Question 1

The demand for the product of a competitive price-taker firm is:

Accepted Answer

A)  perfectly inelastic. 
B)  perfectly elastic. 
C)  greater than zero but less than one. 
D)  dependent on the availability of substitutes for the firm's product. 
A)  perfectly inelastic. 
B)  perfectly elastic. 
C)  greater than zero but less than one. 
D)  dependent on the availability of substitutes for the firm's product.

Question 2

Assume a competitive market has firms earning large economic profits.What is expected to happen over time in this competitive market and to firm's profits?

Accepted Answer

Economic profits will attract new firms

Question 3

If a perfectly competitive firm sells 10 units of output at a market price of $5 per unit,its marginal revenue per unit is:

Accepted Answer

A)  $5. 
B)  $50. 
C)  more than $5 but less than $50. 
D)  less than $5. 
A)  $5. 
B)  $50. 
C)  more than $5 but less than $50. 
D)  less than $5.

Question 4

In the short run,the profit maximizing (or minimizing)quantity of output for any firm to produce exists at that output level at which marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 5

Suppose that you have returned from your fishing expedition with 20,000 fish.The market price is $3 per fish.Your average fixed cost was $1 and your total variable cost was $5,000.If the price jumps to $3.50 before you sell your first fish,how much extra profit,if any,do you earn?

Accepted Answer

A)  $10,000. 
B)  $25,000. 
C)  $30,000. 
D)  $45,000. 
E)  $70,000. 
A)  $10,000. 
B)  $25,000. 
C)  $30,000. 
D)  $45,000. 
E)  $70,000.

Question 6

Exhibit 7-2 Total revenue and total cost graph
  
-In Exhibit 7-2,if output is 200 units per week,economic profit for the firm is:

Accepted Answer

A)  zero. 
B)  at its minimum. 
C)  at its maximum. 
D)  none of the above. 
A)  zero. 
B)  at its minimum. 
C)  at its maximum. 
D)  none of the above.

Question 7

Exhibit 7-13 Price and cost per unit curves
  
-In Exhibit 7-13,if the price is P₃,total economic profit is maximized or economic loss minimized at the output:

Accepted Answer

A)  Q₁. 
B)  Q₂. 
C)  Q₃. 
D)  Q₄. 
E)  Q₅. 
A)  Q₁. 
B)  Q₂. 
C)  Q₃. 
D)  Q₄. 
E)  Q₅.

Question 8

Consider a firm with the following cost and revenue information: ATC = $8,AVC = $7,and MR = MC = $6.If the firm produces Q = 60 in the short run,it:

Accepted Answer

A)  is minimizing losses. 
B)  makes a total loss of $60. 
C)  should produce more output. 
D)  is making a mistake and should shut down. 
E)  is maximizing total profit. 
A)  is minimizing losses. 
B)  makes a total loss of $60. 
C)  should produce more output. 
D)  is making a mistake and should shut down. 
E)  is maximizing total profit.

Question 9

If a firm has no ability to select the price of its product,it:

Accepted Answer

A)  will go out of business due to losses. 
B)  is a price-maker. 
C)  cannot maximize profit. 
D)  has a horizontal individual demand curve. 
A)  will go out of business due to losses. 
B)  is a price-maker. 
C)  cannot maximize profit. 
D)  has a horizontal individual demand curve.

Question 10

Exhibit 7-4 Marginal cost and revenue for a firm
  
-In Exhibit 4,this firm is currently operating at its profit-maximizing level of output.How much profit is the firm earning?

Accepted Answer

A)  Zero. 
B)  $1. 
C)  $16. 
D)  -$16. 
E)  Unable to determine with this information. 
A)  Zero. 
B)  $1. 
C)  $16. 
D)  -$16. 
E)  Unable to determine with this information.

Question 11

-If the firm in Exhibit 7-14 minimizes its loss at 200 units of output,marginal cost is:

Accepted Answer

A)  $75 per unit. 
B)  equal to marginal revenue. 
C)  $100 per unit. 
D)  $175 per unit. 
A)  $75 per unit. 
B)  equal to marginal revenue. 
C)  $100 per unit. 
D)  $175 per unit.

Question 12

Exhibit 7-12 Marginal revenue and cost per unit curves
  
-As shown in Exhibit 7-12,the firm will not produce in the short-run if the price is below:

Accepted Answer

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

Question 13

Which of the following is true of a perfectly competitive firm?

Accepted Answer

A)  The firm is a price maker. 
B)  If the firm wishes to maximize profits it will produce an output level in which total revenue equals total cost. 
C)  The firm will not earn an economic profit in the long run. 
D)  The firm's short-run supply curve is its MC curve below its AVC curve. 
A)  The firm is a price maker. 
B)  If the firm wishes to maximize profits it will produce an output level in which total revenue equals total cost. 
C)  The firm will not earn an economic profit in the long run. 
D)  The firm's short-run supply curve is its MC curve below its AVC curve.

