Question 1

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 2

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 3

Firms exit a competitive market when they incur an economic loss. In the long run, this exit means that the economic losses of the surviving firms

Accepted Answer

A) increase. 
B) decrease until they equal zero. 
C) decrease until economic profits are earned. 
D) do not change. 
E) might change but more information is needed about what happens to the price of the good as the firms exit. 
A) increase. 
B) decrease until they equal zero. 
C) decrease until economic profits are earned. 
D) do not change. 
E) might change but more information is needed about what happens to the price of the good as the firms exit.

Question 4

Consider a short-run equilibrium in a perfectly competitive market. Suppose that the firms' average total cost and marginal cost schedules differ. In the short run,

Accepted Answer

A) all firms in the market must be able to make an economic profit. 
B) all firms produce equal amounts of output. 
C) some firms might incur an economic loss, but still produce output. 
D) some firms might make an economic profit and, as a result, shut down. 
E) all firms in the market must be able to make either positive or zero economic profit. 
A) all firms in the market must be able to make an economic profit. 
B) all firms produce equal amounts of output. 
C) some firms might incur an economic loss, but still produce output. 
D) some firms might make an economic profit and, as a result, shut down. 
E) all firms in the market must be able to make either positive or zero economic profit.

Question 5

If concerns about mad-cow disease impose economic losses on the perfectly competitive cattle ranchers, exit by the ranchers combined with no further changes in the demand for beef will force the price of beef to

Accepted Answer

A) decrease. 
B) not change. 
C) increase. 
D) fluctuate, with the trend being lower prices. 
E) probably change, but more information about the market supply of beef is needed to answer the question. 
A) decrease. 
B) not change. 
C) increase. 
D) fluctuate, with the trend being lower prices. 
E) probably change, but more information about the market supply of beef is needed to answer the question.

Question 6

Technological change

Accepted Answer

A) usually requires an investment in a new plant. 
B) is implemented in the short run. 
C) almost always increases the costs of production. 
D) almost always increases the variable costs of production. 
E) cannot help a firm to earn an economic profit in either the short run or the long run. 
A) usually requires an investment in a new plant. 
B) is implemented in the short run. 
C) almost always increases the costs of production. 
D) almost always increases the variable costs of production. 
E) cannot help a firm to earn an economic profit in either the short run or the long run.

Question 7

Which of the following will increase a perfectly competitive seller's short-run supply and shift the firm's short-run supply curve rightward?

Accepted Answer

A) an increase in the market price 
B) a decrease in average fixed costs 
C) a decrease in marginal cost 
D) Both answers A and B are correct. 
E) Both answers A and C are correct. 
A) an increase in the market price 
B) a decrease in average fixed costs 
C) a decrease in marginal cost 
D) Both answers A and B are correct. 
E) Both answers A and C are correct.

Question 8

-The above figure shows a perfectly competitive firm. If the market price is $5 per unit, the firm

Accepted Answer

A) will definitely shut down to minimize its losses. 
B) will stay open to produce and will make zero economic profit. 
C) will stay open to produce and will incur an economic loss. 
D) will stay open to produce and will make an economic profit. 
E) might shut down but more information is needed about the fixed cost. 
A) will definitely shut down to minimize its losses. 
B) will stay open to produce and will make zero economic profit. 
C) will stay open to produce and will incur an economic loss. 
D) will stay open to produce and will make an economic profit. 
E) might shut down but more information is needed about the fixed cost.

Question 9

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 10

-The above figure shows a perfectly competitive firm. If the market price is $5, the firm

Accepted Answer

A) might shut down but more information is needed about the AVC. 
B) is making an economic profit. 
C) is making zero economic profit. 
D) will immediately shut down. 
E) will not shut down. 
A) might shut down but more information is needed about the AVC. 
B) is making an economic profit. 
C) is making zero economic profit. 
D) will immediately shut down. 
E) will not shut down.

Question 11

As a result of firms leaving the perfectly competitive frozen yogurt market in the early 2000s, the market

Accepted Answer

A) supply curve shifted leftward. 
B) supply curve did not change. 
C) demand curve shifted rightward. 
D) supply curve shifted rightward. 
E) demand curve shifted leftward. 
A) supply curve shifted leftward. 
B) supply curve did not change. 
C) demand curve shifted rightward. 
D) supply curve shifted rightward. 
E) demand curve shifted leftward.

Question 12

Shama is producing candles in a perfectly competitive market. When she produces 500 candles, her total cost is $250. If she produces one additional candle, her total cost increases to $260. In order to maximize her profit, she should produce the additional candle

Accepted Answer

A) if the market price for a candle is $12. 
B) only if the market price exceeds $260 for a candle. 
C) only if the market price exceeds $250 for a candle. 
D) if the market price for a candle exceeds $0.50. 
E) if her price exceeds her average total cost. 
A) if the market price for a candle is $12. 
B) only if the market price exceeds $260 for a candle. 
C) only if the market price exceeds $250 for a candle. 
D) if the market price for a candle exceeds $0.50. 
E) if her price exceeds her average total cost.

Question 13

For the perfectly competitive broccoli producers in California, the market demand curve for broccoli is

Accepted Answer

A) a horizontal line. 
B) downward sloping. 
C) nonexistent. 
D) upward sloping. 
E) the same as the demand curve each firm faces. 
A) a horizontal line. 
B) downward sloping. 
C) nonexistent. 
D) upward sloping. 
E) the same as the demand curve each firm faces.

Question 14

The demand curve faced by a perfectly competitive firm is

Accepted Answer

A) horizontal. 
B) vertical. 
C) downward sloping. 
D) upward sloping. 
E) U-shaped. 
A) horizontal. 
B) vertical. 
C) downward sloping. 
D) upward sloping. 
E) U-shaped.

Question 15

The above figure shows some a firm's cost curves and its marginal revenue curve.
-Based on the figure above, what is the price of a can?

Accepted Answer

A) $0 
B) $3.00 per can 
C) $5.15 per can 
D) None of the above prices is correct. 
E) More information is needed to determine the price of a can. 
A) $0 
B) $3.00 per can 
C) $5.15 per can 
D) None of the above prices is correct. 
E) More information is needed to determine the price of a can.

Question 16

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 17

$$\begin{array}{l}
\text { Quantity }\
\begin{array} { c c c } 
\begin{array} { c } 
\text { (bushels of } \
\text { rutabagas) }
\end{array} & \begin{array} { c } 
\text { Total revenue } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Total cost } \
\text { (dollars) }
\end{array} \
\hline 0 & 0 & 12 \
1 & 10 & 22 \
2 & 20 & 28 \
3 & 30 & 30 \
4 & 40 & 31 \
5 & 50 & 34 \
6 & 60 & 45 \
7 & 70 & 59 \
8 & 80 & 80
\end{array}
\end{array}$$
-The above table has the total revenue and total cost schedule for Omar, a perfectly competitive grower of rutabagas. When Omar produces 2 bushels of rutabagas, his total profit equals

Accepted Answer

A) $0. 
B) $20. 
C) $28. 
D) -$8. 
E) $48. 
A) $0. 
B) $20. 
C) $28. 
D) -$8. 
E) $48.

Question 18

Under what conditions would a perfectly competitive cotton farmer who is incurring an economic loss temporarily stay in business?

Accepted Answer

A) if the total revenue exceeds the total fixed cost 
B) if the total revenue exceeds the total variable cost 
C) if the total revenue is positive 
D) if the total revenue is increasing 
E) if the marginal revenue exceeds the price. 
A) if the total revenue exceeds the total fixed cost 
B) if the total revenue exceeds the total variable cost 
C) if the total revenue is positive 
D) if the total revenue is increasing 
E) if the marginal revenue exceeds the price.

