Question 1

If the price of a product falls below average total cost in the short run,the firm

Accepted Answer

A)  has an economic profit. 
B)  cannot cover total fixed costs. 
C)  experiences a loss. 
D)  must always shut down. 
E)  should expand output until MC = MR. 
A)  has an economic profit. 
B)  cannot cover total fixed costs. 
C)  experiences a loss. 
D)  must always shut down. 
E)  should expand output until MC = MR. C

Question 2

Perfect competition is defined as market structure in which:

Accepted Answer

A)  there are many small sellers. 
B)  the product is homogeneous. 
C)  it is very easy for firms to enter or exit the market. 
D)  all of the above. 
A)  there are many small sellers. 
B)  the product is homogeneous. 
C)  it is very easy for firms to enter or exit the market. 
D)  all of the above. D

Question 3

Exhibit 7-7 A firm's cost and MR curves
  
-In Exhibit 7-7,if this firm is currently producing 20 units of output,this firm:

Accepted Answer

A)  is at its profit-maximizing point. 
B)  is losing $20. 
C)  is earning a total profit of $60. 
D)  should shut down. 
E)  is earning a total profit of $3. 
A)  is at its profit-maximizing point. 
B)  is losing $20. 
C)  is earning a total profit of $60. 
D)  should shut down. 
E)  is earning a total profit of $3. C

Question 4

Exhibit 7-18 A typical firm in a perfectly competitive market
  
-As shown in Exhibit 7-18,the perfectly competitive firm is in long-run equilibrium at an output of:

Accepted Answer

The answer of Exhibit 7-18 A typical firm in a...

Question 5

A firm is currently operating where the MC of the last unit produced = $84,and the MR of this unit = $70.What would you advise this firm to do?

Accepted Answer

A)  Shut down. 
B)  Increase output. 
C)  Stay at its current output. 
D)  Decrease output. 
E)  Decrease price. 
A)  Shut down. 
B)  Increase output. 
C)  Stay at its current output. 
D)  Decrease output. 
E)  Decrease price.

Question 6

If a perfectly competitive firm charges more than the market price,then it loses all of its customers.

Accepted Answer

A) True 
 B)False

Question 7

The supply curve of a price-taker firm in the short run is the:

Accepted Answer

A)  firm's average variable cost curve. 
B)  portion of the firm's average total cost curve that lies above average variable cost curve. 
C)  portion of the firm's marginal cost curve that lies above average variable cost curve. 
D)  firm's marginal revenue curve. 
A)  firm's average variable cost curve. 
B)  portion of the firm's average total cost curve that lies above average variable cost curve. 
C)  portion of the firm's marginal cost curve that lies above average variable cost curve. 
D)  firm's marginal revenue curve.

Question 8

If marginal revenue exceeds marginal cost,profit maximizers should:

Accepted Answer

A)  reduce output until they are equal. 
B)  increase output until they are equal. 
C)  increase output until profits are zero. 
D)  decrease output unless profits are zero. 
E)  maintain current output. 
A)  reduce output until they are equal. 
B)  increase output until they are equal. 
C)  increase output until profits are zero. 
D)  decrease output unless profits are zero. 
E)  maintain current output.

Question 9

In short-run perfectly competitive equilibrium,which of the following is always true?

Accepted Answer

A)  Profit equals zero. 
B)  Profit can be negative, zero, or positive. 
C)  Profit can be zero or positive, but not negative. 
D)  Profit is positive, otherwise firms would not produce. 
A)  Profit equals zero. 
B)  Profit can be negative, zero, or positive. 
C)  Profit can be zero or positive, but not negative. 
D)  Profit is positive, otherwise firms would not produce.

Question 10

If a potato farmer expands output,he finds that the increase in total revenue is less than the increase in total costs.This means that:

Accepted Answer

A)  profit is being maximized. 
B)  he should not have expanded output. 
C)  he should produce even more output. 
D)  the firm is wasting resources. 
E)  the farmer should go out of business. 
A)  profit is being maximized. 
B)  he should not have expanded output. 
C)  he should produce even more output. 
D)  the firm is wasting resources. 
E)  the farmer should go out of business.

Question 11

Marginal revenue is the change in:

Accepted Answer

A)  total revenue resulting from a one unit change in output. 
B)  total revenue resulting from a change in marginal cost. 
C)  price resulting from a one unit change in output. 
D)  none of the above. 
A)  total revenue resulting from a one unit change in output. 
B)  total revenue resulting from a change in marginal cost. 
C)  price resulting from a one unit change in output. 
D)  none of the above.

Question 12

Exhibit 7-10 Price and cost data for a firm
  
-In Exhibit 7-10,the maximum possible total profit is:

Accepted Answer

A)  $36. 
B)  $24. 
C)  $20. 
D)  $12. 
E)  $8. 
A)  $36. 
B)  $24. 
C)  $20. 
D)  $12. 
E)  $8.