Question 14

What is a firm's short run supply curve?

Accepted Answer

A FIRM'S SHORT RUN SUPPLY CURV

Question 15

Marginal revenue is the change in:

Accepted Answer

A)  total profit brought about by selling one more unit of output. 
B)  price brought about by selling one more unit of output. 
C)  total revenue brought about by selling one more unit of output. 
D)  output brought about by a $1 change in product price. 
E)  average revenue brought about by selling one more unit of output. 
A)  total profit brought about by selling one more unit of output. 
B)  price brought about by selling one more unit of output. 
C)  total revenue brought about by selling one more unit of output. 
D)  output brought about by a $1 change in product price. 
E)  average revenue brought about by selling one more unit of output.

Question 16

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

Accepted Answer

A)  Economies of scale. 
B)  Minimum short-run average total cost. 
C)  The sum of each short-run marginal cost curve. 
D)  All of the above. 
A)  Economies of scale. 
B)  Minimum short-run average total cost. 
C)  The sum of each short-run marginal cost curve. 
D)  All of the above.

Question 17

What are the pros and cons of a competitive market in the long run?

Accepted Answer

The pros include price equals minimum av

Question 18

A perfectly competitive firm's short-run supply curve is the:

Accepted Answer

A)  average total cost curve. 
B)  demand curve above the marginal revenue curve. 
C)  same as the market supply curve. 
D)  marginal cost curve above the average variable cost curve. 
A)  average total cost curve. 
B)  demand curve above the marginal revenue curve. 
C)  same as the market supply curve. 
D)  marginal cost curve above the average variable cost curve.

Question 19

Exhibit 7-15 Short-run cost curves for E-Z Care lawn mowing company
  
-In Exhibit 7-15,what market price would cause E-Z-Care to just beak even?

Accepted Answer

A)  $6 per lawn. 
B)  $8 per lawn. 
C)  $12 per lawn. 
D)  $16 per lawn. 
A)  $6 per lawn. 
B)  $8 per lawn. 
C)  $12 per lawn. 
D)  $16 per lawn.

Question 20

If ABC Printing is producing an output level of 100,where MR is $5 and MC is $3,then the firm is:

Accepted Answer

A)  maximizing total profit. 
B)  making too much profit. 
C)  making $200 total profit. 
D)  making $200 total loss. 
E)  making an unknown amount of profit or loss. 
A)  maximizing total profit. 
B)  making too much profit. 
C)  making $200 total profit. 
D)  making $200 total loss. 
E)  making an unknown amount of profit or loss.

Exam 7: Perfect Competition

The demand for the product of a competitive price-taker firm is:

Assume a competitive market has firms earning large economic profits.What is expected to happen over time in this competitive market and to firm's profits?

If a perfectly competitive firm sells 10 units of output at a market price of $5 per unit,its marginal revenue per unit is:

In the short run,the profit maximizing (or minimizing)quantity of output for any firm to produce exists at that output level at which marginal revenue equals marginal cost.

Suppose that you have returned from your fishing expedition with 20,000 fish.The market price is $3 per fish.Your average fixed cost was $1 and your total variable cost was $5,000.If the price jumps to $3.50 before you sell your first fish,how much extra profit,if any,do you earn?

Exhibit 7-2 Total revenue and total cost graph -In Exhibit 7-2,if output is 200 units per week,economic profit for the firm is:

Exhibit 7-13 Price and cost per unit curves -In Exhibit 7-13,if the price is P₃,total economic profit is maximized or economic loss minimized at the output:

Consider a firm with the following cost and revenue information: ATC = $8,AVC = $7,and MR = MC = $6.If the firm produces Q = 60 in the short run,it:

If a firm has no ability to select the price of its product,it:

Exhibit 7-4 Marginal cost and revenue for a firm -In Exhibit 4,this firm is currently operating at its profit-maximizing level of output.How much profit is the firm earning?

-If the firm in Exhibit 7-14 minimizes its loss at 200 units of output,marginal cost is:

Exhibit 7-12 Marginal revenue and cost per unit curves -As shown in Exhibit 7-12,the firm will not produce in the short-run if the price is below:

Which of the following is true of a perfectly competitive firm?

What is a firm's short run supply curve?

Marginal revenue is the change in:

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

What are the pros and cons of a competitive market in the long run?

A perfectly competitive firm's short-run supply curve is the:

Exhibit 7-15 Short-run cost curves for E-Z Care lawn mowing company -In Exhibit 7-15,what market price would cause E-Z-Care to just beak even?

If ABC Printing is producing an output level of 100,where MR is $5 and MC is $3,then the firm is:

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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