Question 1

The figure above shows some of a firm's cost curves and its marginal revenue curve.
-The firm in the figure above has a total cost equal to ________ .

Accepted Answer

A) $5.10 × 10 
B) $8.00 × 10 
C) ($5.10 - $8.00)× 10 
D) ($8.00 - $5.10)× 10 
E) None of the above answers are correct because more information is needed. 
A) $5.10 × 10 
B) $8.00 × 10 
C) ($5.10 - $8.00)× 10 
D) ($8.00 - $5.10)× 10 
E) None of the above answers are correct because more information is needed.

Question 2

If a perfectly competitive firm's average total cost is less than the price, then the firm

Accepted Answer

A) incurs an economic loss. 
B) makes an economic profit. 
C) makes zero economic profit. 
D) makes either zero economic profit or an economic profit depending on whether the marginal revenue is equal to or greater than the price. 
E) None of the above answers is correct because the relationship between the price and average total cost has nothing to do with the firm's profit. 
A) incurs an economic loss. 
B) makes an economic profit. 
C) makes zero economic profit. 
D) makes either zero economic profit or an economic profit depending on whether the marginal revenue is equal to or greater than the price. 
E) None of the above answers is correct because the relationship between the price and average total cost has nothing to do with the firm's profit.

Question 3

During the middle of the 2000s, the price of gasoline soared and there was a movement to switch to fuels made from a mixture of gasoline and ethanol.Ethanol can be made from corn.The price of corn skyrocketed and then, after a couple of years, the price decreased.What might have led to these price changes in the corn market?

Accepted Answer

There are thousands upon thousands of co

Question 4

Juan's Software Service Company is in a perfectly competitive market.Juan has total fixed cost of $25,000, average variable cost for 1,000 service calls is $45, and marginal revenue is $75.Juan's makes 1,000 service calls a month.What is his economic profit?

Accepted Answer

A) $5,000 
B) $25,000 
C) $45,000 
D) $75,000 
E) $50,000 
A) $5,000 
B) $25,000 
C) $45,000 
D) $75,000 
E) $50,000

Question 5

The market supply in the short run for the perfectly competitive industry is

Accepted Answer

A) the same as each producer's supply. 
B) the sum of the supply schedules of all firms. 
C) divided up according to each firm's selling price. 
D) set at the maximum price a buyer will pay for one unit. 
E) equal to the average of each firm's supply schedule. 
A) the same as each producer's supply. 
B) the sum of the supply schedules of all firms. 
C) divided up according to each firm's selling price. 
D) set at the maximum price a buyer will pay for one unit. 
E) equal to the average of each firm's supply schedule.

Question 6

"A perfectly competitive firm is called a price maker because all the firms together must make the market price." Is the previous statement correct or incorrect? Briefly explain your answer.

Accepted Answer

The statement is false.A perfe

Question 7

Keith is a perfectly competitive carnation grower.The market price is $2 per dozen carnations.Keith's average total cost to grow carnations is $2.50 per dozen.In the long run, Keith will

Accepted Answer

A) raise his price to more than $2.50 per dozen carnations. 
B) raise his price to $2.50 per dozen carnations. 
C) exit the industry if the price and his costs do not change. 
D) incur an economic loss. 
E) continue to make an economic profit. 
A) raise his price to more than $2.50 per dozen carnations. 
B) raise his price to $2.50 per dozen carnations. 
C) exit the industry if the price and his costs do not change. 
D) incur an economic loss. 
E) continue to make an economic profit.

Question 8

Suppose that a perfectly competitive firm's marginal revenue equals $12 when it sells 10 units of output.If the marginal cost of producing the 10th unit is $14, to maximize its profit the firm should

Accepted Answer

A) do nothing because it is already maximizing its profit. 
B) decrease its production. 
C) increase its production. 
D) shut down. 
E) increase the price it charges for its product. 
A) do nothing because it is already maximizing its profit. 
B) decrease its production. 
C) increase its production. 
D) shut down. 
E) increase the price it charges for its product.

Question 9

For a syrup producer in central Vermont, profit is maximized at the level of output for which total

Accepted Answer

A) revenue exceeds total cost by the largest amount. 
B) revenue exceeds total cost by the smallest amount. 
C) revenue is maximized. 
D) cost is minimized. 
E) revenue equals total cost. 
A) revenue exceeds total cost by the largest amount. 
B) revenue exceeds total cost by the smallest amount. 
C) revenue is maximized. 
D) cost is minimized. 
E) revenue equals total cost.

