temporarily, but in the long run its economic profits will be eliminated as other firms copy the innovation.

Question 4

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000.The fixed cost of production is $20,000.The price of each good is $10.Should the firm continue to produce in the short run?

Accepted Answer

A) No, it should shut down because it is making a loss. 
B) Yes, it should continue to produce because its price exceeds its average fixed cost. 
C) Yes, it should continue to produce because the firm's revenues cover the total variable cost of $16,000. 
D) There is insufficient information to answer the question. 
A) No, it should shut down because it is making a loss. 
B) Yes, it should continue to produce because its price exceeds its average fixed cost. 
C) Yes, it should continue to produce because the firm's revenues cover the total variable cost of $16,000. 
D) There is insufficient information to answer the question.

Question 5

For a perfectly competitive firm, which of the following is not true at profit maximization?

Accepted Answer

A) Market price is greater than marginal cost. 
B) Marginal revenue equals marginal cost. 
C) Total revenue minus total cost is maximized. 
D) Price equals marginal cost. 
A) Market price is greater than marginal cost. 
B) Marginal revenue equals marginal cost. 
C) Total revenue minus total cost is maximized. 
D) Price equals marginal cost.

Question 6

Figure 12-6
   
Figure 12-6 shows the demand, marginal cost (MC)and average total cost (ATC)curves for Jason's House of Apples.
-Refer to Figure 12-6.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 7

If, as a perfectly competitive industry expands, it can supply larger quantities at the same long-run market 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 8

What is meant by allocative efficiency? How does a perfectly competitive firm achieve allocative efficiency?

Accepted Answer

Allocative efficiency refers to a state

Question 9

Figure 12-3
  
-Refer to Figure 12-3.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.Identify the area that represents the loss.

Accepted Answer

A) P₂ deP₁ 
B) P₃cbP₁ 
C) P₃caP₀ 
D) 0P₁ bQ₁ 
A) P₂ deP₁ 
B) P₃cbP₁ 
C) P₃caP₀ 
D) 0P₁ bQ₁

Question 10

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.Max's explicit cost amounts to $3,000 per month more than his revenue.Should Max continue operating his business?

Accepted Answer

A) Max's explicit cost exceeds his total revenue. He should shut down his tattoo parlor. 
B) Max should continue to run the tattoo parlor until his lease runs out. 
C) If Max's marginal revenue is greater than or equal to his marginal cost, then he should stay in business. 
D) This cannot be determined without information on his revenue. 
A) Max's explicit cost exceeds his total revenue. He should shut down his tattoo parlor. 
B) Max should continue to run the tattoo parlor until his lease runs out. 
C) If Max's marginal revenue is greater than or equal to his marginal cost, then he should stay in business. 
D) This cannot be determined without information on his revenue.

Question 11

If firms do not earn economic profits in a competitive equilibrium, then why would the firms choose to stay in business?

Accepted Answer

When firms earn no economic profit but e

Question 12

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 13

Competition has driven the economic profits in the video rental business to zero.Surya Bacha, who owns a video rental business, would be better off leaving the industry for another alternative.

Accepted Answer

A) True 
 B)False

Question 14

Figure 12-11
  
-Refer to Figure 12-11.Suppose the prevailing price is $20 and the firm is currently producing 1,350 units.In the long-run equilibrium, the firm represented in the diagram

Accepted Answer

A) will continue to produce the same quantity. 
B) will reduce its output to 1,100 units. 
C) will reduce its output to 750 units. 
D) will cease to exist. 
A) will continue to produce the same quantity. 
B) will reduce its output to 1,100 units. 
C) will reduce its output to 750 units. 
D) will cease to exist.

Question 15

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 16

For a perfectly competitive firm, average revenue equals marginal cost at the profit-maximizing output.

Accepted Answer

A) True 
 B)False

Question 17

Figure 12-16
  
-Refer to Figure 12-16.Which panel best represents the perfectly competitive organic produce market's transition to the long run when some firms in the market are earning economic profits?

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 18

Some markets have many buyers and sellers but fall into the category of monopolistic competition rather than perfect competition.The most common reason for this is

Accepted Answer

A) there are high barriers to entering these markets. 
B) firms in these markets sell identical products. 
C) firms in these markets make high profits. 
D) firms in these markets do not sell identical products. 
A) there are high barriers to entering these markets. 
B) firms in these markets sell identical products. 
C) firms in these markets make high profits. 
D) firms in these markets do not sell identical products.

Question 19

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

Accepted Answer

They are called price takers b

Question 20

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.

Figure 12-10 -Refer to Figure 12-10.The total cost at the profit-maximizing output level equals

The short-run supply curve for a perfectly competitive firm is that part of the firm's marginal cost curve that lies above the minimum point of its average variable cost curve.

Assume that the 4K and OLED television sets industry is perfectly competitive.Suppose a producer develops a successful innovation that enables it to lower its cost of production.What happens in the short run and in the long run?

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000.The fixed cost of production is $20,000.The price of each good is $10.Should the firm continue to produce in the short run?

For a perfectly competitive firm, which of the following is not true at profit maximization?

Figure 12-6 Figure 12-6 shows the demand, marginal cost (MC)and average total cost (ATC)curves for Jason's House of Apples. -Refer to Figure 12-6.Which of the following statements is true?

If, as a perfectly competitive industry expands, it can supply larger quantities at the same long-run market price, it is

What is meant by allocative efficiency? How does a perfectly competitive firm achieve allocative efficiency?

Figure 12-3 -Refer to Figure 12-3.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.Identify the area that represents the loss.

If firms do not earn economic profits in a competitive equilibrium, then why would the firms choose to stay in business?

A constant-cost industry is an industry in which

Competition has driven the economic profits in the video rental business to zero.Surya Bacha, who owns a video rental business, would be better off leaving the industry for another alternative.

Figure 12-11 -Refer to Figure 12-11.Suppose the prevailing price is $20 and the firm is currently producing 1,350 units.In the long-run equilibrium, the firm represented in the diagram

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

For a perfectly competitive firm, average revenue equals marginal cost at the profit-maximizing output.

Figure 12-16 -Refer to Figure 12-16.Which panel best represents the perfectly competitive organic produce market's transition to the long run when some firms in the market are earning economic profits?

Some markets have many buyers and sellers but fall into the category of monopolistic competition rather than perfect competition.The most common reason for this is

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

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

Figure 12-10 -Refer to Figure 12-10.The total cost at the profit-maximizing output level equals

The short-run supply curve for a perfectly competitive firm is that part of the firm's marginal cost curve that lies above the minimum point of its average variable cost curve.

Assume that the 4K and OLED television sets industry is perfectly competitive.Suppose a producer develops a successful innovation that enables it to lower its cost of production.What happens in the short run and in the long run?

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000.The fixed cost of production is $20,000.The price of each good is $10.Should the firm continue to produce in the short run?

For a perfectly competitive firm, which of the following is not true at profit maximization?

Figure 12-6 Figure 12-6 shows the demand, marginal cost (MC)and average total cost (ATC)curves for Jason's House of Apples. -Refer to Figure 12-6.Which of the following statements is true?

If, as a perfectly competitive industry expands, it can supply larger quantities at the same long-run market price, it is

What is meant by allocative efficiency? How does a perfectly competitive firm achieve allocative efficiency?

Figure 12-3 -Refer to Figure 12-3.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.Identify the area that represents the loss.

If firms do not earn economic profits in a competitive equilibrium, then why would the firms choose to stay in business?

A constant-cost industry is an industry in which

Competition has driven the economic profits in the video rental business to zero.Surya Bacha, who owns a video rental business, would be better off leaving the industry for another alternative.

Figure 12-11 -Refer to Figure 12-11.Suppose the prevailing price is $20 and the firm is currently producing 1,350 units.In the long-run equilibrium, the firm represented in the diagram

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

For a perfectly competitive firm, average revenue equals marginal cost at the profit-maximizing output.

Figure 12-16 -Refer to Figure 12-16.Which panel best represents the perfectly competitive organic produce market's transition to the long run when some firms in the market are earning economic profits?

Some markets have many buyers and sellers but fall into the category of monopolistic competition rather than perfect competition.The most common reason for this is

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

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