Question 13

Exhibit 7-12 Marginal revenue and cost per unit curves
  
-As shown in Exhibit 7-12,the price that will yield zero economic profit is:

Accepted Answer

A)  OA. 
B)  OB. 
C)  OC. 
D)  OD. 
A)  OA. 
B)  OB. 
C)  OC. 
D)  OD.

Question 14

A portrait photographer produces output in packages of 100 photos each.If the output sold increases from 600 to 700 photos,total revenue increases from $1,200 to $1,400.The marginal revenue per photo is:

Accepted Answer

A)  $200. 
B)  $100. 
C)  $20. 
D)  $2. 
E)  $1. 
A)  $200. 
B)  $100. 
C)  $20. 
D)  $2. 
E)  $1.

Question 15

The profit maximizing,or loss minimizing quantity of output for any firm to produce exists at that output level in which:

Accepted Answer

A)  total revenue is maximized. 
B)  total cost is minimized. 
C)  marginal cost is minimized. 
D)  marginal revenue equals marginal cost. 
A)  total revenue is maximized. 
B)  total cost is minimized. 
C)  marginal cost is minimized. 
D)  marginal revenue equals marginal cost.

Question 16

In the long-run equilibrium for a perfectly competitive firm,price equals which of the following?

Accepted Answer

A)  price. 
B)  minimum short-run average total cost. 
C)  short-run marginal cost. 
D)  All of the above. 
A)  price. 
B)  minimum short-run average total cost. 
C)  short-run marginal cost. 
D)  All of the above.

Question 17

Exhibit 7-12 Marginal revenue and cost per unit curves
  
-The firm shown in Exhibit 7-12 will:

Accepted Answer

A)  produce where marginal cost equals marginal revenue. 
B)  be a price taker. 
C)  not produce below a price of OA. 
D)  all of the above. 
A)  produce where marginal cost equals marginal revenue. 
B)  be a price taker. 
C)  not produce below a price of OA. 
D)  all of the above.

Question 18

In long-run equilibrium,a competitive firm produces the level of output at which:

Accepted Answer

A)  marginal cost is at a minimum. 
B)  short-run average total cost and long-run average cost are at a minimum. 
C)  total revenue is at a maximum. 
D)  diseconomies of scale end. 
A)  marginal cost is at a minimum. 
B)  short-run average total cost and long-run average cost are at a minimum. 
C)  total revenue is at a maximum. 
D)  diseconomies of scale end.

Question 19

A firm in a price-taker market:

Accepted Answer

A)  must take the price that is determined in the market. 
B)  must reduce its price if it wants to sell a larger quantity. 
C)  must be large relative to the total market. 
D)  can exert a major influence on the market price. 
A)  must take the price that is determined in the market. 
B)  must reduce its price if it wants to sell a larger quantity. 
C)  must be large relative to the total market. 
D)  can exert a major influence on the market price.

Question 20

A perfectly competitive industry must have a perfectly elastic long-run supply curve.

Accepted Answer

A) True 
 B)False

Exam 7: Perfect Competition

If the price of a product falls below average total cost in the short run,the firm

Perfect competition is defined as market structure in which:

Exhibit 7-7 A firm's cost and MR curves -In Exhibit 7-7,if this firm is currently producing 20 units of output,this firm:

Exhibit 7-18 A typical firm in a perfectly competitive market -As shown in Exhibit 7-18,the perfectly competitive firm is in long-run equilibrium at an output of:

A firm is currently operating where the MC of the last unit produced = $84,and the MR of this unit = $70.What would you advise this firm to do?

If a perfectly competitive firm charges more than the market price,then it loses all of its customers.

The supply curve of a price-taker firm in the short run is the:

If marginal revenue exceeds marginal cost,profit maximizers should:

In short-run perfectly competitive equilibrium,which of the following is always true?

If a potato farmer expands output,he finds that the increase in total revenue is less than the increase in total costs.This means that:

Marginal revenue is the change in:

Exhibit 7-10 Price and cost data for a firm -In Exhibit 7-10,the maximum possible total profit is:

Exhibit 7-12 Marginal revenue and cost per unit curves -As shown in Exhibit 7-12,the price that will yield zero economic profit is:

A portrait photographer produces output in packages of 100 photos each.If the output sold increases from 600 to 700 photos,total revenue increases from $1,200 to $1,400.The marginal revenue per photo is:

The profit maximizing,or loss minimizing quantity of output for any firm to produce exists at that output level in which:

In the long-run equilibrium for a perfectly competitive firm,price equals which of the following?

Exhibit 7-12 Marginal revenue and cost per unit curves -The firm shown in Exhibit 7-12 will:

In long-run equilibrium,a competitive firm produces the level of output at which:

A firm in a price-taker market:

A perfectly competitive industry must have a perfectly elastic long-run supply curve.

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

Filters