Question 1

If firms exit an market, the

Accepted Answer

A) market supply curve shifts leftward. 
B) price of the good falls. 
C) economic profit of the remaining firms decrease. 
D) total market output increases. 
E) economic profit of the remaining firms stay the same. 
A) market supply curve shifts leftward. 
B) price of the good falls. 
C) economic profit of the remaining firms decrease. 
D) total market output increases. 
E) economic profit of the remaining firms stay the same.

Question 2

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, 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 3

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 firm sells 5 units of output, total 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 4

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 average variable cost of producing the 1st balloon is

Accepted Answer

A) $1.00. 
B) $4.00. 
C) $2.00. 
D) $4.80. 
E) $3.00. 
A) $1.00. 
B) $4.00. 
C) $2.00. 
D) $4.80. 
E) $3.00.

Question 5

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.If the price of a tattoo is $12.50, Archibald's economic profit is

Accepted Answer

A) -$10.00 an hour. 
B) zero. 
C) $12.50 an hour. 
D) $10.00 an hour. 
E) maximized. 
A) -$10.00 an hour. 
B) zero. 
C) $12.50 an hour. 
D) $10.00 an hour. 
E) maximized.

Question 6

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.These gas stations operate in a ________market.

Accepted Answer

A) competitive 
B) noncompetitive 
C) monopolistic 
D) challenging 
E) consumer's 
A) competitive 
B) noncompetitive 
C) monopolistic 
D) challenging 
E) consumer's

Question 7

For perfect competition to arise, it is necessary that market demand be

Accepted Answer

A) inelastic. 
B) elastic. 
C) perfectly elastic. 
D) large relative to the minimum efficient scale of a single firm. 
E) small relative to the minimum efficient scale of a single firm. 
A) inelastic. 
B) elastic. 
C) perfectly elastic. 
D) large relative to the minimum efficient scale of a single firm. 
E) small relative to the minimum efficient scale of a single firm.

Question 8

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 2 units of output, it

Accepted Answer

A) makes an economic profit of $9. 
B) makes an economic profit of $60. 
C) incurs an economic loss of $9. 
D) incurs an economic loss of $60. 
E) incurs an economic loss of $69. 
A) makes an economic profit of $9. 
B) makes an economic profit of $60. 
C) incurs an economic loss of $9. 
D) incurs an economic loss of $60. 
E) incurs an economic loss of $69.

Question 9

Use the table below to answer the following question.
Table 12.4.1

-Refer to Table 12.4.1.The top table shows the market demand schedule for paper.The market is perfectly competitive and there are 1,000 firms that produce paper.Each firm has the costs shown in the bottom table when it uses its least-cost plant.The market price in the long run is ________ a box and the equilibrium quantity produced in the long run is ________ boxes a week.

Accepted Answer

A) $11.60; 250,000 
B) $7.00; a little less than 400,000 
C) $10.00; 300,000 
D) $6.40; a little more than 400,000 
E) $8.40; 350,000 
A) $11.60; 250,000 
B) $7.00; a little less than 400,000 
C) $10.00; 300,000 
D) $6.40; a little more than 400,000 
E) $8.40; 350,000

Question 10

An efficient allocation is achieved when

Accepted Answer

A) consumers are selecting points on their demand curves. 
B) producers are selecting points on their supply curves. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) all of the above 
E) none of the above 
A) consumers are selecting points on their demand curves. 
B) producers are selecting points on their supply curves. 
C) the sum of consumer surplus and producer surplus is maximized. 
D) all of the above 
E) none of the above

Question 11

If a perfectly competitive firm is producing an output at which price is equal to average total cost, the firm

Accepted Answer

A) should shut down. 
B) is breaking even. 
C) is making an economic profit. 
D) is incurring an economic loss. 
E) is not producing its profit-maximizing quantity. 
A) should shut down. 
B) is breaking even. 
C) is making an economic profit. 
D) is incurring an economic loss. 
E) is not producing its profit-maximizing quantity.

