Question 1

If the price is less than a perfectly competitive firm's minimum average variable cost, the firm

Accepted Answer

A) makes an economic profit. 
B) operates and incurs an economic loss equal to total fixed cost. 
C) operates and incurs an economic loss equal to average variable cost. 
D) shuts down and incurs an economic loss equal to total fixed cost. 
E) shuts down and incurs an economic loss equal to average variable cost. 
A) makes an economic profit. 
B) operates and incurs an economic loss equal to total fixed cost. 
C) operates and incurs an economic loss equal to average variable cost. 
D) shuts down and incurs an economic loss equal to total fixed cost. 
E) shuts down and incurs an economic loss equal to average variable cost.

Question 2

How does the demand for any one seller's product in perfect competition compare to the market demand for that product?

Accepted Answer

A) They are identical. 
B) The demand for any one seller is proportionally smaller but otherwise identical to the market demand. 
C) The demand for any one seller's product is perfectly elastic while the market demand curve is downward sloping. 
D) There is no demand for any one seller's competitively sold product. 
E) The demand for any one seller's product is not perfectly elastic while the market demand is perfectly elastic. 
A) They are identical. 
B) The demand for any one seller is proportionally smaller but otherwise identical to the market demand. 
C) The demand for any one seller's product is perfectly elastic while the market demand curve is downward sloping. 
D) There is no demand for any one seller's competitively sold product. 
E) The demand for any one seller's product is not perfectly elastic while the market demand is perfectly elastic.

Question 3

If the wheat industry is perfectly competitive with a market price of $4 per bushel and Farmer Brown charged $5 per bushel, how many bushels would Farmer Brown sell?

Accepted Answer

A) some, but fewer than he would at a price of $4 
B) more than he would at a price of $4 
C) just as many as he would at a price of $4 
D) none 
E) More information is needed about the prices charged by the other wheat farmers. 
A) some, but fewer than he would at a price of $4 
B) more than he would at a price of $4 
C) just as many as he would at a price of $4 
D) none 
E) More information is needed about the prices charged by the other wheat farmers.

Question 4

In the short run, a perfectly competitive firm

Accepted Answer

A) can make only zero economic profit. 
B) can possibly make an economic profit or possibly incur an economic loss. 
C) produces the level of output that sets the average total cost equal to the market price. 
D) can vary all its inputs. 
E) can change only its fixed inputs. 
A) can make only zero economic profit. 
B) can possibly make an economic profit or possibly incur an economic loss. 
C) produces the level of output that sets the average total cost equal to the market price. 
D) can vary all its inputs. 
E) can change only its fixed inputs.

Question 5

The price for the shutdown point ________.

Accepted Answer

A) $5.14 
B) between $3.01 and $5.13 
C) $3.00 
D) between $0 and $2.99 
E) greater than $5.15 
A) $5.14 
B) between $3.01 and $5.13 
C) $3.00 
D) between $0 and $2.99 
E) greater than $5.15

Question 6

A perfectly competitive firm can

Accepted Answer

A) sell all of its output at the prevailing market price. 
B) set a higher price to customers who are willing to pay more. 
C) raise its price in order to increase its total revenue. 
D) sell additional output only by lowering its price. 
E) usually not sell all the output it produces, but still "over-produces" because there are some periods when it can sell the extra output at very profitable prices. 
A) sell all of its output at the prevailing market price. 
B) set a higher price to customers who are willing to pay more. 
C) raise its price in order to increase its total revenue. 
D) sell additional output only by lowering its price. 
E) usually not sell all the output it produces, but still "over-produces" because there are some periods when it can sell the extra output at very profitable prices.

Question 7

"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect.

Accepted Answer

The statement is incorrect.Perfectly com

Question 8

Will a perfectly competitive firm ever produce in the short run even though it is suffering an economic loss?

Accepted Answer

Yes, a perfectly competitive firm will c

Question 9

-The above diagram shows the cost curves for a perfectly competitive wheat farmer.At what price does the wheat farmer shut down?

Accepted Answer

The wheat farmer shuts down if

Question 10

"For a perfectly competitive market, an economic profit attracts new firms.But when these firms enter the market, the price falls and the economic profit is eliminated." Are the previous statements correct or incorrect? What is the long-run profit or loss outcome for firms in a perfectly competitive market?

