Question 1

If a profit-maximizing firm in a perfectly competitive market is making an economic profit, then it must be producing a level of output where

Accepted Answer

A) price is greater than marginal cost. 
B) price is greater than marginal revenue. 
C) marginal cost is greater than marginal revenue. 
D) marginal cost is greater than average total cost. 
E) average total cost is greater than marginal cost. 
A) price is greater than marginal cost. 
B) price is greater than marginal revenue. 
C) marginal cost is greater than marginal revenue. 
D) marginal cost is greater than average total cost. 
E) average total cost is greater than marginal cost.

Question 2

A firm in a perfectly competitive industry is maximizing its economic profit by producing 500 units of output.At 500 units of output, which one of the following must be false?

Accepted Answer

A) MC  ATC 
D) MR  AVC 
A) MC  ATC 
D) MR  AVC

Question 3

A perfectly competitive firm is maximizing profit if

Accepted Answer

A) marginal cost equals price and price is not below minimum average variable cost. 
B) marginal cost equals price and price is not below minimum average fixed cost. 
C) total revenue is at a maximum. 
D) average variable cost is at a minimum. 
E) average total cost is at a minimum. 
A) marginal cost equals price and price is not below minimum average variable cost. 
B) marginal cost equals price and price is not below minimum average fixed cost. 
C) total revenue is at a maximum. 
D) average variable cost is at a minimum. 
E) average total cost is at a minimum.

Question 4

If a profit-maximizing firm in a perfectly competitive market is incurring an economic loss, then it must be producing a level of output where

Accepted Answer

A) price is greater than marginal cost. 
B) price is greater than marginal revenue. 
C) marginal cost is greater than marginal revenue. 
D) average total cost is greater than marginal cost. 
E) average total cost is less than marginal cost. 
A) price is greater than marginal cost. 
B) price is greater than marginal revenue. 
C) marginal cost is greater than marginal revenue. 
D) average total cost is greater than marginal cost. 
E) average total cost is less than marginal cost.

Question 5

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,

Accepted Answer

A) firms that remain in the market will expand production. 
B) market demand will increase. 
C) market supply will decrease. 
D) firms will exit the market. 
E) firms that remain in the market will decrease production. 
A) firms that remain in the market will expand production. 
B) market demand will increase. 
C) market supply will decrease. 
D) firms will exit the market. 
E) firms that remain in the market will decrease production.

Question 6

A price taker is a firm that

Accepted Answer

A) must lower its price if it wants to sell more output. 
B) sets the market price. 
C) cannot influence the market price. 
D) is incurring an economic loss. 
E) can raise its price if it lowers output. 
A) must lower its price if it wants to sell more output. 
B) sets the market price. 
C) cannot influence the market price. 
D) is incurring an economic loss. 
E) can raise its price if it lowers output.

Question 7

In a perfectly competitive market, which of the following increases the price that the firms charge in the short run?

Accepted Answer

A) an increase in the number of firms 
B) an increase in the price of a good that is a complement of the good produced in this market 
C) an increase in market supply 
D) a decrease in the price of a good that is a substitute for the good produced in this market 
E) an increase in market demand 
A) an increase in the number of firms 
B) an increase in the price of a good that is a complement of the good produced in this market 
C) an increase in market supply 
D) a decrease in the price of a good that is a substitute for the good produced in this market 
E) an increase in market demand

Question 8

In the price range below minimum average variable cost, a perfectly competitive firm's supply curve is

Accepted Answer

A) horizontal at the market price. 
B) vertical at zero output. 
C) the same as its marginal cost curve. 
D) the same as its average variable cost curve. 
E) the same as its total variable cost curve. 
A) horizontal at the market price. 
B) vertical at zero output. 
C) the same as its marginal cost curve. 
D) the same as its average variable cost curve. 
E) the same as its total variable cost curve.

Question 9

If a perfectly competitive firm's marginal revenue is less than its marginal cost, the firm

Accepted Answer

A) cannot increase its economic profit. 
B) must be making an economic profit. 
C) will decrease its output to increase economic profit. 
D) will increase its output to increase economic profit. 
E) must raise the price. 
A) cannot increase its economic profit. 
B) must be making an economic profit. 
C) will decrease its output to increase economic profit. 
D) will increase its output to increase economic profit. 
E) must raise the price.

Question 10

Use the figure below to answer the following question.
   
Figure 12.3.3
-Refer to Figure 12.3.3, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry.The firm is

Accepted Answer

A) making an economic profit. 
B) incurring an economic loss. 
C) breaking even. 
D) at its shutdown point. 
E) larger than the other firms in the industry. 
A) making an economic profit. 
B) incurring an economic loss. 
C) breaking even. 
D) at its shutdown point. 
E) larger than the other firms in the industry.

Question 11

Use the table below to answer the following questions.
Table 12.2.3
  
-Refer to Table 12.2.3, which gives the total cost schedule for Brenda's Balloon Shop, a perfectly competitive firm.Brenda's total fixed cost is

Accepted Answer

A) $3 an hour. 
B) $4 an hour. 
C) $7 an hour. 
D) $29 an hour. 
E) zero. 
A) $3 an hour. 
B) $4 an hour. 
C) $7 an hour. 
D) $29 an hour. 
E) zero.

Question 12

Choose the statement that is incorrect.

Accepted Answer

A) Resources are used efficiently when marginal social benefit equals marginal social cost. 
B) Competitive equilibrium achieves an efficient outcome. 
C) Competitive equilibrium maximizes the gains from trade. 
D) When firms in perfect competition are away from long-run equilibrium, either entry or exit is taking place and the market is still efficient. 
E) Producer surplus is maximized at the competitive equilibrium. 
A) Resources are used efficiently when marginal social benefit equals marginal social cost. 
B) Competitive equilibrium achieves an efficient outcome. 
C) Competitive equilibrium maximizes the gains from trade. 
D) When firms in perfect competition are away from long-run equilibrium, either entry or exit is taking place and the market is still efficient. 
E) Producer surplus is maximized at the competitive equilibrium.

Question 13

If a perfectly competitive firm is producing in the short run at an output where price is less than average total cost, the firm

Accepted Answer

A) will shut down. 
B) is breaking even. 
C) is still making a positive economic profit. 
D) is incurring an economic loss but will continue to operate as long as price is above minimum average fixed cost. 
E) is incurring an economic loss but will continue to operate as long as price is above minimum average variable cost. 
A) will shut down. 
B) is breaking even. 
C) is still making a positive economic profit. 
D) is incurring an economic loss but will continue to operate as long as price is above minimum average fixed cost. 
E) is incurring an economic loss but will continue to operate as long as price is above minimum average variable cost.

Question 14

Use the table below to answer the following questions.
Table 12.1.1
  
-Refer to Table 12.1.1 which gives the demand schedule for a perfectly competitive firm.If the quantity sold by the firm rises from 5 to 6, marginal revenue is

Accepted Answer

A) $15. 
B) $30. 
C) $75. 
D) $90. 
E) $105. 
A) $15. 
B) $30. 
C) $75. 
D) $90. 
E) $105.

Question 15

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.Each of these gas stations has little control over the price of gasoline because

Accepted Answer

A) the price of gasoline is determined by head office. 
B) lowering the price will eliminate competition and the government mandates that gasoline stations must have competition. 
C) if it raises its price, the station will lose customers. 
D) the price of gasoline is set according to the price of oil. 
E) the demand for gasoline is perfectly inelastic. 
A) the price of gasoline is determined by head office. 
B) lowering the price will eliminate competition and the government mandates that gasoline stations must have competition. 
C) if it raises its price, the station will lose customers. 
D) the price of gasoline is set according to the price of oil. 
E) the demand for gasoline is perfectly inelastic.

Question 16

Use the figure below to answer the following questions.
   
Figure 12.3.1
-Refer to Figure 12.3.1, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry.In the short run, if the market price of the good is $10, the firm produces ________ units of output and ________.

Accepted Answer

A) 10; incurs an economic loss of $20 
B) 10; incurs an economic loss of $40 
C) less than 10; incurs an economic loss of $20 
D) 10; makes an economic profit of $20 
E) less than 10; incurs an economic loss of less than $20 
A) 10; incurs an economic loss of $20 
B) 10; incurs an economic loss of $40 
C) less than 10; incurs an economic loss of $20 
D) 10; makes an economic profit of $20 
E) less than 10; incurs an economic loss of less than $20

Question 17

Use the table below to answer the following questions.
Table 12.2.3
  
-Refer to Table 12.2.3, which gives the total cost schedule for Brenda's Balloon Shop, a perfectly competitive firm.The marginal cost of increasing production from 4 balloons an hour to 5 balloons an hour is

Accepted Answer

A) $1.00. 
B) $4.50. 
C) $4.70. 
D) $4.80. 
E) $4.40. 
A) $1.00. 
B) $4.50. 
C) $4.70. 
D) $4.80. 
E) $4.40.

Question 18

Technological change

Accepted Answer

A) brings only temporary gains to producers. 
B) brings only temporary gains to consumers. 
C) brings permanent gains to producers. 
D) decreases the number of firms in an industry. 
E) decreases the number of consumers in a market. 
A) brings only temporary gains to producers. 
B) brings only temporary gains to consumers. 
C) brings permanent gains to producers. 
D) decreases the number of firms in an industry. 
E) decreases the number of consumers in a market.

Question 19

A decrease in demand brings all of the following except

Accepted Answer

A) a lower equilibrium price. 
B) economic losses in the short run. 
C) exit in the long run. 
D) a decrease in the equilibrium quantity. 
E) inefficiency. 
A) a lower equilibrium price. 
B) economic losses in the short run. 
C) exit in the long run. 
D) a decrease in the equilibrium quantity. 
E) inefficiency.

Question 20

In a perfectly competitive market, the short-run market supply curve is

Accepted Answer

A) the horizontal sum of the supply curves of all the individual firms. 
B) the vertical sum of the supply curves of all the individual firms. 
C) vertical at the total level of output being produced by all firms. 
D) horizontal at the current market price. 
E) upward sloping with a constant slope. 
A) the horizontal sum of the supply curves of all the individual firms. 
B) the vertical sum of the supply curves of all the individual firms. 
C) vertical at the total level of output being produced by all firms. 
D) horizontal at the current market price. 
E) upward sloping with a constant slope.

If a profit-maximizing firm in a perfectly competitive market is making an economic profit, then it must be producing a level of output where

A firm in a perfectly competitive industry is maximizing its economic profit by producing 500 units of output.At 500 units of output, which one of the following must be false?

A perfectly competitive firm is maximizing profit if

If a profit-maximizing firm in a perfectly competitive market is incurring an economic loss, then it must be producing a level of output where

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,

A price taker is a firm that

In a perfectly competitive market, which of the following increases the price that the firms charge in the short run?

In the price range below minimum average variable cost, a perfectly competitive firm's supply curve is

If a perfectly competitive firm's marginal revenue is less than its marginal cost, the firm

Use the figure below to answer the following question. Figure 12.3.3 -Refer to Figure 12.3.3, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry.The firm is

Use the table below to answer the following questions. Table 12.2.3 -Refer to Table 12.2.3, which gives the total cost schedule for Brenda's Balloon Shop, a perfectly competitive firm.Brenda's total fixed cost is

Choose the statement that is incorrect.

If a perfectly competitive firm is producing in the short run at an output where price is less than average total cost, the firm

Use the table below to answer the following questions. Table 12.1.1 -Refer to Table 12.1.1 which gives the demand schedule for a perfectly competitive firm.If the quantity sold by the firm rises from 5 to 6, marginal revenue is

Use the figure below to answer the following questions. Figure 12.3.1 -Refer to Figure 12.3.1, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry.In the short run, if the market price of the good is $10, the firm produces units of output and .

Use the table below to answer the following questions. Table 12.2.3 -Refer to Table 12.2.3, which gives the total cost schedule for Brenda's Balloon Shop, a perfectly competitive firm.The marginal cost of increasing production from 4 balloons an hour to 5 balloons an hour is

Technological change

A decrease in demand brings all of the following except

In a perfectly competitive market, the short-run market supply curve is

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

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Exam 12: Perfect Competition

If a profit-maximizing firm in a perfectly competitive market is making an economic profit, then it must be producing a level of output where

A firm in a perfectly competitive industry is maximizing its economic profit by producing 500 units of output.At 500 units of output, which one of the following must be false?

A perfectly competitive firm is maximizing profit if

If a profit-maximizing firm in a perfectly competitive market is incurring an economic loss, then it must be producing a level of output where

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,

A price taker is a firm that

In a perfectly competitive market, which of the following increases the price that the firms charge in the short run?

In the price range below minimum average variable cost, a perfectly competitive firm's supply curve is

If a perfectly competitive firm's marginal revenue is less than its marginal cost, the firm

Use the figure below to answer the following question. Figure 12.3.3 -Refer to Figure 12.3.3, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry.The firm is

Use the table below to answer the following questions. Table 12.2.3 -Refer to Table 12.2.3, which gives the total cost schedule for Brenda's Balloon Shop, a perfectly competitive firm.Brenda's total fixed cost is

Choose the statement that is incorrect.

If a perfectly competitive firm is producing in the short run at an output where price is less than average total cost, the firm

Use the table below to answer the following questions. Table 12.1.1 -Refer to Table 12.1.1 which gives the demand schedule for a perfectly competitive firm.If the quantity sold by the firm rises from 5 to 6, marginal revenue is

Use the table below to answer the following questions. Table 12.2.3 -Refer to Table 12.2.3, which gives the total cost schedule for Brenda's Balloon Shop, a perfectly competitive firm.The marginal cost of increasing production from 4 balloons an hour to 5 balloons an hour is

Technological change

A decrease in demand brings all of the following except

In a perfectly competitive market, the short-run market supply curve is

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