Question 12

Which one of the following need not be satisfied to achieve allocative efficiency?

Accepted Answer

A) Marginal social cost equals marginal social benefit. 
B) The sum of consumer surplus and producer surplus is maximized. 
C) Price equals marginal social benefit. 
D) Price equals marginal social cost. 
E) Only high-quality goods are produced. 
A) Marginal social cost equals marginal social benefit. 
B) The sum of consumer surplus and producer surplus is maximized. 
C) Price equals marginal social benefit. 
D) Price equals marginal social cost. 
E) Only high-quality goods are produced.

Question 13

If firms in a perfectly competitive market are making an economic profit, new firms will enter.This entry 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 rightward and the market demand curve leftward. 
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 rightward and the market demand curve leftward.

Question 14

A firm that temporarily shuts down and produces no output incurs a loss equal to its

Accepted Answer

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

Question 15

An example of a perfectly competitive industry is the

Accepted Answer

A) airline industry. 
B) beer industry. 
C) running shoe industry. 
D) fast food industry. 
E) wheat industry. 
A) airline industry. 
B) beer industry. 
C) running shoe industry. 
D) fast food industry. 
E) wheat industry.

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.The price of a fortune cookie is determined by ________.The marginal revenue of a fortune cookie equals ________.

Accepted Answer

A) market demand and market supply; price 
B) the ingredients that Lin's uses to produce his fortune cookies; average total cost 
C) the number of cookies that Lin's produces; average variable cost 
D) the freshness of the fortune cookies; average fixed cost 
E) market demand and market supply; the price elasticity of demand 
A) market demand and market supply; price 
B) the ingredients that Lin's uses to produce his fortune cookies; average total cost 
C) the number of cookies that Lin's produces; average variable cost 
D) the freshness of the fortune cookies; average fixed cost 
E) market demand and market supply; the price elasticity of demand

Question 17

In a perfectly competitive market, the market demand curve is illustrated by

Accepted Answer

A) a downward-sloping curve. 
B) a line that is vertical at the market output. 
C) an upward-sloping curve. 
D) a line that is horizontal at the market price. 
E) a curve that is bowed towards the origin. 
A) a downward-sloping curve. 
B) a line that is vertical at the market output. 
C) an upward-sloping curve. 
D) a line that is horizontal at the market price. 
E) a curve that is bowed towards the origin.

If firms exit an market, the

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, market

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 firm sells 5 units of output, total 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 average variable cost of producing the 1st balloon is

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.If the price of a tattoo is $12.50, Archibald's economic profit is

For perfect competition to arise, it is necessary that market demand be

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 2 units of output, it

An efficient allocation is achieved when

If a perfectly competitive firm is producing an output at which price is equal to average total cost, the firm

Which one of the following need not be satisfied to achieve allocative efficiency?

If firms in a perfectly competitive market are making an economic profit, new firms will enter.This entry shifts the market

A firm that temporarily shuts down and produces no output incurs a loss equal to its

An example of a perfectly competitive industry is the

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.The price of a fortune cookie is determined by .The marginal revenue of a fortune cookie equals .

In a perfectly competitive market, the market demand curve is illustrated by

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

If firms exit an market, the

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, market

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 firm sells 5 units of output, total 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 average variable cost of producing the 1st balloon is

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.If the price of a tattoo is $12.50, Archibald's economic profit is

For perfect competition to arise, it is necessary that market demand be

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 2 units of output, it

An efficient allocation is achieved when

If a perfectly competitive firm is producing an output at which price is equal to average total cost, the firm

Which one of the following need not be satisfied to achieve allocative efficiency?

If firms in a perfectly competitive market are making an economic profit, new firms will enter.This entry shifts the market

A firm that temporarily shuts down and produces no output incurs a loss equal to its

An example of a perfectly competitive industry is the

In a perfectly competitive market, the market demand curve is illustrated by

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