Question 1

If total revenue exceeds fixed cost, a firm

Accepted Answer

A) should produce in the short run. 
B) has covered its variable cost. 
C) is making short-run profits. 
D) may or may not produce in the short run, depending on whether total revenue covers variable cost. 
A) should produce in the short run. 
B) has covered its variable cost. 
C) is making short-run profits. 
D) may or may not produce in the short run, depending on whether total revenue covers variable cost.

Question 2

A perfectly competitive firm's short-run supply curve is

Accepted Answer

A) upward sloping and is the portion of the marginal cost curve that lies above the average total cost curve. 
B) upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve. 
C) perfectly elastic at the market price. 
D) horizontal at the minimum average total cost. 
A) upward sloping and is the portion of the marginal cost curve that lies above the average total cost curve. 
B) upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve. 
C) perfectly elastic at the market price. 
D) horizontal at the minimum average total cost.

Question 3

A perfectly competitive firm's horizontal demand curve implies that the firm does not have to lower its price to sell more output.

Accepted Answer

A) True 
 B)False

Question 4

If, for the last bushel of apples produced and sold by an apple farm marginal revenue exceeds marginal cost, then in producing that bushel the farm

Accepted Answer

A) added more to total cost than it added to total revenue. 
B) added an equal amount to both total revenue and total cost. 
C) added more to total revenue than it added to total cost. 
D) maximized its profits or minimized its losses. 
A) added more to total cost than it added to total revenue. 
B) added an equal amount to both total revenue and total cost. 
C) added more to total revenue than it added to total cost. 
D) maximized its profits or minimized its losses.

Question 5

If the market price is $40 in a perfectly competitive market, the marginal revenue from selling the fifth unit is

Accepted Answer

A) $8. 
B) $20. 
C) $40. 
D) $200. 
A) $8. 
B) $20. 
C) $40. 
D) $200.

Question 6

In the mid-1990s, cattle ranchers in the United States kept raising cattle even though prices were at a ten-year low and below average total cost.What is the likely explanation for this?

Accepted Answer

A) Continuing to operate resulted in smaller losses than would have been incurred by shutting down. 
B) The ranchers were hoping to receive government subsidies. 
C) The exit costs were too high. 
D) Cattle is an important source of protein and its production is essential for the United States. 
A) Continuing to operate resulted in smaller losses than would have been incurred by shutting down. 
B) The ranchers were hoping to receive government subsidies. 
C) The exit costs were too high. 
D) Cattle is an important source of protein and its production is essential for the United States.

Question 7

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 P₁, the firm would produce

Accepted Answer

A) Q₁ units 
B) Q₃ units. 
C) Q₅ units. 
D) zero units. 
A) Q₁ units 
B) Q₃ units. 
C) Q₅ units. 
D) zero units.

Question 8

Figure 12-1
  
-Refer to Figure 12-1.If the firm is producing 700 units

Accepted Answer

A) it is making a profit. 
B) it is making a loss. 
C) it should cut back its output to maximize profit. 
D) it should increase its output to maximize profit. 
A) it is making a profit. 
B) it is making a loss. 
C) it should cut back its output to maximize profit. 
D) it should increase its output to maximize profit.

Question 9

Suppose Veronica sells teapots in the perfectly competitive teapot market.Her output per day and her costs are as follows:
   
Suppose the current equilibrium price in the teapot market is $20.To maximize profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss)will she make? Draw a graph to illustrate your answer.Your graph should include Veronica's demand, ATC, AVC, MC, and MR curves, the price she is charging, the quantity she is producing, and the area representing her profit (or loss).

Accepted Answer

Veronica will produce 6 teapot

Question 10

A constant-cost industry is an industry in which

Accepted Answer

A) average costs fall as the industry expands output. 
B) average costs rise as the industry expands output. 
C) average costs remain constant as the industry expands output. 
D) input prices rise at a constant rate as firms in the industry use more inputs. 
A) average costs fall as the industry expands output. 
B) average costs rise as the industry expands output. 
C) average costs remain constant as the industry expands output. 
D) input prices rise at a constant rate as firms in the industry use more inputs.

