Question 1

If a firm is currently equating MR and MC and product price = $24,AVC = $22,and ATC = $26,then in the long run this firm:

Accepted Answer

A)  will continue to operate at a loss. 
B)  will earn a positive profit. 
C)  will go out of business. 
D)  should increase output. 
E)  should decrease price. 
A)  will continue to operate at a loss. 
B)  will earn a positive profit. 
C)  will go out of business. 
D)  should increase output. 
E)  should decrease price.

Question 2

Under perfect competition,which of the following are the same (equal)at all levels of output?

Accepted Answer

A)  Price and marginal cost. 
B)  Price and marginal revenue. 
C)  Marginal cost and marginal revenue. 
D)  All of the above. 
A)  Price and marginal cost. 
B)  Price and marginal revenue. 
C)  Marginal cost and marginal revenue. 
D)  All of the above.

Question 3

If a firm equates MR and MC,then:

Accepted Answer

A)  TR is at a maximum, and TC is at a minimum. 
B)  output is at a maximum. 
C)  losses are at a maximum. 
D)  profits are at a maximum or losses are at a minimum. 
E)  both TR and TC are at a maximum. 
A)  TR is at a maximum, and TC is at a minimum. 
B)  output is at a maximum. 
C)  losses are at a maximum. 
D)  profits are at a maximum or losses are at a minimum. 
E)  both TR and TC are at a maximum.

Question 4

Exhibit 16 Short-run cost curves for a competitive firm
  
-In Exhibit 7-16,suppose the firm faces a price of $80 per unit.How much should the firm produce to earn the largest possible profit?

Accepted Answer

A)  2 units per hour. 
B)  4 units per hour. 
C)  5 units per hour. 
D)  6 units per hour. 
A)  2 units per hour. 
B)  4 units per hour. 
C)  5 units per hour. 
D)  6 units per hour.

Question 5

If a business firm is not operating at the point where MR = MC,then:

Accepted Answer

A)  it should shut down. 
B)  it will incur losses. 
C)  it cannot be earning a profit. 
D)  its profit is zero. 
E)  it is not earning the maximum potential profit. 
A)  it should shut down. 
B)  it will incur losses. 
C)  it cannot be earning a profit. 
D)  its profit is zero. 
E)  it is not earning the maximum potential profit.

Question 6

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)  could increase profits by increasing output. 
C)  could increase profits by decreasing output. 
D)  should shut down. 
E)  should decrease price. 
A)  is at its profit-maximizing point. 
B)  could increase profits by increasing output. 
C)  could increase profits by decreasing output. 
D)  should shut down. 
E)  should decrease price.

Question 7

If a firm's marginal revenue from its 100th unit of output is $50 and the marginal cost from its 100th unit of output is $45,then in the short run this firm should:

Accepted Answer

A)  increase its plant size. 
B)  change its technology. 
C)  produce more than 99 units of output. 
D)  produce less than 100 units of output. 
E)  shut down. 
A)  increase its plant size. 
B)  change its technology. 
C)  produce more than 99 units of output. 
D)  produce less than 100 units of output. 
E)  shut down.

Question 8

When faced with an economic loss,a competitive firm will shut down its operations in the short run.

Accepted Answer

A) True 
 B)False

Question 9

If at some output level for a firm price exceeds average total cost,then the firm is earning an economic profit.

Accepted Answer

A) True 
 B)False

Question 10

Exhibit 7-9 A firm's cost and marginal revenue curves
  
-In Exhibit 7-9,product price in this market is fixed at $7.This firm is currently operating where MR = MC.What do you advise this firm to do?

Accepted Answer

A)  This firm should shut down. 
B)  This firm could increase profits by increasing output. 
C)  This firm could increase profits by decreasing output. 
D)  This firm should continue to operate at its current output. 
E)  This firm should decrease price. 
A)  This firm should shut down. 
B)  This firm could increase profits by increasing output. 
C)  This firm could increase profits by decreasing output. 
D)  This firm should continue to operate at its current output. 
E)  This firm should decrease price.

Question 11

When the price of a good is a constant,the marginal revenue per unit of output is the same as:

Accepted Answer

A)  total revenue. 
B)  average total cost. 
C)  price. 
D)  quantity of output. 
E)  profit per unit. 
A)  total revenue. 
B)  average total cost. 
C)  price. 
D)  quantity of output. 
E)  profit per unit.

Question 12

Exhibit 7-4 Marginal cost and revenue for a firm
  
-In Exhibit 4,what is this firm's profit-maximizing rate of output?

Accepted Answer

A)  13. 
B)  14. 
C)  15. 
D)  16. 
E)  17. 
A)  13. 
B)  14. 
C)  15. 
D)  16. 
E)  17.

Question 13

A perfectly competitive firm shuts down in the short-run when the market price is less than the average variable cost.