Question 10

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

Accepted Answer

If the demand for wheat decreases, the p

Question 11

A permanent decrease in demand definitely

Accepted Answer

A) shifts a firm's average total cost curve downward. 
B) creates diseconomies for individual firms. 
C) lowers the market price. 
D) decreases the number of firms in the industry. 
E) shifts a firm's average total cost curve upward. 
A) shifts a firm's average total cost curve downward. 
B) creates diseconomies for individual firms. 
C) lowers the market price. 
D) decreases the number of firms in the industry. 
E) shifts a firm's average total cost curve upward.

Question 12

-Acme is a perfectly competitive firm.It has the cost schedules given in the above table and has a fixed cost of $12.00.The price of Acme's product is $4.00.What is Acme's most profitable amount of output? What is Acme's total economic profit or loss?

Accepted Answer

Acme's most profitable (which means, in

Question 13

Suppose a farmer raising beef is making a normal profit.Then, because of a scare about mad cow disease, the demand for beef decreases drastically.What happens to the profits of the beef farmer in the short run and in the long run?

Accepted Answer

In the short run, the fall in beef price

Question 14

A firm that is a price taker faces

Accepted Answer

A) an elastic supply curve. 
B) an inelastic supply curve. 
C) a perfectly elastic demand curve. 
D) a perfectly inelastic demand curve. 
E) an elastic but not perfectly elastic demand curve. 
A) an elastic supply curve. 
B) an inelastic supply curve. 
C) a perfectly elastic demand curve. 
D) a perfectly inelastic demand curve. 
E) an elastic but not perfectly elastic demand curve.

Question 15

One requirement for an industry to be perfectly competitive is that in the industry there

Accepted Answer

A) are a few firms who control the market. 
B) are many firms for whom the efficient scale of production is small. 
C) is one firm that sells a product with no close substitutes. 
D) are many firms selling different products. 
E) is a barrier to entry that makes the entry of new firms difficult. 
A) are a few firms who control the market. 
B) are many firms for whom the efficient scale of production is small. 
C) is one firm that sells a product with no close substitutes. 
D) are many firms selling different products. 
E) is a barrier to entry that makes the entry of new firms difficult.

Question 16

Suppose a perfectly competitive firm's minimum average variable cost is $3 when it produces 50.If the price is $2 and the firm's marginal cost is $2, the firm should

Accepted Answer

A) continue to produce, but produce more than 50. 
B) continue to produce 50. 
C) continue to produce, but produce less than 50. 
D) shut down. 
E) continue to operate, but to determine the amount of production needs more information than is given. 
A) continue to produce, but produce more than 50. 
B) continue to produce 50. 
C) continue to produce, but produce less than 50. 
D) shut down. 
E) continue to operate, but to determine the amount of production needs more information than is given.

Question 17

Pumpkin growing is a perfectly competitive industry.Suppose that pumpkin growers are all incurring an economic loss.What happens as time passes? What is the long-run equilibrium outcome?

Accepted Answer

Because the firms are incurring an econo

Question 18

In the long run, existing firms exit a perfectly competitive market

Accepted Answer

A) only if economic profits are zero. 
B) if they make a positive economic profit. 
C) if normal profits are greater than zero. 
D) only if they incur an economic loss. 
E) if they either make a normal profit or if they incur an economic loss. 
A) only if economic profits are zero. 
B) if they make a positive economic profit. 
C) if normal profits are greater than zero. 
D) only if they incur an economic loss. 
E) if they either make a normal profit or if they incur an economic loss.

Question 19

During the winter, theme parks in Orlando close earlier than in the summer.The reason the theme parks close early during the winter is because during that season the marginal revenue from staying open later is ________ the marginal cost.

Accepted Answer

A) greater than 
B) less than 
C) equal to 
D) zero compared to 
E) not comparable to 
A) greater than 
B) less than 
C) equal to 
D) zero compared to 
E) not comparable to

Question 20

What is the relationship between the price, P, and the average total cost, ATC, for a firm in perfect competition that makes an economic profit? That makes zero economic profit? That incurs an economic loss?

Accepted Answer

If the price is greater than the average

The figure above shows some of a firm's cost curves and its marginal revenue curve. -The firm in the figure above has a total cost equal to ________ .

