Question 1

Market supply is found by

Accepted Answer

A) vertically summing the relevant part of each individual producer's marginal cost curve. 
B) horizontally summing the relevant part of each individual producer's marginal cost curve. 
C) vertically summing each individual producer's average total cost curve. 
D) horizontally summing each individual producer's average total cost curve. 
A) vertically summing the relevant part of each individual producer's marginal cost curve. 
B) horizontally summing the relevant part of each individual producer's marginal cost curve. 
C) vertically summing each individual producer's average total cost curve. 
D) horizontally summing each individual producer's average total cost curve.

Question 2

Figure 12-16
  
-Refer to Figure 12-16.Which panel best represents the perfectly competitive organic produce market in which firms are breaking even, economically, organic produce is considered a normal good, and the average income level of consumers is rising?

Accepted Answer

A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D 
A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D

Question 3

Figure 12-12
  
-Refer to Figure 12-12.Consider a typical firm in a perfectly competitive industry that makes short-run profits.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Accepted Answer

A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D 
A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D

Question 4

For a perfectly competitive firm, at the profit-maximizing output average revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 5

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.If the market price is $20, what is the average profit at the profit-maximizing quantity?

Accepted Answer

A) $5 
B) $6 
C) $9 
D) $20 
A) $5 
B) $6 
C) $9 
D) $20

Question 6

Figure 12-13
  
-Refer to Figure 12-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.In the long-run equilibrium

Accepted Answer

A) there will be fewer firms in the industry and total industry output decreases. 
B) there will be more firms in the industry and total industry output increases. 
C) there will be fewer firms in the industry but total industry output increases. 
D) there will be more firms in the industry and total industry output remains constant. 
A) there will be fewer firms in the industry and total industry output decreases. 
B) there will be more firms in the industry and total industry output increases. 
C) there will be fewer firms in the industry but total industry output increases. 
D) there will be more firms in the industry and total industry output remains constant.

Question 7

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

Accepted Answer

A) Each firm produces up to the point where the price of the good equals the marginal cost of producing the last unit. 
B) Each firm produces up to the point where all scale economies are exhausted. 
C) Production occurs at the lowest average total cost. 
D) Firms use an input combination that minimizes cost and maximizes output. 
A) Each firm produces up to the point where the price of the good equals the marginal cost of producing the last unit. 
B) Each firm produces up to the point where all scale economies are exhausted. 
C) Production occurs at the lowest average total cost. 
D) Firms use an input combination that minimizes cost and maximizes output.

Question 8

In long-run competitive equilibrium, the perfectly competitive firm produces where price equals minimum average total cost.
a.What is this efficiency criterion called?
b.How does it benefit consumers?

Accepted Answer

a.Productive efficiency
b.Productive eff

Question 9

Figure 12-1
  
-Refer to Figure 12-1.If the firm is producing 200 units

Accepted Answer

A) it breaks even. 
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 breaks even. 
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 10

If in the long run a firm makes zero profit, it should exit the industry.

Accepted Answer

A) True 
 B)False

Question 11

In the short run, if a firm shuts down its maximum loss equals the amount of its fixed cost.

Accepted Answer

A) True 
 B)False

Question 12

Assume that the medical screening industry is perfectly competitive.Consider a typical firm that is making short-run losses.Suppose the medical screening industry runs an effective advertising campaign which convinces a large number of people that yearly CT scans are critical for good health.How will this affect a typical firm that remains in the industry?

Accepted Answer

A) The firm's supply curve shifts right and its marginal revenue curve shifts upwards as the market price rises and ultimately the firm starts making profits. 
B) The firm's marginal revenue curve and average cost curve shift upwards in response to the increase in market price and advertising expenditure. The firm increases output until it starts breaking even. 
C) The marginal revenue curve shifts upwards, the firm's output increases along its marginal cost curve, it expands production and eventually starts making profits. 
D) The marginal revenue curve shifts upwards, the firm's output increases along its marginal cost curve, it expands production until it breaks even. 
A) The firm's supply curve shifts right and its marginal revenue curve shifts upwards as the market price rises and ultimately the firm starts making profits. 
B) The firm's marginal revenue curve and average cost curve shift upwards in response to the increase in market price and advertising expenditure. The firm increases output until it starts breaking even. 
C) The marginal revenue curve shifts upwards, the firm's output increases along its marginal cost curve, it expands production and eventually starts making profits. 
D) The marginal revenue curve shifts upwards, the firm's output increases along its marginal cost curve, it expands production until it breaks even.

Question 13

Which of the following describes a difference between allocative efficiency and productive efficiency in a perfectly competitive market?

Accepted Answer

A) Allocative efficiency is achieved only in the long run. Productive efficiency is achieved only in the short run. 
B) Allocative efficiency is achieved only in the long run. Productive efficiency is achieved in the short run and the long run. 
C) Allocative efficiency is achieved only in the short run. Productive efficiency is achieved only in the long run. 
D) Allocative efficiency is achieved in the short run and the long run. Productive efficiency is achieved only in the long run. 
A) Allocative efficiency is achieved only in the long run. Productive efficiency is achieved only in the short run. 
B) Allocative efficiency is achieved only in the long run. Productive efficiency is achieved in the short run and the long run. 
C) Allocative efficiency is achieved only in the short run. Productive efficiency is achieved only in the long run. 
D) Allocative efficiency is achieved in the short run and the long run. Productive efficiency is achieved only in the long run.