Accepted Answer

A) True 
 B)False

Question 14

The marginal approach to profit maximization means that a firm should produce until:

Accepted Answer

A)  marginal revenue equals zero. 
B)  marginal revenue equals marginal cost. 
C)  marginal cost becomes negatively sloped. 
D)  marginal revenue equals price. 
E)  price equals average total cost. 
A)  marginal revenue equals zero. 
B)  marginal revenue equals marginal cost. 
C)  marginal cost becomes negatively sloped. 
D)  marginal revenue equals price. 
E)  price equals average total cost.

Question 15

Exhibit 7-6 A firm's cost and MC curves
  
-In Exhibit 7-6,if this firm is currently producing 20 units of output,this firm:

Accepted Answer

A)  is earning a profit of $10. 
B)  is earning a profit of $.50. 
C)  is losing $10. 
D)  should shut down. 
E)  is losing $.50 
A)  is earning a profit of $10. 
B)  is earning a profit of $.50. 
C)  is losing $10. 
D)  should shut down. 
E)  is losing $.50

Question 16

In long-run equilibrium,the typical perfectly competitive firm has no incentive to:

Accepted Answer

A)  change output. 
B)  change plant size. 
C)  enter or leave the industry. 
D)  do any of the above. 
A)  change output. 
B)  change plant size. 
C)  enter or leave the industry. 
D)  do any of the above.

Question 17

Exhibit 7-3 Cost per unit curves
  
-As shown in Exhibit 7-3,the firm will produce in the short run if the price is at least equal to:

Accepted Answer

A)  $1.00 per unit (point 
A) . 
B)  $1.50 per unit (point 
B) . 
C)  $2.00 per unit (point 
C) . 
D)  $4.00 per unit (point 
D) . 
A)  $1.00 per unit (point 
A) . 
B)  $1.50 per unit (point 
B) . 
C)  $2.00 per unit (point 
C) . 
D)  $4.00 per unit (point 
D) .

Question 18

A fishing boat owner brings 50,000 fish to market and the market price is $4 per fish.Her average variable cost of 50,000 fish is $1 and the fixed cost of the boat is $100,000,what is her profit per fish?

Accepted Answer

A)  $1. 
B)  $500. 
C)  $5,000. 
D)  $25,000. 
E)  $500,000. 
A)  $1. 
B)  $500. 
C)  $5,000. 
D)  $25,000. 
E)  $500,000.

Question 19

A perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the:

Accepted Answer

A)  average total cost curve. 
B)  average variable cost curve. 
C)  average fixed curve. 
D)  average price curve. 
A)  average total cost curve. 
B)  average variable cost curve. 
C)  average fixed curve. 
D)  average price curve.

Question 20

Exhibit 7-4 Marginal cost and revenue for a firm
  
-In Exhibit 4,this firm is currently producing 16 units of output.What would you advise this firm to do?

Accepted Answer

A)  Decrease output to 13. 
B)  Increase output to 15. 
C)  Remain at 16 units of output. 
D)  Decrease output to 14. 
E)  Increase output to 17. 
A)  Decrease output to 13. 
B)  Increase output to 15. 
C)  Remain at 16 units of output. 
D)  Decrease output to 14. 
E)  Increase output to 17.

Exam 7: Perfect Competition

If a firm is currently equating MR and MC and product price = $24,AVC = $22,and ATC = $26,then in the long run this firm:

Under perfect competition,which of the following are the same (equal)at all levels of output?

If a firm equates MR and MC,then:

Exhibit 16 Short-run cost curves for a competitive firm -In Exhibit 7-16,suppose the firm faces a price of $80 per unit.How much should the firm produce to earn the largest possible profit?

If a business firm is not operating at the point where MR = MC,then:

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:

If a firm's marginal revenue from its 100th unit of output is $50 and the marginal cost from its 100th unit of output is $45,then in the short run this firm should:

When faced with an economic loss,a competitive firm will shut down its operations in the short run.

If at some output level for a firm price exceeds average total cost,then the firm is earning an economic profit.

Exhibit 7-9 A firm's cost and marginal revenue curves -In Exhibit 7-9,product price in this market is fixed at $7.This firm is currently operating where MR = MC.What do you advise this firm to do?

When the price of a good is a constant,the marginal revenue per unit of output is the same as:

Exhibit 7-4 Marginal cost and revenue for a firm -In Exhibit 4,what is this firm's profit-maximizing rate of output?

A perfectly competitive firm shuts down in the short-run when the market price is less than the average variable cost.

The marginal approach to profit maximization means that a firm should produce until:

Exhibit 7-6 A firm's cost and MC curves -In Exhibit 7-6,if this firm is currently producing 20 units of output,this firm:

In long-run equilibrium,the typical perfectly competitive firm has no incentive to:

Exhibit 7-3 Cost per unit curves -As shown in Exhibit 7-3,the firm will produce in the short run if the price is at least equal to:

A fishing boat owner brings 50,000 fish to market and the market price is $4 per fish.Her average variable cost of 50,000 fish is $1 and the fixed cost of the boat is $100,000,what is her profit per fish?

A perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the:

Exhibit 7-4 Marginal cost and revenue for a firm -In Exhibit 4,this firm is currently producing 16 units of output.What would you advise this firm to do?

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

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