If a perfectly competitive firm's average total cost is less than the price, then the firm

Juan's Software Service Company is in a perfectly competitive market.Juan has total fixed cost of $25,000, average variable cost for 1,000 service calls is $45, and marginal revenue is $75.Juan's makes 1,000 service calls a month.What is his economic profit?

The market supply in the short run for the perfectly competitive industry is

"A perfectly competitive firm is called a price maker because all the firms together must make the market price." Is the previous statement correct or incorrect? Briefly explain your answer.

Keith is a perfectly competitive carnation grower.The market price is $2 per dozen carnations.Keith's average total cost to grow carnations is $2.50 per dozen.In the long run, Keith will

Suppose that a perfectly competitive firm's marginal revenue equals $12 when it sells 10 units of output.If the marginal cost of producing the 10th unit is $14, to maximize its profit the firm should

For a syrup producer in central Vermont, profit is maximized at the level of output for which total

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

A permanent decrease in demand definitely

-Acme is a perfectly competitive firm.It has the cost schedules given in the above table and has a fixed cost of $12.00.The price of Acme's product is $4.00.What is Acme's most profitable amount of output? What is Acme's total economic profit or loss?

Suppose a farmer raising beef is making a normal profit.Then, because of a scare about mad cow disease, the demand for beef decreases drastically.What happens to the profits of the beef farmer in the short run and in the long run?

A firm that is a price taker faces

One requirement for an industry to be perfectly competitive is that in the industry there

Suppose a perfectly competitive firm's minimum average variable cost is $3 when it produces 50.If the price is $2 and the firm's marginal cost is $2, the firm should

Pumpkin growing is a perfectly competitive industry.Suppose that pumpkin growers are all incurring an economic loss.What happens as time passes? What is the long-run equilibrium outcome?

In the long run, existing firms exit a perfectly competitive market

During the winter, theme parks in Orlando close earlier than in the summer.The reason the theme parks close early during the winter is because during that season the marginal revenue from staying open later is ________ the marginal cost.

What is the relationship between the price, P, and the average total cost, ATC, for a firm in perfect competition that makes an economic profit? That makes zero economic profit? That incurs an economic loss?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 15: Perfect Competition

The figure above shows some of a firm's cost curves and its marginal revenue curve. -The firm in the figure above has a total cost equal to ________ .

If a perfectly competitive firm's average total cost is less than the price, then the firm

Juan's Software Service Company is in a perfectly competitive market.Juan has total fixed cost of $25,000, average variable cost for 1,000 service calls is $45, and marginal revenue is $75.Juan's makes 1,000 service calls a month.What is his economic profit?

The market supply in the short run for the perfectly competitive industry is

"A perfectly competitive firm is called a price maker because all the firms together must make the market price." Is the previous statement correct or incorrect? Briefly explain your answer.

Keith is a perfectly competitive carnation grower.The market price is $2 per dozen carnations.Keith's average total cost to grow carnations is $2.50 per dozen.In the long run, Keith will

Suppose that a perfectly competitive firm's marginal revenue equals $12 when it sells 10 units of output.If the marginal cost of producing the 10th unit is $14, to maximize its profit the firm should

For a syrup producer in central Vermont, profit is maximized at the level of output for which total

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

A permanent decrease in demand definitely

-Acme is a perfectly competitive firm.It has the cost schedules given in the above table and has a fixed cost of $12.00.The price of Acme's product is $4.00.What is Acme's most profitable amount of output? What is Acme's total economic profit or loss?

Suppose a farmer raising beef is making a normal profit.Then, because of a scare about mad cow disease, the demand for beef decreases drastically.What happens to the profits of the beef farmer in the short run and in the long run?

A firm that is a price taker faces

One requirement for an industry to be perfectly competitive is that in the industry there

Suppose a perfectly competitive firm's minimum average variable cost is $3 when it produces 50.If the price is $2 and the firm's marginal cost is $2, the firm should

Pumpkin growing is a perfectly competitive industry.Suppose that pumpkin growers are all incurring an economic loss.What happens as time passes? What is the long-run equilibrium outcome?

In the long run, existing firms exit a perfectly competitive market

During the winter, theme parks in Orlando close earlier than in the summer.The reason the theme parks close early during the winter is because during that season the marginal revenue from staying open later is ________ the marginal cost.

What is the relationship between the price, P, and the average total cost, ATC, for a firm in perfect competition that makes an economic profit? That makes zero economic profit? That incurs an economic loss?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters