Question 1

A firm maximizes profit by producing the output at which marginal cost equals

Accepted Answer

A) marginal revenue. 
B) minimum average total cost. 
C) minimum average variable cost. 
D) average fixed cost. 
E) total revenue. 
A) marginal revenue. 
B) minimum average total cost. 
C) minimum average variable cost. 
D) average fixed cost. 
E) total revenue.

Question 2

When a perfectly competitive market is in long-run equilibrium,

Accepted Answer

A) at least one firm makes an economic profit. 
B) all firms make zero economic profit. 
C) firms enter the market if other firms are making an economic profit. 
D) firms exit the market if other firms are incurring an economic loss. 
E) marginal revenue equals minimum average variable cost. 
A) at least one firm makes an economic profit. 
B) all firms make zero economic profit. 
C) firms enter the market if other firms are making an economic profit. 
D) firms exit the market if other firms are incurring an economic loss. 
E) marginal revenue equals minimum average variable cost.

Question 3

Use the figure below to answer the following question.
   
Figure 12.4.4
-Refer to Figure 12.4.4, which shows the cost curves for a perfectly competitive firm.If all firms in the market have the same cost curves and the price is $16 per unit,

Accepted Answer

A) the market is in long-run equilibrium. 
B) in the long run, firms will leave this market. 
C) in the long run, the price will fall as new firms enter the market. 
D) the firm is making zero economic profit. 
E) none of the above 
A) the market is in long-run equilibrium. 
B) in the long run, firms will leave this market. 
C) in the long run, the price will fall as new firms enter the market. 
D) the firm is making zero economic profit. 
E) none of the above

Question 4

Use the figure below to answer the following questions.
   
Figure 12.4.2
-Refer to Figure 12.4.2, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run, market

Accepted Answer

A) demand will increase. 
B) demand will decrease. 
C) supply will increase. 
D) supply will decrease. 
E) supply and market demand will decrease. 
A) demand will increase. 
B) demand will decrease. 
C) supply will increase. 
D) supply will decrease. 
E) supply and market demand will decrease.

Question 5

The market for maple syrup is perfectly competitive.Suppose that the market is in long-run equilibrium when the market demand for maple syrup increases.All of the following occur except

Accepted Answer

A) in the long run, firms make an economic profit. 
B) the price rises in the short run. 
C) the equilibrium quantity increases. 
D) in the short run, existing firms make an economic profit. 
E) the number of firms in the long run is greater than the number of firms in the short run. 
A) in the long run, firms make an economic profit. 
B) the price rises in the short run. 
C) the equilibrium quantity increases. 
D) in the short run, existing firms make an economic profit. 
E) the number of firms in the long run is greater than the number of firms in the short run.

Question 6

A perfectly competitive market is in short-run equilibrium with price below average total cost.Which one of the following is not a prediction of the long-run consequences of such a situation?

Accepted Answer

A) Price will rise. 
B) Market output will increase. 
C) Firms will exit the market. 
D) The output of each existing firm will increase. 
E) Economic profit will be zero. 
A) Price will rise. 
B) Market output will increase. 
C) Firms will exit the market. 
D) The output of each existing firm will increase. 
E) Economic profit will be zero.

Question 7

Use the table below to answer the following questions.
Table 12.2.5
  
-Refer to Table 12.2.5.Archibald's Tattoos is a perfectly competitive firm.The firm's total costs are shown in the table.The price at Archibald's shut-down point is

Accepted Answer

A) $10.00. 
B) $15.00. 
C) $12.50. 
D) $13.33. 
E) $17.00. 
A) $10.00. 
B) $15.00. 
C) $12.50. 
D) $13.33. 
E) $17.00.

Question 8

Homer's Holesome Donuts has determined that its profit-maximizing quantity is 10,000 donuts per year.Homer's total revenue from the sale of donuts is $12,000 a year.Homer's costs are $16,000 in annual rental payments for its five-year lease on its store and $5,000 for ingredients.Should Homer's exit the market in the long run?

Accepted Answer

A) Yes, because Homer's is incurring an economic loss. 
B) Yes, because all costs are fixed in the long run. 
C) No, because Homer's is covering its variable costs. 
D) No, because Homer's is covering its fixed costs. 
E) No, because all costs are variable in the long run. 
A) Yes, because Homer's is incurring an economic loss. 
B) Yes, because all costs are fixed in the long run. 
C) No, because Homer's is covering its variable costs. 
D) No, because Homer's is covering its fixed costs. 
E) No, because all costs are variable in the long run.

Question 9

In which one of the following situations will a perfectly competitive firm incur an economic loss?

Accepted Answer

A) MR > AVC 
B) MR > ATC 
C) ATC  MR 
E) MC > AVC 
A) MR > AVC 
B) MR > ATC 
C) ATC  MR 
E) MC > AVC

Question 10

Use the table below to answer the following questions.
Table 12.2.1
  
-Refer to Table 12.2.1, which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.The marginal revenue received from the sale of the 4th unit of output is

Accepted Answer

A) $3. 
B) $15. 
C) $10. 
D) $120. 
E) $30. 
A) $3. 
B) $15. 
C) $10. 
D) $120. 
E) $30.

