Question 1

In the short run, a firm in a perfectly competitive market

Accepted Answer

A) can make an economic profit, incur an economic loss, or break even. 
B) always makes an economic profit. 
C) chooses the price that maximizes its economic profit. 
D) chooses the price that minimizes its marginal cost. 
E) shuts down if it incurs an economic loss. 
A) can make an economic profit, incur an economic loss, or break even. 
B) always makes an economic profit. 
C) chooses the price that maximizes its economic profit. 
D) chooses the price that minimizes its marginal cost. 
E) shuts down if it incurs an economic loss.

Question 2

A firm is producing the profit-maximizing amount of output when it is producing where its ________ curve intersects its ________ curve.

Accepted Answer

A) marginal cost; average total cost 
B) marginal cost; average variable cost 
C) marginal cost; marginal revenue 
D) average total cost; average variable cost 
E) total cost; total revenue 
A) marginal cost; average total cost 
B) marginal cost; average variable cost 
C) marginal cost; marginal revenue 
D) average total cost; average variable cost 
E) total cost; total revenue

Question 3

In which one of the following situations will a perfectly competitive firm make an economic profit?

Accepted Answer

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

Question 4

In a perfectly competitive market, a firm maximizes its profit by producing the quantity of output at which

Accepted Answer

A) market price equals average fixed cost. 
B) market price equals marginal cost. 
C) average variable cost equals average fixed cost. 
D) market price equals minimum average variable cost. 
E) market price equals marginal revenue. 
A) market price equals average fixed cost. 
B) market price equals marginal cost. 
C) average variable cost equals average fixed cost. 
D) market price equals minimum average variable cost. 
E) market price equals marginal revenue.

Question 5

If a firm faces a perfectly elastic demand for its product, then

Accepted Answer

A) it is not a price taker. 
B) it will want to lower its price to increase sales. 
C) it will want to raise its price to increase total revenue. 
D) its marginal revenue curve is horizontal at the market price. 
E) it will always make zero economic profit. 
A) it is not a price taker. 
B) it will want to lower its price to increase sales. 
C) it will want to raise its price to increase total revenue. 
D) its marginal revenue curve is horizontal at the market price. 
E) it will always make zero economic profit.

Question 6

Use the table below to answer the following questions.
Table 12.2.2
  
-Refer to Table 12.2.2, which gives the total cost schedule for Chip's Pizza Palace, a perfectly competitive firm.If the price of a pizza is $7, what is Chip's profit-maximizing output per hour?

Accepted Answer

A) zero pizzas 
B) 1 pizza 
C) 2 pizzas 
D) 3 pizzas 
E) 4 pizzas 
A) zero pizzas 
B) 1 pizza 
C) 2 pizzas 
D) 3 pizzas 
E) 4 pizzas

Question 7

The shutdown point occurs at the point of minimum

Accepted Answer

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

Question 8

A technological advance occurs in a perfectly competitive market.Which of the following statements is incorrect?

Accepted Answer

A) All old-technology firms exit in the long run. 
B) In the long run, all firms make zero economic profit. 
C) The technological advance brings permanent gains to producers and temporary gains to consumers. 
D) As more firms begin to use the new technology, market supply increases. 
E) As more firms begin to use the new technology, the market price falls. 
A) All old-technology firms exit in the long run. 
B) In the long run, all firms make zero economic profit. 
C) The technological advance brings permanent gains to producers and temporary gains to consumers. 
D) As more firms begin to use the new technology, market supply increases. 
E) As more firms begin to use the new technology, the market price falls.

Question 9

If price falls below minimum average variable cost, the best a firm can do is

Accepted Answer

A) increase production and incur a loss equal to total variable cost. 
B) increase production and incur a loss equal to total fixed cost. 
C) stop production and incur a loss equal to total fixed cost. 
D) stop production and incur a loss equal to total variable cost. 
E) stay at the same production level and incur a loss equal to the difference between total cost and total revenue. 
A) increase production and incur a loss equal to total variable cost. 
B) increase production and incur a loss equal to total fixed cost. 
C) stop production and incur a loss equal to total fixed cost. 
D) stop production and incur a loss equal to total variable cost. 
E) stay at the same production level and incur a loss equal to the difference between total cost and total revenue.

Question 10

If firms in a perfectly competitive market are incurring an economic loss, some firms will exit.This exit shifts the market

Accepted Answer

A) demand curve leftward, and the market price falls. 
B) demand curve rightward, and the market price rises. 
C) supply curve leftward, and the market price rises. 
D) supply curve rightward, and the market price falls. 
E) supply curve leftward and the market demand curve rightward. 
A) demand curve leftward, and the market price falls. 
B) demand curve rightward, and the market price rises. 
C) supply curve leftward, and the market price rises. 
D) supply curve rightward, and the market price falls. 
E) supply curve leftward and the market demand curve rightward.

Question 11

A perfectly competitive firm is producing at the point at which marginal cost equals marginal revenue. If the firm increases production, total revenue ________ and economic profit ________.

