Question 1

For a perfectly competitive firm, at profit maximization

Accepted Answer

A) market price exceeds marginal cost. 
B) total revenue is maximized. 
C) marginal revenue equals marginal cost. 
D) production must occur where average cost is minimized. 
A) market price exceeds marginal cost. 
B) total revenue is maximized. 
C) marginal revenue equals marginal cost. 
D) production must occur where average cost is minimized.

Question 2

Which of the following is a characteristic of a monopoly?

Accepted Answer

A) It is easy for new firms to enter the market. 
B) There is only one seller in the market. 
C) The product is not unique. 
D) The firm has no control over price. 
A) It is easy for new firms to enter the market. 
B) There is only one seller in the market. 
C) The product is not unique. 
D) The firm has no control over price.

Question 3

Figure 12-17
   
The graphs in Figure 12-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry.
-Refer to Figure 12-17.Which of the following statements is true?

Accepted Answer

A) The current market price is $3 but the firm will be able to increase the price in the future. 
B) The current market price is $3 but the price will fall in the long run as a result of a decrease in demand. 
C) The current market price is $3 but the price will fall in the long run as new firms enter the market. 
D) The current market price is $3 but the price will increase in the future as the market demand increases. 
A) The current market price is $3 but the firm will be able to increase the price in the future. 
B) The current market price is $3 but the price will fall in the long run as a result of a decrease in demand. 
C) The current market price is $3 but the price will fall in the long run as new firms enter the market. 
D) The current market price is $3 but the price will increase in the future as the market demand increases.

Question 4

Which of the following describes a situation in which a good or service is produced at the lowest possible cost?

Accepted Answer

A) productive efficiency 
B) allocative efficiency 
C) marginal efficiency 
D) profit maximization 
A) productive efficiency 
B) allocative efficiency 
C) marginal efficiency 
D) profit maximization

Question 5

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 rate 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 6

Mark Frost grows apples in a perfectly competitive market.If we drew a line in a graph that illustrates Mark's total revenue from selling apples, it would be

Accepted Answer

A) a straight, upward-sloping line. 
B) a horizontal line. 
C) a straight, downward-sloping line. 
D) a curve that is negatively sloped at low levels of output and positively sloped at higher levels of output. 
A) a straight, upward-sloping line. 
B) a horizontal line. 
C) a straight, downward-sloping line. 
D) a curve that is negatively sloped at low levels of output and positively sloped at higher levels of output.

Question 7

A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000.The price of each bushel is $50.Calculate the firm's short-run profit or loss.

Accepted Answer

A) loss of $14,000 
B) profit of $14,000 
C) profit of $50,000 
D) There is insufficient information to answer the question. 
A) loss of $14,000 
B) profit of $14,000 
C) profit of $50,000 
D) There is insufficient information to answer the question.

Question 8

Figure 12-9
   
Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9.At price P₄, the firm would produce

Accepted Answer

A) Q₃ units. 
B) Q₄ units. 
C) Q₅ units. 
D) Q₆ units. 
A) Q₃ units. 
B) Q₄ units. 
C) Q₅ units. 
D) Q₆ units.

Question 9

Figure 12-1
  
-Refer to Figure 12-3.If the firm is producing 500 units, what is the amount of its profit or loss?

Accepted Answer

A) profit of $280 
B) loss equivalent to the area A 
C) profit equivalent to the area A 
D) There is insufficient information to answer the question. 
A) profit of $280 
B) loss equivalent to the area A 
C) profit equivalent to the area A 
D) There is insufficient information to answer the question.

Question 10

Producing where marginal revenue equals marginal cost is equivalent to producing where

Accepted Answer

A) average total cost equals average revenue. 
B) average fixed cost is minimized. 
C) total revenue is equal to total cost. 
D) total profit is maximized. 
A) average total cost equals average revenue. 
B) average fixed cost is minimized. 
C) total revenue is equal to total cost. 
D) total profit is maximized.

Question 11

All of the following can be used to compute average profit except

Accepted Answer

A) marginal profit minus marginal cost. 
B) total profit divided by quantity. 
C) average revenue minus average total cost. 
D) price minus average total cost. 
A) marginal profit minus marginal cost. 
B) total profit divided by quantity. 
C) average revenue minus average total cost. 
D) price minus average total cost.

Question 12

Firms that are price takers

Accepted Answer

A) must lower their prices to increase sales. 
B) are able to sell a fixed quantity of output at the market price. 
C) can raise their prices as a result of a successful advertising campaign. 
D) are able to sell all their output at the market price. 
A) must lower their prices to increase sales. 
B) are able to sell a fixed quantity of output at the market price. 
C) can raise their prices as a result of a successful advertising campaign. 
D) are able to sell all their output at the market price.

Question 13

Apple introduced its iPhone 3G in July 2008 and within a month sales had topped 3 million units.By April 2009, more than 25,000 apps for the iPhone 3G were available in the iTunes store, an indication that in a competitive market

Accepted Answer

A) the ease at which a new firm can enter a competitive market is low. 
B) the ease at which a new firm can enter a competitive market is high. 
C) entry into the market is blocked. 
D) entry into the market is restricted in the short run, but becomes easier in the long run. 
A) the ease at which a new firm can enter a competitive market is low. 
B) the ease at which a new firm can enter a competitive market is high. 
C) entry into the market is blocked. 
D) entry into the market is restricted in the short run, but becomes easier in the long run.

Question 14

Table 12-4
   
Table 12-4 shows the short-run cost data of a perfectly competitive firm.Assume that output can only be increased in batches of 20 units.
-Refer to Table 12-4.If the market price is $45 the firm will produce

Accepted Answer

A) 60 units. 
B) 80 units. 
C) 100 units 
D) 120 units 
A) 60 units. 
B) 80 units. 
C) 100 units 
D) 120 units

Question 15

A very large number of small sellers who sell identical products imply

Accepted Answer

A) a multitude of vastly different selling prices. 
B) a downward sloping demand curve for each seller's product. 
C) the inability of one seller to influence price. 
D) chaos in the market. 
A) a multitude of vastly different selling prices. 
B) a downward sloping demand curve for each seller's product. 
C) the inability of one seller to influence price. 
D) chaos in the market.

Question 16

In a perfectly competitive market the term "price taker" applies to

Accepted Answer

A) sellers and buyers. 
B) sellers but not buyers. 
C) buyers but not sellers. 
D) only the smallest sellers and buyers. 
A) sellers and buyers. 
B) sellers but not buyers. 
C) buyers but not sellers. 
D) only the smallest sellers and buyers.

Question 17

Which of the following statements is true?

Accepted Answer

A) A long-run competitive equilibrium can only be achieved in constant-cost industries. 
B) When an industry achieves a long-run competitive equilibrium, industry output will not change in the future. 
C) A long-run competitive equilibrium outcome is not economically efficient. 
D) When an industry reaches a long-run competitive equilibrium, the typical firm in the industry breaks even. 
A) A long-run competitive equilibrium can only be achieved in constant-cost industries. 
B) When an industry achieves a long-run competitive equilibrium, industry output will not change in the future. 
C) A long-run competitive equilibrium outcome is not economically efficient. 
D) When an industry reaches a long-run competitive equilibrium, the typical firm in the industry breaks even.

Question 18

What is the relationship among the following variables for a perfectly competitive firm: the market price, average revenue and marginal revenue?

Accepted Answer

A) Average revenue is equal to the market price; average revenue is greater than marginal revenue. 
B) The market price is equal to both average revenue and marginal revenue. 
C) Average revenue is equal to marginal revenue; average revenue is greater than the market price. 
D) As a firm lowers the market price to sell more output, marginal revenue and average revenue will be less than the market price. 
A) Average revenue is equal to the market price; average revenue is greater than marginal revenue. 
B) The market price is equal to both average revenue and marginal revenue. 
C) Average revenue is equal to marginal revenue; average revenue is greater than the market price. 
D) As a firm lowers the market price to sell more output, marginal revenue and average revenue will be less than the market price.