Question 11

Figure 12-2
  
-Refer to Figure 12-2.The firm breaks even at an output level of

Accepted Answer

A) Q₁ units. 
B) Q₂ units. 
C) Q₃ units. 
D) Q₄ units. 
A) Q₁ units. 
B) Q₂ units. 
C) Q₃ units. 
D) Q₄ units.

Question 12

For a perfectly competitive firm, which of the following is not true at profit maximization?

Accepted Answer

A) Market price is greater than marginal cost. 
B) Marginal revenue equals marginal cost. 
C) Total revenue minus total cost is maximized. 
D) Price equals marginal cost. 
A) Market price is greater than marginal cost. 
B) Marginal revenue equals marginal cost. 
C) Total revenue minus total cost is maximized. 
D) Price equals marginal cost.

Question 13

The supply curve of a perfectly competitive firm in the short run is

Accepted Answer

A) the firm's average variable cost curve. 
B) the portion of the firm's marginal cost curve below the minimum point of the average variable cost curve. 
C) the portion of the firm's marginal cost curve above the minimum point of the average variable cost curve. 
D) the portion of the firm's marginal cost curve above the minimum point of the average total cost curve. 
A) the firm's average variable cost curve. 
B) the portion of the firm's marginal cost curve below the minimum point of the average variable cost curve. 
C) the portion of the firm's marginal cost curve above the minimum point of the average variable cost curve. 
D) the portion of the firm's marginal cost curve above the minimum point of the average total cost curve.

Question 14

A perfectly competitive wheat farmer in a constant-cost industry produces 1,000 bushels of wheat at a total cost of $50,000.The prevailing market price is $48.What will happen to the market price of wheat in the long run?

Accepted Answer

A) The price remains constant at $48. 
B) The price falls below $48. 
C) The price rises above $48. 
D)  There is insufficient information to answer the question. 
A) The price remains constant at $48. 
B) The price falls below $48. 
C) The price rises above $48. 
D)  There is insufficient information to answer the question.

Question 15

Table 12-2
   
Table 12-2 lists the various pounds (lbs.)of apples that Margie Stattler can sell.Assume that Margie operates in a perfectly competitive market.
-Refer to Table 12-2.How many pounds of apples should Margie sell to maximize her profit?

Accepted Answer

A) 300 pounds 
B) 400 pounds 
C) This cannot be determined without knowing Margie's total or marginal production costs. 
D) This can be determined only when all of the values for market price, total revenue, average revenue and marginal revenue are given. 
A) 300 pounds 
B) 400 pounds 
C) This cannot be determined without knowing Margie's total or marginal production costs. 
D) This can be determined only when all of the values for market price, total revenue, average revenue and marginal revenue are given.

Question 16

Figure 12-5
   
Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 12-5.What is the amount of the firm's fixed cost of production?

Accepted Answer

A) $5,400 
B) $6,750 
C) $8,100 
D) It cannot be determined. 
A) $5,400 
B) $6,750 
C) $8,100 
D) It cannot be determined.

Question 17

If a typical firm in a perfectly competitive industry is earning profits, then

Accepted Answer

A) all firms will continue to earn profits. 
B) new firms will enter in the long run causing market supply to decrease, market price to rise, and profits to increase. 
C) new firms will enter in the long run causing market supply to increase, market price to fall, and profits to decrease. 
D) the number of firms in the industry will remain constant in the long run. 
A) all firms will continue to earn profits. 
B) new firms will enter in the long run causing market supply to decrease, market price to rise, and profits to increase. 
C) new firms will enter in the long run causing market supply to increase, market price to fall, and profits to decrease. 
D) the number of firms in the industry will remain constant in the long run.

Question 18

The long-run supply curve for a perfectly competitive, constant-cost industry

Accepted Answer

A) is upward-sloping. 
B) is horizontal. 
C) is downward-sloping. 
D) is found by adding up the marginal cost curves for all firms in the industry. 
A) is upward-sloping. 
B) is horizontal. 
C) is downward-sloping. 
D) is found by adding up the marginal cost curves for all firms in the industry.