Question 19

A perfectly competitive firm will shut down when the price is just below the minimum point on the

Accepted Answer

A) average fixed cost curve. 
B) average total cost curve. 
C) marginal cost curve. 
D) average variable cost curve. 
E) marginal revenue curve. 
A) average fixed cost curve. 
B) average total cost curve. 
C) marginal cost curve. 
D) average variable cost curve. 
E) marginal revenue curve.

Question 20

When one firm sells a good or service that has no close substitutes and a barrier blocks the entry of new firms, what type of market is this?

Accepted Answer

A) perfect competition 
B) only monopoly 
C) oligopoly 
D) only monopolistic competition 
E) either monopoly or monopolistic competition 
A) perfect competition 
B) only monopoly 
C) oligopoly 
D) only monopolistic competition 
E) either monopoly or monopolistic competition

A firm that is a price taker faces

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

Firms exit a competitive market when they incur an economic loss. In the long run, this exit means that the economic losses of the surviving firms

Consider a short-run equilibrium in a perfectly competitive market. Suppose that the firms' average total cost and marginal cost schedules differ. In the short run,

If concerns about mad-cow disease impose economic losses on the perfectly competitive cattle ranchers, exit by the ranchers combined with no further changes in the demand for beef will force the price of beef to

Technological change

Which of the following will increase a perfectly competitive seller's short-run supply and shift the firm's short-run supply curve rightward?

-The above figure shows a perfectly competitive firm. If the market price is $5 per unit, the firm

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

-The above figure shows a perfectly competitive firm. If the market price is $5, the firm

As a result of firms leaving the perfectly competitive frozen yogurt market in the early 2000s, the market

Shama is producing candles in a perfectly competitive market. When she produces 500 candles, her total cost is $250. If she produces one additional candle, her total cost increases to $260. In order to maximize her profit, she should produce the additional candle

For the perfectly competitive broccoli producers in California, the market demand curve for broccoli is

The demand curve faced by a perfectly competitive firm is

The above figure shows some a firm's cost curves and its marginal revenue curve. -Based on the figure above, what is the price of a can?

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

Under what conditions would a perfectly competitive cotton farmer who is incurring an economic loss temporarily stay in business?

A perfectly competitive firm will shut down when the price is just below the minimum point on the

When one firm sells a good or service that has no close substitutes and a barrier blocks the entry of new firms, what type of market is this?

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

Exam 11: Perfect Competition

A firm that is a price taker faces

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

Firms exit a competitive market when they incur an economic loss. In the long run, this exit means that the economic losses of the surviving firms

Consider a short-run equilibrium in a perfectly competitive market. Suppose that the firms' average total cost and marginal cost schedules differ. In the short run,

If concerns about mad-cow disease impose economic losses on the perfectly competitive cattle ranchers, exit by the ranchers combined with no further changes in the demand for beef will force the price of beef to

Technological change

Which of the following will increase a perfectly competitive seller's short-run supply and shift the firm's short-run supply curve rightward?

-The above figure shows a perfectly competitive firm. If the market price is $5 per unit, the firm

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

-The above figure shows a perfectly competitive firm. If the market price is $5, the firm

As a result of firms leaving the perfectly competitive frozen yogurt market in the early 2000s, the market

Shama is producing candles in a perfectly competitive market. When she produces 500 candles, her total cost is $250. If she produces one additional candle, her total cost increases to $260. In order to maximize her profit, she should produce the additional candle

For the perfectly competitive broccoli producers in California, the market demand curve for broccoli is

The demand curve faced by a perfectly competitive firm is

The above figure shows some a firm's cost curves and its marginal revenue curve. -Based on the figure above, what is the price of a can?

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

Under what conditions would a perfectly competitive cotton farmer who is incurring an economic loss temporarily stay in business?

A perfectly competitive firm will shut down when the price is just below the minimum point on the

When one firm sells a good or service that has no close substitutes and a barrier blocks the entry of new firms, what type of market is this?

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