Question 19

If, as a perfectly competitive industry expands, it can supply larger quantities at the same long-run market price, it is

Accepted Answer

A)  a constant-cost industry. 
B) an increasing-cost industry. 
C) a decreasing-cost industry. 
D) a fixed-cost industry. 
A)  a constant-cost industry. 
B) an increasing-cost industry. 
C) a decreasing-cost industry. 
D) a fixed-cost industry.

Question 20

Figure 12-9
   
Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9.At price P₂, the firm would

Accepted Answer

A) lose an amount equal to its fixed cost. 
B) lose an amount more than fixed cost. 
C) lose an amount less than fixed cost. 
D) break even. 
A) lose an amount equal to its fixed cost. 
B) lose an amount more than fixed cost. 
C) lose an amount less than fixed cost. 
D) break even.

For a perfectly competitive firm, at profit maximization

Which of the following is a characteristic of a monopoly?

Figure 12-17 The graphs in Figure 12-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry. -Refer to Figure 12-17.Which of the following statements is true?

Which of the following describes a situation in which a good or service is produced at the lowest possible 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 rate indicated by point and his average profit will equal .

Mark Frost grows apples in a perfectly competitive market.If we drew a line in a graph that illustrates Mark's total revenue from selling apples, it would be

A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000.The price of each bushel is $50.Calculate the firm's short-run profit or loss.

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₄, the firm would produce

Figure 12-1 -Refer to Figure 12-3.If the firm is producing 500 units, what is the amount of its profit or loss?

Producing where marginal revenue equals marginal cost is equivalent to producing where

All of the following can be used to compute average profit except

Firms that are price takers

Apple introduced its iPhone 3G in July 2008 and within a month sales had topped 3 million units.By April 2009, more than 25,000 apps for the iPhone 3G were available in the iTunes store, an indication that in a competitive market

Table 12-4 Table 12-4 shows the short-run cost data of a perfectly competitive firm.Assume that output can only be increased in batches of 20 units. -Refer to Table 12-4.If the market price is $45 the firm will produce

A very large number of small sellers who sell identical products imply

In a perfectly competitive market the term "price taker" applies to

Which of the following statements is true?

What is the relationship among the following variables for a perfectly competitive firm: the market price, average revenue and marginal revenue?

If, as a perfectly competitive industry expands, it can supply larger quantities at the same long-run market price, it is

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₂, the firm would

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 More Realistic Setting

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

For a perfectly competitive firm, at profit maximization

Which of the following is a characteristic of a monopoly?

Figure 12-17 The graphs in Figure 12-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry. -Refer to Figure 12-17.Which of the following statements is true?

Which of the following describes a situation in which a good or service is produced at the lowest possible 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 rate indicated by point ________ and his average profit will equal ________.

Mark Frost grows apples in a perfectly competitive market.If we drew a line in a graph that illustrates Mark's total revenue from selling apples, it would be

A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000.The price of each bushel is $50.Calculate the firm's short-run profit or loss.

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₄, the firm would produce

Figure 12-1 -Refer to Figure 12-3.If the firm is producing 500 units, what is the amount of its profit or loss?

Producing where marginal revenue equals marginal cost is equivalent to producing where

All of the following can be used to compute average profit except

Firms that are price takers

Apple introduced its iPhone 3G in July 2008 and within a month sales had topped 3 million units.By April 2009, more than 25,000 apps for the iPhone 3G were available in the iTunes store, an indication that in a competitive market

Table 12-4 Table 12-4 shows the short-run cost data of a perfectly competitive firm.Assume that output can only be increased in batches of 20 units. -Refer to Table 12-4.If the market price is $45 the firm will produce

A very large number of small sellers who sell identical products imply

In a perfectly competitive market the term "price taker" applies to

Which of the following statements is true?

What is the relationship among the following variables for a perfectly competitive firm: the market price, average revenue and marginal revenue?

If, as a perfectly competitive industry expands, it can supply larger quantities at the same long-run market price, it is

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₂, the firm would

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 More Realistic Setting

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 rate indicated by point and his average profit will equal .