Accepted Answer

The statements are correct.As the statem

Question 11

A firm in perfect competition is a price taker because

Accepted Answer

A) there are no good substitutes for its good. 
B) many other firms produce identical products. 
C) it is very large. 
D) its demand curves are downward sloping. 
E) it's demand curve is vertical at the profit-maximizing quantity. 
A) there are no good substitutes for its good. 
B) many other firms produce identical products. 
C) it is very large. 
D) its demand curves are downward sloping. 
E) it's demand curve is vertical at the profit-maximizing quantity.

Question 12

A market with a large number of sellers

Accepted Answer

A) can only be a perfectly competitive market. 
B) might be an oligopoly or a perfectly competitive market. 
C) might be a monopolistically competitive or a perfectly competitive market. 
D) might be a perfectly competitive, monopolistically competitive, oligopoly, or monopoly market. 
E) can only be a monopolistically competitive market. 
A) can only be a perfectly competitive market. 
B) might be an oligopoly or a perfectly competitive market. 
C) might be a monopolistically competitive or a perfectly competitive market. 
D) might be a perfectly competitive, monopolistically competitive, oligopoly, or monopoly market. 
E) can only be a monopolistically competitive market.

Question 13

-As a perfectly competitive firm's output increases, its total revenue ________ and its total cost ________.

Accepted Answer

A) increases; increases 
B) increases; decreases 
C) decreases; increases 
D) decreases; decreases 
E) does not change; increases 
A) increases; increases 
B) increases; decreases 
C) decreases; increases 
D) decreases; decreases 
E) does not change; increases

Question 14

If the market supply curve and market demand curve for a good intersect at 600,000 units and there are 10,000 identical firms in the market, then each firm is producing

Accepted Answer

A) 600,000 units. 
B) 60,000,000,000 units. 
C) 60,000 units. 
D) 60 units. 
E) 10,000 units. 
A) 600,000 units. 
B) 60,000,000,000 units. 
C) 60,000 units. 
D) 60 units. 
E) 10,000 units.

Question 15

-Computer memory chips are produced on wafers, each wafer having many separate chips that are separated and sold.The above table shows costs for a perfectly competitive producer of computer memory chips.If the market price of a wafer is $2,400 dollars, how many wafers will the firm produce?

Accepted Answer

A) 0 
B) 4 or 5 
C) 3 or 4 
D) 1 or 2 
E) 6 
A) 0 
B) 4 or 5 
C) 3 or 4 
D) 1 or 2 
E) 6

Question 16

Suppose Pat's Paints is a perfectly competitive firm.If Pat's Paints' marginal revenue equals $5 per can, and Pat decides to sell 100 cans of paint, Pat's total revenue equals

Accepted Answer

A) $5. 
B) $100. 
C) $500. 
D) $20. 
E) Information on the price of a can of paint is needed to answer the question. 
A) $5. 
B) $100. 
C) $500. 
D) $20. 
E) Information on the price of a can of paint is needed to answer the question.

Question 17

-The above figure illustrates a perfectly competitive firm.If the market price is $40 a unit, to maximize its profit (or minimize its loss)the firm should

Accepted Answer

A) shut down. 
B) produce more than 10 and less than 30 units. 
C) produce 30 units. 
D) produce more than 30 units and less than 40 units.. 
E) produce 40 units. 
A) shut down. 
B) produce more than 10 and less than 30 units. 
C) produce 30 units. 
D) produce more than 30 units and less than 40 units.. 
E) produce 40 units.

Question 18

Suppose a perfectly competitive market is in long-run equilibrium with a price of $12.Then there is a permanent increase in demand.As a result, in the short run the market price ________ and in the long run the number of firms ________ and the price is ________ the price was in the short run.