Question 11

A firm will shut down temporarily when the price is so low that total revenue is insufficient to cover the

Accepted Answer

A) total cost of production. 
B) total variable cost of production. 
C) total fixed cost of production. 
D) marginal cost of production. 
E) average variable cost of production. 
A) total cost of production. 
B) total variable cost of production. 
C) total fixed cost of production. 
D) marginal cost of production. 
E) average variable cost of production.

Question 12

A perfectly competitive firm's supply curve includes its marginal cost curve at all prices above minimum

Accepted Answer

A) average total cost. 
B) average fixed cost. 
C) total cost. 
D) average variable cost. 
E) total variable cost. 
A) average total cost. 
B) average fixed cost. 
C) total cost. 
D) average variable cost. 
E) total variable cost.

Question 13

Use the figure below to answer the following questions.
   
Figure 12.2.2
-Refer to Figure 12.2.2, which shows a perfectly competitive firm's economic profit and loss.The firm is incurring a loss at

Accepted Answer

A) point A. 
B) point B. 
C) point C. 
D) point D. 
E) both points B and D. 
A) point A. 
B) point B. 
C) point C. 
D) point D. 
E) both points B and D.

Question 14

In a perfectly competitive market, a technological advance brings ________ economic profit for producers and ________ lower prices for consumers.

Accepted Answer

A) temporary; temporary 
B) permanent; permanent 
C) permanent; temporary 
D) temporary; permanent 
E) negative; permanent 
A) temporary; temporary 
B) permanent; permanent 
C) permanent; temporary 
D) temporary; permanent 
E) negative; permanent

Question 15

The slope of a perfectly competitive firm's demand curve is

Accepted Answer

A) infinity. 
B) zero. 
C) 1. 
D) greater than 1. 
E) negative. 
A) infinity. 
B) zero. 
C) 1. 
D) greater than 1. 
E) negative.

Question 16

All of the following statements are true except

Accepted Answer

A) consumers allocate their budgets to get the most value possible. 
B) we derive a consumer's demand curve by finding how the best budget allocation changes as the price of a good changes. 
C) firms get the most value out of their resources at every point along a consumer's demand curve. 
D) a competitive equilibrium achieves an efficient outcome. 
E) when firms in perfect competition are away from the long-run equilibrium, the market is still efficient. 
A) consumers allocate their budgets to get the most value possible. 
B) we derive a consumer's demand curve by finding how the best budget allocation changes as the price of a good changes. 
C) firms get the most value out of their resources at every point along a consumer's demand curve. 
D) a competitive equilibrium achieves an efficient outcome. 
E) when firms in perfect competition are away from the long-run equilibrium, the market is still efficient.

Question 17

Which one of the following does not occur in the long run when firms in a market make an economic profit?

Accepted Answer

A) Firms enter the market. 
B) The market supply curve shifts rightward. 
C) Each firm increases production. 
D) Economic profit of each firm decreases. 
E) Market price falls. 
A) Firms enter the market. 
B) The market supply curve shifts rightward. 
C) Each firm increases production. 
D) Economic profit of each firm decreases. 
E) Market price falls.

Question 18

Use the information below to answer the following questions.
Fact 12.1.1 Money in the Bank
Two gas stations stand on opposite sides of the road: Rutter's Farm Store and Sheetz gas station. Rutter's doesn't even have to look across the highway to know when Sheetz changes its price for gas. When Sheetz raises the price, Rutter's pumps are busy. When Sheetz lowers prices, there's not a car in sight. Both gas stations survive but each has no control over the price.
Source: The Mining Journal, May 24, 2008
-Refer to Fact 12.1.1.The price of gasoline is determined by ________.The marginal revenue from gasoline equals ________.

Accepted Answer

A) the quantity of gasoline that Rutter's and Sheetz sells; average variable cost 
B) the number of tourists who drive by Rutter's and Sheetz; average fixed cost 
C) the other goods and services that Rutter's and Sheetz sell; average total cost 
D) market demand and market supply; price 
E) the price elasticity of demand of gasoline; the change in total revenue that occurs when the price of a litre of gasoline rises by an incremental amount 
A) the quantity of gasoline that Rutter's and Sheetz sells; average variable cost 
B) the number of tourists who drive by Rutter's and Sheetz; average fixed cost 
C) the other goods and services that Rutter's and Sheetz sell; average total cost 
D) market demand and market supply; price 
E) the price elasticity of demand of gasoline; the change in total revenue that occurs when the price of a litre of gasoline rises by an incremental amount

Question 19

Use the table below to answer the following questions.
Table 12.2.1
  
-Refer to Table 12.2.1, which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.If the firm produces 3 units of output, it will

Accepted Answer

A) make an economic profit of $4. 
B) make an economic profit of $90. 
C) incur an economic loss of $4. 
D) break even. 
E) incur an economic loss of $86. 
A) make an economic profit of $4. 
B) make an economic profit of $90. 
C) incur an economic loss of $4. 
D) break even. 
E) incur an economic loss of $86.

