Question 1

If price is equal to average variable cost, then a perfectly competitive firm breaks even.

Accepted Answer

A) True 
 B)False

Question 2

Figure 12-1
  
-Refer to Figure 12-1.If the firm is producing 700 units,

Accepted Answer

A) it is making a profit. 
B) it is incurring a loss. 
C) it should cut back its output to maximize profit. 
D) it should increase its output to maximize profit. 
A) it is making a profit. 
B) it is incurring a loss. 
C) it should cut back its output to maximize profit. 
D) it should increase its output to maximize profit.

Question 3

If total revenue exceeds fixed cost, a firm

Accepted Answer

A) should produce in the short run. 
B) has covered its variable cost. 
C) is making short-run profits. 
D) may or may not produce in the short run, depending on whether total revenue covers variable cost. 
A) should produce in the short run. 
B) has covered its variable cost. 
C) is making short-run profits. 
D) may or may not produce in the short run, depending on whether total revenue covers variable cost.

Question 4

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.If the prevailing market price is $48, the number of firms and the industry's output will decrease in the long run.

Accepted Answer

A) True 
 B)False

Question 5

Suppose there are economies of scale in the production of a specialized memory chip that is used in manufacturing microwaves.This suggests that the microwave industry is a decreasing-cost industry.

Accepted Answer

A) True 
 B)False

Question 6

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 7

In the short run, a firm that incurs losses might choose to produce rather than shut down if the amount of its revenue is less than its fixed cost.

Accepted Answer

A) True 
 B)False

Question 8

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.If Jason maximizes his profit he will produce the output level indicated by point ________ and his average profit will equal ________.

Accepted Answer

A) d; $3 minus ATC at point d 
B) b; $3 minus ATC at point b 
C) e; $3 minus ATC at point e 
D) a; $3 
A) d; $3 minus ATC at point d 
B) b; $3 minus ATC at point b 
C) e; $3 minus ATC at point e 
D) a; $3

Question 9

A perfectly competitive firm in long-run equilibrium produces output at the lowest possible average total cost.

Accepted Answer

A) True 
 B)False

Question 10

After an increase in demand in a constant-cost industry, firms will find themselves with higher average cost curves.

Accepted Answer

A) True 
 B)False

Question 11

In the short run, a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

Accepted Answer

A) True 
 B)False

Question 12

Marginal revenue is

Accepted Answer

A) total revenue divided by the total quantity of output. 
B) the change in profit divided by the change in the quantity of output. 
C) the change in total revenue divided by the change in total cost. 
D) the change in total revenue divided by the change in the quantity of output. 
A) total revenue divided by the total quantity of output. 
B) the change in profit divided by the change in the quantity of output. 
C) the change in total revenue divided by the change in total cost. 
D) the change in total revenue divided by the change in the quantity of output.

Question 13

A wheat farmer and a firm in a perfectly competitive market are similar in that

Accepted Answer

A) both face vertical demand curves. 
B) both have to lower their prices if a rival firm lowers its price. 
C) both face horizontal demand curves. 
D) both will earn an economic profit if their total revenue equals their total cost. 
A) both face vertical demand curves. 
B) both have to lower their prices if a rival firm lowers its price. 
C) both face horizontal demand curves. 
D) both will earn an economic profit if their total revenue equals their total cost.

Question 14

Perfectly competitive industries tend to produce low-priced, low-technology products.

Accepted Answer

A) True 
 B)False

Question 15

What is always true at the quantity where a firm's average total cost equals average revenue?

Accepted Answer

A) The firm's revenue is maximized. 
B) The firm's profit is maximized. 
C) The firm breaks even. 
D) Marginal cost equals marginal revenue. 
A) The firm's revenue is maximized. 
B) The firm's profit is maximized. 
C) The firm breaks even. 
D) Marginal cost equals marginal revenue.

Question 16

In long-run competitive equilibrium, the perfectly competitive firm produces where price equals minimum average total cost.
a.What is this efficiency criterion called?
b.How does it benefit consumers?