Accepted Answer

A) increases; increases 
B) increases; decreases 
C) decreases; decreases 
D) decreases; increases 
E) increases; remains unchanged 
A) increases; increases 
B) increases; decreases 
C) decreases; decreases 
D) decreases; increases 
E) increases; remains unchanged

Question 12

Use the figure below to answer the following question.
   
Figure 12.2.1
-Refer to Figure 12.2.1, which shows a perfectly competitive firm's total revenue and total cost curves.Which one of the following statements is false?

Accepted Answer

A) Economic profit is the vertical distance between the total revenue curve and the total cost curve. 
B) At an output of Q₁ units a day, the firm makes zero economic profit. 
C) At an output greater than Q₃ units a day, the firm incurs an economic loss. 
D) At an output of Q₂ units a day, the firm incurs an economic loss. 
E) At an output less than Q₁ units a day, the firm incurs an economic loss. 
A) Economic profit is the vertical distance between the total revenue curve and the total cost curve. 
B) At an output of Q₁ units a day, the firm makes zero economic profit. 
C) At an output greater than Q₃ units a day, the firm incurs an economic loss. 
D) At an output of Q₂ units a day, the firm incurs an economic loss. 
E) At an output less than Q₁ units a day, the firm incurs an economic loss.

Question 13

Use the figure below to answer the following questions.
   
Figure 12.4.1
-Refer to Figure 12.4.1, 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 increase. 
D) firms will enter the market. 
E) firms that remain in the market will reduce production. 
A) firms that remain in the market will expand production. 
B) market demand will increase. 
C) market supply will increase. 
D) firms will enter the market. 
E) firms that remain in the market will reduce production.

Question 14

In a perfectly competitive market, each firm maximizes its profit by choosing only the quantity to produce.Regardless of whether the firm makes an economic profit or incurs an economic loss, the short-run equilibrium is efficient.This statement is

Accepted Answer

A) false. The market is efficient only in the long run because it is only in the long run that economic profit equals zero. 
B) false. The firm chooses both the price and the quantity to produce in a perfectly competitive market. 
C) true. The firm is a price taker so it chooses only the quantity to produce. The market is efficient because at the short-run equilibrium, marginal social benefit equals marginal social cost. 
D) true. The firm is a price taker so it chooses only the quantity to produce. A competitive market is efficient in the short run but it is inefficient in the long run. 
E) false. In a perfectly competitive market, each firm chooses the price that maximizes its economic profit. 
A) false. The market is efficient only in the long run because it is only in the long run that economic profit equals zero. 
B) false. The firm chooses both the price and the quantity to produce in a perfectly competitive market. 
C) true. The firm is a price taker so it chooses only the quantity to produce. The market is efficient because at the short-run equilibrium, marginal social benefit equals marginal social cost. 
D) true. The firm is a price taker so it chooses only the quantity to produce. A competitive market is efficient in the short run but it is inefficient in the long run. 
E) false. In a perfectly competitive market, each firm chooses the price that maximizes its economic profit.

Question 15

A perfectly competitive market is characterized by

Accepted Answer

A) firms that are price setters. 
B) firms that each face a downward-sloping demand curve. 
C) firms that each sell a unique good or service. 
D) buyers who are unaware of the price charged by each firm. 
E) no restrictions on entry into the market. 
A) firms that are price setters. 
B) firms that each face a downward-sloping demand curve. 
C) firms that each sell a unique good or service. 
D) buyers who are unaware of the price charged by each firm. 
E) no restrictions on entry into the market.

Question 16

Lin's fortune cookies are identical to the fortune cookies made by dozens of other firms, and there is free entry in the fortune cookie market.Buyers and sellers are well informed about prices.Lin's fortune cookies operates in a ________ market.

Accepted Answer

A) challenging 
B) monopolistic 
C) perfectly competitive 
D) noncompetitive 
E) perfectly competent 
A) challenging 
B) monopolistic 
C) perfectly competitive 
D) noncompetitive 
E) perfectly competent

Question 17

Long-run equilibrium occurs in a competitive market when

Accepted Answer

A) economic profit and economic loss have been eliminated. 
B) no barriers to entry exist. 
C) all firms are operating at their shutdown points. 
D) price equals marginal cost. 
E) total revenue is maximized. 
A) economic profit and economic loss have been eliminated. 
B) no barriers to entry exist. 
C) all firms are operating at their shutdown points. 
D) price equals marginal cost. 
E) total revenue is maximized.

Question 18

Which one of the following does not occur in perfect competition?

Accepted Answer

A) No single firm can exert a significant influence on the market price of the good. 
B) There are many buyers. 
C) There are significant restrictions on entry into the market. 
D) Sellers and buyers are well informed about prices. 
E) Established firms have no advantage over new ones. 
A) No single firm can exert a significant influence on the market price of the good. 
B) There are many buyers. 
C) There are significant restrictions on entry into the market. 
D) Sellers and buyers are well informed about prices. 
E) Established firms have no advantage over new ones.

Question 19

The maximum loss a firm will experience in the short run equals

Accepted Answer

A) zero. 
B) its total fixed cost. 
C) its total variable cost. 
D) its total cost. 
E) its marginal cost. 
A) zero. 
B) its total fixed cost. 
C) its total variable cost. 
D) its total cost. 
E) its marginal cost.

Question 20

Consider a perfectly competitive market.In the short run, if demand increases due to a technological advance, the equilibrium price

Accepted Answer

A) remains constant and the equilibrium quantity increases. 
B) remains constant and the equilibrium quantity decreases. 
C) rises and the equilibrium quantity increases. 
D) falls and the equilibrium quantity decreases. 
E) rises and the equilibrium quantity remains the same. 
A) remains constant and the equilibrium quantity increases. 
B) remains constant and the equilibrium quantity decreases. 
C) rises and the equilibrium quantity increases. 
D) falls and the equilibrium quantity decreases. 
E) rises and the equilibrium quantity remains the same.

In the short run, a firm in a perfectly competitive market

A firm is producing the profit-maximizing amount of output when it is producing where its curve intersects its curve.

In which one of the following situations will a perfectly competitive firm make an economic profit?

In a perfectly competitive market, a firm maximizes its profit by producing the quantity of output at which

If a firm faces a perfectly elastic demand for its product, then

Use the table below to answer the following questions. Table 12.2.2 -Refer to Table 12.2.2, which gives the total cost schedule for Chip's Pizza Palace, a perfectly competitive firm.If the price of a pizza is $7, what is Chip's profit-maximizing output per hour?

The shutdown point occurs at the point of minimum

A technological advance occurs in a perfectly competitive market.Which of the following statements is incorrect?

If price falls below minimum average variable cost, the best a firm can do is

If firms in a perfectly competitive market are incurring an economic loss, some firms will exit.This exit shifts the market

A perfectly competitive firm is producing at the point at which marginal cost equals marginal revenue. If the firm increases production, total revenue and economic profit .

Use the figure below to answer the following question. Figure 12.2.1 -Refer to Figure 12.2.1, which shows a perfectly competitive firm's total revenue and total cost curves.Which one of the following statements is false?

Use the figure below to answer the following questions. Figure 12.4.1 -Refer to Figure 12.4.1, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,

In a perfectly competitive market, each firm maximizes its profit by choosing only the quantity to produce.Regardless of whether the firm makes an economic profit or incurs an economic loss, the short-run equilibrium is efficient.This statement is

A perfectly competitive market is characterized by

Lin's fortune cookies are identical to the fortune cookies made by dozens of other firms, and there is free entry in the fortune cookie market.Buyers and sellers are well informed about prices.Lin's fortune cookies operates in a ________ market.

Long-run equilibrium occurs in a competitive market when

Which one of the following does not occur in perfect competition?

The maximum loss a firm will experience in the short run equals

Consider a perfectly competitive market.In the short run, if demand increases due to a technological advance, the equilibrium price

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

In the short run, a firm in a perfectly competitive market

A firm is producing the profit-maximizing amount of output when it is producing where its ________ curve intersects its ________ curve.

In which one of the following situations will a perfectly competitive firm make an economic profit?

In a perfectly competitive market, a firm maximizes its profit by producing the quantity of output at which

If a firm faces a perfectly elastic demand for its product, then

Use the table below to answer the following questions. Table 12.2.2 -Refer to Table 12.2.2, which gives the total cost schedule for Chip's Pizza Palace, a perfectly competitive firm.If the price of a pizza is $7, what is Chip's profit-maximizing output per hour?

The shutdown point occurs at the point of minimum

A technological advance occurs in a perfectly competitive market.Which of the following statements is incorrect?

If price falls below minimum average variable cost, the best a firm can do is

If firms in a perfectly competitive market are incurring an economic loss, some firms will exit.This exit shifts the market

A perfectly competitive firm is producing at the point at which marginal cost equals marginal revenue. If the firm increases production, total revenue ________ and economic profit ________.

Use the figure below to answer the following question. Figure 12.2.1 -Refer to Figure 12.2.1, which shows a perfectly competitive firm's total revenue and total cost curves.Which one of the following statements is false?

Use the figure below to answer the following questions. Figure 12.4.1 -Refer to Figure 12.4.1, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,

In a perfectly competitive market, each firm maximizes its profit by choosing only the quantity to produce.Regardless of whether the firm makes an economic profit or incurs an economic loss, the short-run equilibrium is efficient.This statement is

A perfectly competitive market is characterized by

Lin's fortune cookies are identical to the fortune cookies made by dozens of other firms, and there is free entry in the fortune cookie market.Buyers and sellers are well informed about prices.Lin's fortune cookies operates in a ________ market.

Long-run equilibrium occurs in a competitive market when

Which one of the following does not occur in perfect competition?

The maximum loss a firm will experience in the short run equals

Consider a perfectly competitive market.In the short run, if demand increases due to a technological advance, the equilibrium price

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

A firm is producing the profit-maximizing amount of output when it is producing where its curve intersects its curve.

A perfectly competitive firm is producing at the point at which marginal cost equals marginal revenue. If the firm increases production, total revenue and economic profit .