Accepted Answer

A) rises; does not change; is equal to 
B) rises; increases; higher than 
C) rises; does not change; lower than 
D) falls; decreases; is equal to 
E) rises; increases; lower than 
A) rises; does not change; is equal to 
B) rises; increases; higher than 
C) rises; does not change; lower than 
D) falls; decreases; is equal to 
E) rises; increases; lower than

Question 19

John keeps beehives and sells 100 quarts of honey per month.The honey market is perfectly competitive, and the price of a quart of honey is $10.John has an average variable cost of $5 and an average fixed cost of $3.At 100 quarts per month, John's marginal cost is $10.
a∙Is John maximizing his profit? If not, what should John do?
b∙Calculate John's total revenue, total cost, and total economic profit or economic loss when he produces 100 quarts of honey.

Accepted Answer

a∙Yes, John is maximizing his profit bec

Question 20

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 revenue 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.

If the price is less than a perfectly competitive firm's minimum average variable cost, the firm

How does the demand for any one seller's product in perfect competition compare to the market demand for that product?

If the wheat industry is perfectly competitive with a market price of $4 per bushel and Farmer Brown charged $5 per bushel, how many bushels would Farmer Brown sell?

In the short run, a perfectly competitive firm

The price for the shutdown point ________.

A perfectly competitive firm can

"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect.

Will a perfectly competitive firm ever produce in the short run even though it is suffering an economic loss?

-The above diagram shows the cost curves for a perfectly competitive wheat farmer.At what price does the wheat farmer shut down?

A firm in perfect competition is a price taker because

A market with a large number of sellers

-As a perfectly competitive firm's output increases, its total revenue and its total cost .

If the market supply curve and market demand curve for a good intersect at 600,000 units and there are 10,000 identical firms in the market, then each firm is producing

-Computer memory chips are produced on wafers, each wafer having many separate chips that are separated and sold.The above table shows costs for a perfectly competitive producer of computer memory chips.If the market price of a wafer is $2,400 dollars, how many wafers will the firm produce?

Suppose Pat's Paints is a perfectly competitive firm.If Pat's Paints' marginal revenue equals $5 per can, and Pat decides to sell 100 cans of paint, Pat's total revenue equals

-The above figure illustrates a perfectly competitive firm.If the market price is $40 a unit, to maximize its profit (or minimize its loss)the firm should

Suppose a perfectly competitive market is in long-run equilibrium with a price of $12.Then there is a permanent increase in demand.As a result, in the short run the market price and in the long run the number of firms and the price is the price was in the short run.

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 revenue equal to ________.

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

If the price is less than a perfectly competitive firm's minimum average variable cost, the firm

How does the demand for any one seller's product in perfect competition compare to the market demand for that product?

If the wheat industry is perfectly competitive with a market price of $4 per bushel and Farmer Brown charged $5 per bushel, how many bushels would Farmer Brown sell?

In the short run, a perfectly competitive firm

The price for the shutdown point ________.

A perfectly competitive firm can

"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect.

Will a perfectly competitive firm ever produce in the short run even though it is suffering an economic loss?

-The above diagram shows the cost curves for a perfectly competitive wheat farmer.At what price does the wheat farmer shut down?

A firm in perfect competition is a price taker because

A market with a large number of sellers

-As a perfectly competitive firm's output increases, its total revenue ________ and its total cost ________.

If the market supply curve and market demand curve for a good intersect at 600,000 units and there are 10,000 identical firms in the market, then each firm is producing

-Computer memory chips are produced on wafers, each wafer having many separate chips that are separated and sold.The above table shows costs for a perfectly competitive producer of computer memory chips.If the market price of a wafer is $2,400 dollars, how many wafers will the firm produce?

Suppose Pat's Paints is a perfectly competitive firm.If Pat's Paints' marginal revenue equals $5 per can, and Pat decides to sell 100 cans of paint, Pat's total revenue equals

-The above figure illustrates a perfectly competitive firm.If the market price is $40 a unit, to maximize its profit (or minimize its loss)the firm should

Suppose a perfectly competitive market is in long-run equilibrium with a price of $12.Then there is a permanent increase in demand.As a result, in the short run the market price ________ and in the long run the number of firms ________ and the price is ________ the price was in the short run.

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 revenue equal to ________.

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

-As a perfectly competitive firm's output increases, its total revenue and its total cost .

Suppose a perfectly competitive market is in long-run equilibrium with a price of $12.Then there is a permanent increase in demand.As a result, in the short run the market price and in the long run the number of firms and the price is the price was in the short run.