Question 19

The price of a seller's product in perfect competition is determined by

Accepted Answer

A) the individual seller. 
B) a few of the sellers. 
C) market demand and market supply. 
D) the individual demander. 
A) the individual seller. 
B) a few of the sellers. 
C) market demand and market supply. 
D) the individual demander.

Question 20

The marginal revenue curve for a perfectly competitive firm

Accepted Answer

A) is downward-sloping. 
B) is the same as its demand curve. 
C) is perfectly inelastic. 
D) is the same as its marginal cost curve. 
A) is downward-sloping. 
B) is the same as its demand curve. 
C) is perfectly inelastic. 
D) is the same as its marginal cost curve.

If total revenue exceeds fixed cost, a firm

A perfectly competitive firm's short-run supply curve is

A perfectly competitive firm's horizontal demand curve implies that the firm does not have to lower its price to sell more output.

If, for the last bushel of apples produced and sold by an apple farm marginal revenue exceeds marginal cost, then in producing that bushel the farm

If the market price is $40 in a perfectly competitive market, the marginal revenue from selling the fifth unit is

In the mid-1990s, cattle ranchers in the United States kept raising cattle even though prices were at a ten-year low and below average total cost.What is the likely explanation for this?

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 P₁, the firm would produce

Figure 12-1 -Refer to Figure 12-1.If the firm is producing 700 units

A constant-cost industry is an industry in which

Figure 12-2 -Refer to Figure 12-2.The firm breaks even at an output level of

For a perfectly competitive firm, which of the following is not true at profit maximization?

The supply curve of a perfectly competitive firm in the short run is

A perfectly competitive wheat farmer in a constant-cost industry produces 1,000 bushels of wheat at a total cost of $50,000.The prevailing market price is $48.What will happen to the market price of wheat in the long run?

Table 12-2 Table 12-2 lists the various pounds (lbs.)of apples that Margie Stattler can sell.Assume that Margie operates in a perfectly competitive market. -Refer to Table 12-2.How many pounds of apples should Margie sell to maximize her profit?

Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 12-5.What is the amount of the firm's fixed cost of production?

If a typical firm in a perfectly competitive industry is earning profits, then

The long-run supply curve for a perfectly competitive, constant-cost industry

The price of a seller's product in perfect competition is determined by

The marginal revenue curve for a perfectly competitive firm

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

If total revenue exceeds fixed cost, a firm

A perfectly competitive firm's short-run supply curve is

A perfectly competitive firm's horizontal demand curve implies that the firm does not have to lower its price to sell more output.

If, for the last bushel of apples produced and sold by an apple farm marginal revenue exceeds marginal cost, then in producing that bushel the farm

If the market price is $40 in a perfectly competitive market, the marginal revenue from selling the fifth unit is

In the mid-1990s, cattle ranchers in the United States kept raising cattle even though prices were at a ten-year low and below average total cost.What is the likely explanation for this?

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 P₁, the firm would produce

Figure 12-1 -Refer to Figure 12-1.If the firm is producing 700 units

A constant-cost industry is an industry in which

Figure 12-2 -Refer to Figure 12-2.The firm breaks even at an output level of

For a perfectly competitive firm, which of the following is not true at profit maximization?

The supply curve of a perfectly competitive firm in the short run is

A perfectly competitive wheat farmer in a constant-cost industry produces 1,000 bushels of wheat at a total cost of $50,000.The prevailing market price is $48.What will happen to the market price of wheat in the long run?

Table 12-2 Table 12-2 lists the various pounds (lbs.)of apples that Margie Stattler can sell.Assume that Margie operates in a perfectly competitive market. -Refer to Table 12-2.How many pounds of apples should Margie sell to maximize her profit?

Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 12-5.What is the amount of the firm's fixed cost of production?

If a typical firm in a perfectly competitive industry is earning profits, then

The long-run supply curve for a perfectly competitive, constant-cost industry

The price of a seller's product in perfect competition is determined by

The marginal revenue curve for a perfectly competitive firm

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