Question 20

Firms in a perfectly competitive industry are in long-run equilibrium.A new technology becomes available that lowers production costs.Choose the statement that is incorrect.

Accepted Answer

A) The first firms to use the new technology make an economic profit. 
B) As more firms begin to use the new technology, market supply increases. 
C) Firms that use the old technology incur economic losses. 
D) Old technology firms exit the market. 
E) In the long run, price is equal to average variable cost. 
A) The first firms to use the new technology make an economic profit. 
B) As more firms begin to use the new technology, market supply increases. 
C) Firms that use the old technology incur economic losses. 
D) Old technology firms exit the market. 
E) In the long run, price is equal to average variable cost.

A firm maximizes profit by producing the output at which marginal cost equals

When a perfectly competitive market is in long-run equilibrium,

Use the figure below to answer the following question. Figure 12.4.4 -Refer to Figure 12.4.4, which shows the cost curves for a perfectly competitive firm.If all firms in the market have the same cost curves and the price is $16 per unit,

Use the figure below to answer the following questions. Figure 12.4.2 -Refer to Figure 12.4.2, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run, market

The market for maple syrup is perfectly competitive.Suppose that the market is in long-run equilibrium when the market demand for maple syrup increases.All of the following occur except

A perfectly competitive market is in short-run equilibrium with price below average total cost.Which one of the following is not a prediction of the long-run consequences of such a situation?

Use the table below to answer the following questions. Table 12.2.5 -Refer to Table 12.2.5.Archibald's Tattoos is a perfectly competitive firm.The firm's total costs are shown in the table.The price at Archibald's shut-down point is

In which one of the following situations will a perfectly competitive firm incur an economic loss?

Use the table below to answer the following questions. Table 12.2.1 -Refer to Table 12.2.1, which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.The marginal revenue received from the sale of the 4th unit of output is

A firm will shut down temporarily when the price is so low that total revenue is insufficient to cover the

A perfectly competitive firm's supply curve includes its marginal cost curve at all prices above minimum

Use the figure below to answer the following questions. Figure 12.2.2 -Refer to Figure 12.2.2, which shows a perfectly competitive firm's economic profit and loss.The firm is incurring a loss at

In a perfectly competitive market, a technological advance brings economic profit for producers and lower prices for consumers.

The slope of a perfectly competitive firm's demand curve is

All of the following statements are true except

Which one of the following does not occur in the long run when firms in a market make an economic profit?

Use the table below to answer the following questions. Table 12.2.1 -Refer to Table 12.2.1, which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.If the firm produces 3 units of output, it will

Firms in a perfectly competitive industry are in long-run equilibrium.A new technology becomes available that lowers production costs.Choose the statement that is incorrect.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Filters

Exam 12: Perfect Competition

A firm maximizes profit by producing the output at which marginal cost equals

When a perfectly competitive market is in long-run equilibrium,

Use the figure below to answer the following question. Figure 12.4.4 -Refer to Figure 12.4.4, which shows the cost curves for a perfectly competitive firm.If all firms in the market have the same cost curves and the price is $16 per unit,

Use the figure below to answer the following questions. Figure 12.4.2 -Refer to Figure 12.4.2, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run, market

The market for maple syrup is perfectly competitive.Suppose that the market is in long-run equilibrium when the market demand for maple syrup increases.All of the following occur except

A perfectly competitive market is in short-run equilibrium with price below average total cost.Which one of the following is not a prediction of the long-run consequences of such a situation?

Use the table below to answer the following questions. Table 12.2.5 -Refer to Table 12.2.5.Archibald's Tattoos is a perfectly competitive firm.The firm's total costs are shown in the table.The price at Archibald's shut-down point is

In which one of the following situations will a perfectly competitive firm incur an economic loss?

Use the table below to answer the following questions. Table 12.2.1 -Refer to Table 12.2.1, which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.The marginal revenue received from the sale of the 4th unit of output is

A firm will shut down temporarily when the price is so low that total revenue is insufficient to cover the

A perfectly competitive firm's supply curve includes its marginal cost curve at all prices above minimum

Use the figure below to answer the following questions. Figure 12.2.2 -Refer to Figure 12.2.2, which shows a perfectly competitive firm's economic profit and loss.The firm is incurring a loss at

In a perfectly competitive market, a technological advance brings ________ economic profit for producers and ________ lower prices for consumers.

The slope of a perfectly competitive firm's demand curve is

All of the following statements are true except

Which one of the following does not occur in the long run when firms in a market make an economic profit?

Use the table below to answer the following questions. Table 12.2.1 -Refer to Table 12.2.1, which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.If the firm produces 3 units of output, it will

Firms in a perfectly competitive industry are in long-run equilibrium.A new technology becomes available that lowers production costs.Choose the statement that is incorrect.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Filters

In a perfectly competitive market, a technological advance brings economic profit for producers and lower prices for consumers.