Accepted Answer

a.Productive efficiency
b.Productive eff

Question 17

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Accepted Answer

A) True 
 B)False

Question 18

An industry's long-run supply curve shows

Accepted Answer

A) the relationship in the long run between market price and quantity supplied. 
B) how the government determines the price of the product. 
C) how average productivity is changing. 
D) greater than normal profit. 
A) the relationship in the long run between market price and quantity supplied. 
B) how the government determines the price of the product. 
C) how average productivity is changing. 
D) greater than normal profit.

Question 19

Under what conditions should a competitive firm shut down in the short run?

Accepted Answer

When market price is below ave

Question 20

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.What is Margie's total revenue if she sells 250 pounds of apples?

Accepted Answer

A) $250 
B) $500 
C) $750 
D) There is not enough information in the table to determine Margie's total revenue. 
A) $250 
B) $500 
C) $750 
D) There is not enough information in the table to determine Margie's total revenue.

If price is equal to average variable cost, then a perfectly competitive firm breaks even.

Figure 12-1 -Refer to Figure 12-1.If the firm is producing 700 units,

If total revenue exceeds fixed cost, a firm

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.If the prevailing market price is $48, the number of firms and the industry's output will decrease in the long run.

Suppose there are economies of scale in the production of a specialized memory chip that is used in manufacturing microwaves.This suggests that the microwave industry is a decreasing-cost industry.

If a firm shuts down in the short run,

In the short run, a firm that incurs losses might choose to produce rather than shut down if the amount of its revenue is less than its fixed cost.

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.If Jason maximizes his profit he will produce the output level indicated by point and his average profit will equal .

A perfectly competitive firm in long-run equilibrium produces output at the lowest possible average total cost.

After an increase in demand in a constant-cost industry, firms will find themselves with higher average cost curves.

In the short run, a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

Marginal revenue is

A wheat farmer and a firm in a perfectly competitive market are similar in that

Perfectly competitive industries tend to produce low-priced, low-technology products.

What is always true at the quantity where a firm's average total cost equals average revenue?

In long-run competitive equilibrium, the perfectly competitive firm produces where price equals minimum average total cost. a.What is this efficiency criterion called? b.How does it benefit consumers?

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

An industry's long-run supply curve shows

Under what conditions should a competitive firm shut down in the short run?

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.What is Margie's total revenue if she sells 250 pounds of apples?

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

If price is equal to average variable cost, then a perfectly competitive firm breaks even.

Figure 12-1 -Refer to Figure 12-1.If the firm is producing 700 units,

If total revenue exceeds fixed cost, a firm

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.If the prevailing market price is $48, the number of firms and the industry's output will decrease in the long run.

Suppose there are economies of scale in the production of a specialized memory chip that is used in manufacturing microwaves.This suggests that the microwave industry is a decreasing-cost industry.

If a firm shuts down in the short run,

In the short run, a firm that incurs losses might choose to produce rather than shut down if the amount of its revenue is less than its fixed cost.

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.If Jason maximizes his profit he will produce the output level indicated by point ________ and his average profit will equal ________.

A perfectly competitive firm in long-run equilibrium produces output at the lowest possible average total cost.

After an increase in demand in a constant-cost industry, firms will find themselves with higher average cost curves.

In the short run, a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

Marginal revenue is

A wheat farmer and a firm in a perfectly competitive market are similar in that

Perfectly competitive industries tend to produce low-priced, low-technology products.

What is always true at the quantity where a firm's average total cost equals average revenue?

In long-run competitive equilibrium, the perfectly competitive firm produces where price equals minimum average total cost. a.What is this efficiency criterion called? b.How does it benefit consumers?

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

An industry's long-run supply curve shows

Under what conditions should a competitive firm shut down in the short run?

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.What is Margie's total revenue if she sells 250 pounds of apples?

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

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.If Jason maximizes his profit he will produce the output level indicated by point and his average profit will equal .