Question 14

In the short run, a firm that is operating at a loss has two options.These options are

Accepted Answer

A) to reduce output or reduce its variable costs. 
B) to go out of business or declare bankruptcy. 
C) to shut down temporarily or continue to produce. 
D) to adopt new technology or change the size of its physical plant. 
A) to reduce output or reduce its variable costs. 
B) to go out of business or declare bankruptcy. 
C) to shut down temporarily or continue to produce. 
D) to adopt new technology or change the size of its physical plant.

Question 15

If price is equal to average variable cost, a perfectly competitive firm breaks even.

Accepted Answer

A) True 
 B)False

Question 16

At the profit-maximizing level of output for a perfectly competitive firm, price equals marginal cost.Which of the following is also true?

Accepted Answer

A) The difference between total revenue and total cost is the greatest. 
B) Total revenue equals total cost. 
C) Average revenue equals average total cost. 
D) Marginal profit equals marginal cost. 
A) The difference between total revenue and total cost is the greatest. 
B) Total revenue equals total cost. 
C) Average revenue equals average total cost. 
D) Marginal profit equals marginal cost.

Question 17

If, as a perfectly competitive industry expands, it can supply larger quantities only at a higher long-run equilibrium 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 18

Explain two different ways to determine the profit-maximizing level of output for a firm in a perfectly competitive market.

Accepted Answer

One way is using total revenue and total

Question 19

Figure 12-9
   
Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9.Identify the firm's short-run supply curve.

Accepted Answer

A) the marginal cost curve 
B) the marginal cost curve from a and above 
C) the marginal cost curve from b and above 
D) the marginal cost curve from d and above 
A) the marginal cost curve 
B) the marginal cost curve from a and above 
C) the marginal cost curve from b and above 
D) the marginal cost curve from d and above

Question 20

A wheat farmer and a firm in a perfectly competitive market are similar in that

Accepted Answer

A) both face vertical demand curves. 
B) both have to lower their prices if a rival firm lowers its price. 
C) both face horizontal demand curves. 
D) both will earn an economic profit if their total revenue equals their total cost. 
A) both face vertical demand curves. 
B) both have to lower their prices if a rival firm lowers its price. 
C) both face horizontal demand curves. 
D) both will earn an economic profit if their total revenue equals their total cost.

Market supply is found by

Figure 12-16 -Refer to Figure 12-16.Which panel best represents the perfectly competitive organic produce market in which firms are breaking even, economically, organic produce is considered a normal good, and the average income level of consumers is rising?

Figure 12-12 -Refer to Figure 12-12.Consider a typical firm in a perfectly competitive industry that makes short-run profits.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

For a perfectly competitive firm, at the profit-maximizing output average revenue equals marginal cost.

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.If the market price is $20, what is the average profit at the profit-maximizing quantity?

Figure 12-13 -Refer to Figure 12-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.In the long-run equilibrium

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

In long-run competitive equilibrium, the perfectly competitive firm produces where price equals minimum average total cost. a.What is this efficiency criterion called? b.How does it benefit consumers?

Figure 12-1 -Refer to Figure 12-1.If the firm is producing 200 units

If in the long run a firm makes zero profit, it should exit the industry.

In the short run, if a firm shuts down its maximum loss equals the amount of its fixed cost.

Which of the following describes a difference between allocative efficiency and productive efficiency in a perfectly competitive market?

In the short run, a firm that is operating at a loss has two options.These options are

If price is equal to average variable cost, a perfectly competitive firm breaks even.

At the profit-maximizing level of output for a perfectly competitive firm, price equals marginal cost.Which of the following is also true?

If, as a perfectly competitive industry expands, it can supply larger quantities only at a higher long-run equilibrium price, it is

Explain two different ways to determine the profit-maximizing level of output for a firm in a perfectly competitive market.

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.Identify the firm's short-run supply curve.

A wheat farmer and a firm in a perfectly competitive market are similar in that

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

Market supply is found by

Figure 12-16 -Refer to Figure 12-16.Which panel best represents the perfectly competitive organic produce market in which firms are breaking even, economically, organic produce is considered a normal good, and the average income level of consumers is rising?

Figure 12-12 -Refer to Figure 12-12.Consider a typical firm in a perfectly competitive industry that makes short-run profits.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

For a perfectly competitive firm, at the profit-maximizing output average revenue equals marginal cost.

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.If the market price is $20, what is the average profit at the profit-maximizing quantity?

Figure 12-13 -Refer to Figure 12-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.In the long-run equilibrium

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

In long-run competitive equilibrium, the perfectly competitive firm produces where price equals minimum average total cost. a.What is this efficiency criterion called? b.How does it benefit consumers?

Figure 12-1 -Refer to Figure 12-1.If the firm is producing 200 units

If in the long run a firm makes zero profit, it should exit the industry.

In the short run, if a firm shuts down its maximum loss equals the amount of its fixed cost.

Which of the following describes a difference between allocative efficiency and productive efficiency in a perfectly competitive market?

In the short run, a firm that is operating at a loss has two options.These options are

If price is equal to average variable cost, a perfectly competitive firm breaks even.

At the profit-maximizing level of output for a perfectly competitive firm, price equals marginal cost.Which of the following is also true?

If, as a perfectly competitive industry expands, it can supply larger quantities only at a higher long-run equilibrium price, it is

Explain two different ways to determine the profit-maximizing level of output for a firm in a perfectly competitive market.

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.Identify the firm's short-run supply curve.

A wheat farmer and a firm in a perfectly competitive market are similar in that

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