Question 1

In the long run, a perfectly competitive firm makes zero economic profit. What incentive does the firm have to stay in business if it is making zero economic profit?

Accepted Answer

Zero economic profits do not mean no profit whatsoever. The owners of the firm are still making a normal profit. A normal profit compensates the firm's owners enough to keep the firm in business because it is equal to the owner's opportunity cost. Hence the firm has the incentive to stay in business.

Question 2

For a perfectly competitive sugar producer in Haiti, a short-run economic profit will occur if the price of each ton of sugar sold is

Accepted Answer

A) greater than the average total cost of producing sugar. 
B) equal to the average total cost of producing sugar. 
C) less than the average total cost of producing sugar. 
D) rising as more sugar is sold. 
E) greater than the marginal revenue of each ton of sugar. 
A) greater than the average total cost of producing sugar. 
B) equal to the average total cost of producing sugar. 
C) less than the average total cost of producing sugar. 
D) rising as more sugar is sold. 
E) greater than the marginal revenue of each ton of sugar. A

Question 3

If perfectly competitive firms are making an economic profit, then

Accepted Answer

A) the market must be in long-run equilibrium but cannot be in a short-run equilibrium. 
B) some firms will exit the market. 
C) new firms will enter the market. 
D) the market might be in a long-run equilibrium but not a short-run equilibrium. 
E) the market cannot be in either a short-run or a long-run equilibrium. 
A) the market must be in long-run equilibrium but cannot be in a short-run equilibrium. 
B) some firms will exit the market. 
C) new firms will enter the market. 
D) the market might be in a long-run equilibrium but not a short-run equilibrium. 
E) the market cannot be in either a short-run or a long-run equilibrium. C

Question 4

If a firm shuts down, it

Accepted Answer

A) makes zero economic profit. 
B) incurs an economic loss equal to its total variable cost. 
C) incurs an economic loss equal to its total fixed cost. 
D) makes a normal profit. 
E) might make an economic profit, zero economic profit, or incur an economic loss. 
A) makes zero economic profit. 
B) incurs an economic loss equal to its total variable cost. 
C) incurs an economic loss equal to its total fixed cost. 
D) makes a normal profit. 
E) might make an economic profit, zero economic profit, or incur an economic loss.

Question 5

$$\begin{array}{l}
\text { Quantity Total cost }\
\begin{array} { c c } 
\text { (units) } & \text { (dollars) } \
\hline 0 & 3 \
1 & 6 \
2 & 12 \
3 & 21 \
4 & 33 \
5 & 49
\end{array}
\end{array}$$
-The above table gives the quantity of output and the total cost for a perfectly competitive firm that can sell all of its output at $9 per unit.
a. Find the profit maximizing level of output for this firm.
b. How much economic profit is the firm making?

Accepted Answer

\[\begin{array} { c c c c } 
\begin{arra

Question 6

11.4 Chapter Figures
   
The figure above shows a firm's total revenue and total cost curves.
-When the firm maximizes its profit, it produces ________ cans per day.

Accepted Answer

A) 0 
B) more than 0 and less than 5 
C) 5 or more but less than 10 
D) 10 
E) more than 10 
A) 0 
B) more than 0 and less than 5 
C) 5 or more but less than 10 
D) 10 
E) more than 10

Question 7

If a perfectly competitive wheat farmer is maximizing its profit and then increases its output, the farmer's

Accepted Answer

A) total revenue increases, but total cost rises by more so that the farmer's total profit decreases. 
B) total revenue decreases and total cost increases, both thereby decreasing the farmer's total profit. 
C) total revenue does not change but total cost increases, thereby decreasing the farmer's total profit. 
D) marginal revenue increases, but so does marginal cost so that the farmer's total profit increases. 
E) total revenue and total cost both rise but the effect on the farmer's total profit is uncertain. 
A) total revenue increases, but total cost rises by more so that the farmer's total profit decreases. 
B) total revenue decreases and total cost increases, both thereby decreasing the farmer's total profit. 
C) total revenue does not change but total cost increases, thereby decreasing the farmer's total profit. 
D) marginal revenue increases, but so does marginal cost so that the farmer's total profit increases. 
E) total revenue and total cost both rise but the effect on the farmer's total profit is uncertain.

Question 8

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 9

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 10

$$\begin{array} { c c } 
\begin{array} { c } 
\text { Quantity } \
\text { (units) }
\end{array} & \begin{array} { c } 
\text { Total cost } \
\text { (dollars) }
\end{array} \
\hline 0 & 12.00 \
1 & 20.00 \
2 & 26.00 \
3 & 30.00 \
4 & 32.00 \
5 & 36.00 \
6 & 42.00 \
7 & 49.80 \
8 & 64.00 \
9 & 87.60 \
10 & 124.00
\end{array}$$
-Acme is a perfectly competitive firm. It has the total cost schedule given in the above table. Acme's product sells for $8.00 per unit. What amount of output is the most profitable and what is Acme's economic profit or economic loss?

Accepted Answer

Acme's profit-maximizing level of output

Question 11

Pineapple growing is a perfectly competitive industry. How does the market demand curve for pineapples compare to the demand curve for an individual pineapple grower?

Accepted Answer

The market demand curve for pineapples i

Question 12

The table below shows the total cost schedule for a perfectly competitive firm. The market price is $250 per unit. Complete the table.
 $$\begin{array} { c c c c } 
\begin{array} { c } 
\text { Quantity } \
\text { (units) }
\end{array} & \begin{array} { c } 
\text { Total cost } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total revenue } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Profit or loss } \
\text { (dollars) }
\end{array} \
\hline 0 & 400 & & \
1 & 550 & & \
2 & 600 & & \
3 & 650 & & \
4 & 740 & & \
5 & 850 & & \
6 & 990 & & \
7 & 1,140 & & \
8 & 1,400 & & \
9 & 1,690 & & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { c c c c } 
\begin{arra

Question 13

If perfectly firms are making an economic profit, then

Accepted Answer

A) the market is in its long-run equilibrium. 
B) new firms enter the market and the equilibrium profit of the firms already in the market decreases. 
C) new firms enter the market and the equilibrium profit of the firms already in the market increases. 
D) firms exit the market and the economic profit of the surviving firms in the market decreases. 
E) firms exit the market and the economic profit of the surviving firms in the market increases. 
A) the market is in its long-run equilibrium. 
B) new firms enter the market and the equilibrium profit of the firms already in the market decreases. 
C) new firms enter the market and the equilibrium profit of the firms already in the market increases. 
D) firms exit the market and the economic profit of the surviving firms in the market decreases. 
E) firms exit the market and the economic profit of the surviving firms in the market increases.

Question 14

As a perfectly competitive firm produces more and more of a good, its economic profit

Accepted Answer

A) constantly increases. 
B) constantly decreases. 
C) first decreases, then increases. 
D) first increases, then decreases. 
E) does not change. 
A) constantly increases. 
B) constantly decreases. 
C) first decreases, then increases. 
D) first increases, then decreases. 
E) does not change.

Question 15

Suppose the price of a can was $5.14. In this case, to maximize its profit the firm illustrated in the figure above would

Accepted Answer

A) increase its production and would make an economic profit. 
B) not change its production and would make zero economic profit. 
C) not change its production and would make an economic profit. 
D) increase its production and would incur an economic loss. 
E) not change its production and would incur an economic loss. 
A) increase its production and would make an economic profit. 
B) not change its production and would make zero economic profit. 
C) not change its production and would make an economic profit. 
D) increase its production and would incur an economic loss. 
E) not change its production and would incur an economic loss.

Question 16

To increase its profit, a perfectly competitive firm will produce more output when

Accepted Answer

A) price is greater than average fixed cost. 
B) price is greater than marginal cost. 
C) marginal cost is less than average total cost. 
D) average variable cost is greater than average fixed cost. 
E) price is greater than average variable cost. 
A) price is greater than average fixed cost. 
B) price is greater than marginal cost. 
C) marginal cost is less than average total cost. 
D) average variable cost is greater than average fixed cost. 
E) price is greater than average variable cost.

Question 17

Normal profit is

Accepted Answer

A) the same thing as economic profit. 
B) the return to entrepreneurship. 
C) total revenue minus the total opportunity cost of production. 
D) the point of profit when total revenue is maximized. 
E) part of the firm's total revenue. 
A) the same thing as economic profit. 
B) the return to entrepreneurship. 
C) total revenue minus the total opportunity cost of production. 
D) the point of profit when total revenue is maximized. 
E) part of the firm's total revenue.

Question 18

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 19

A market is ________ when a small number of firms compete.

Accepted Answer

A) a monopoly 
B) perfectly competitive 
C) monopolistically competitive 
D) an oligopoly 
E) either monopolistically competitive or an oligopoly 
A) a monopoly 
B) perfectly competitive 
C) monopolistically competitive 
D) an oligopoly 
E) either monopolistically competitive or an oligopoly

Question 20

Because perfectly competitive firms are price takers, each firm faces a demand that is

Accepted Answer

A) perfectly inelastic. 
B) perfectly elastic. 
C) highly inelastic, but never is it perfectly inelastic. 
D) unit elastic. 
E) highly elastic, but never is it perfectly elastic. 
A) perfectly inelastic. 
B) perfectly elastic. 
C) highly inelastic, but never is it perfectly inelastic. 
D) unit elastic. 
E) highly elastic, but never is it perfectly elastic.

In the long run, a perfectly competitive firm makes zero economic profit. What incentive does the firm have to stay in business if it is making zero economic profit?

For a perfectly competitive sugar producer in Haiti, a short-run economic profit will occur if the price of each ton of sugar sold is

If perfectly competitive firms are making an economic profit, then

If a firm shuts down, it

11.4 Chapter Figures The figure above shows a firm's total revenue and total cost curves. -When the firm maximizes its profit, it produces ________ cans per day.

If a perfectly competitive wheat farmer is maximizing its profit and then increases its output, the farmer's

A firm in perfect competition is a price taker because

The price for the shutdown point ________.

Pineapple growing is a perfectly competitive industry. How does the market demand curve for pineapples compare to the demand curve for an individual pineapple grower?

The table below shows the total cost schedule for a perfectly competitive firm. The market price is $250 per unit. Complete the table. Quantity (units) Total cost (dollars) Total revenue (dollars) Profit or loss (dollars) 0 400 1 550 2 600 3 650 4 740 5 850 6 990 7 1,140 8 1,400 9 1,690

If perfectly firms are making an economic profit, then

As a perfectly competitive firm produces more and more of a good, its economic profit

Suppose the price of a can was $5.14. In this case, to maximize its profit the firm illustrated in the figure above would

To increase its profit, a perfectly competitive firm will produce more output when

Normal profit is

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

A market is ________ when a small number of firms compete.

Because perfectly competitive firms are price takers, each firm faces a demand that is

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

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Fiscal Policy and Monetary Policy

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Exam 11: Perfect Competition

In the long run, a perfectly competitive firm makes zero economic profit. What incentive does the firm have to stay in business if it is making zero economic profit?

For a perfectly competitive sugar producer in Haiti, a short-run economic profit will occur if the price of each ton of sugar sold is

If perfectly competitive firms are making an economic profit, then

If a firm shuts down, it

11.4 Chapter Figures The figure above shows a firm's total revenue and total cost curves. -When the firm maximizes its profit, it produces ________ cans per day.

If a perfectly competitive wheat farmer is maximizing its profit and then increases its output, the farmer's

A firm in perfect competition is a price taker because

The price for the shutdown point ________.

Pineapple growing is a perfectly competitive industry. How does the market demand curve for pineapples compare to the demand curve for an individual pineapple grower?

The table below shows the total cost schedule for a perfectly competitive firm. The market price is $250 per unit. Complete the table. Quantity (units) Total cost (dollars) Total revenue (dollars) Profit or loss (dollars) 0 400 1 550 2 600 3 650 4 740 5 850 6 990 7 1,140 8 1,400 9 1,690

If perfectly firms are making an economic profit, then

As a perfectly competitive firm produces more and more of a good, its economic profit

Suppose the price of a can was $5.14. In this case, to maximize its profit the firm illustrated in the figure above would

To increase its profit, a perfectly competitive firm will produce more output when

Normal profit is

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

A market is ________ when a small number of firms compete.

Because perfectly competitive firms are price takers, each firm faces a demand that is

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters