Question 1

If a firm shuts down in the short run,its maximum loss equals the amount of its fixed cost.

Accepted Answer

A) True 
 B)False

Question 2

At the profit-maximizing level of output for a perfectly competitive firm,

Accepted Answer

A)  price equals marginal cost. 
B)  average revenue equals average variable cost and price equals marginal cost. 
C)  marginal revenue equals marginal cost and average total cost equals average fixed cost. 
D)  price equals average revenue and marginal cost equals average variable cost. 
A)  price equals marginal cost. 
B)  average revenue equals average variable cost and price equals marginal cost. 
C)  marginal revenue equals marginal cost and average total cost equals average fixed cost. 
D)  price equals average revenue and marginal cost equals average variable cost.

Question 3

Profit is the difference between

Accepted Answer

A)  marginal revenue and marginal cost. 
B)  total revenue and variable cost. 
C)  total revenue and total explicit cost. 
D)  total revenue and total cost. 
A)  marginal revenue and marginal cost. 
B)  total revenue and variable cost. 
C)  total revenue and total explicit cost. 
D)  total revenue and total cost.

Question 4

In the mid-1990s,cattle ranchers in the United States kept raising cattle even though prices were at a ten-year low and below average total cost.What is the likely explanation for this?

Accepted Answer

A)  Continuing to operate resulted in smaller losses than would have been incurred by shutting down. 
B)  The ranchers were hoping to receive government subsidies. 
C)  The exit costs were too high. 
D)  Cattle is an important source of protein and its production is essential for the United States. 
A)  Continuing to operate resulted in smaller losses than would have been incurred by shutting down. 
B)  The ranchers were hoping to receive government subsidies. 
C)  The exit costs were too high. 
D)  Cattle is an important source of protein and its production is essential for the United States.

Question 5

Suppose the equilibrium price in a perfectly competitive industry is $10 and a firm in the industry charges $12.Which of the following will happen?

Accepted Answer

A)  The firm will sell more output than its competitors. 
B)  The firm's revenue will increase. 
C)  The firm will not sell any output. 
D)  The firm's profits will increase. 
A)  The firm will sell more output than its competitors. 
B)  The firm's revenue will increase. 
C)  The firm will not sell any output. 
D)  The firm's profits will increase.

Question 6

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

Accepted Answer

A) MR AVC. C) MR > AVC. D) AFC < AVC. A) MR AVC. C) MR > AVC. D) AFC < AVC.

Question 7

According to the Department of Agriculture, net farm income in 2017 will rise from $61.5 billion in 2016 to $63.4 billion in 2017, a modest 3.1 percent increase but also the first increase since 2013. Much of the increase came from the sales of grain inventory, along with increased revenue from milk and livestock. The net income for 2017 is still only about half of its peak level, and according to agricultural economist David Widmar, income closer to $72 billion would be a sign of an improving farm economy.
Source: Alan Bjerga and Jeff Wilson, "First U.S. Farm-Income Gain in Four Years Signals Hope of Bottom," bloomberg.com, August 30, 2017.
-Refer to the Article Summary.Assume that the increase in net farm income in 2017 was a result of average total cost falling from being equal to the market price to slightly below the market price at the output level where marginal cost equals marginal revenue.This indicates that the market went from

Accepted Answer

A)  breaking even to earning a profit. 
B)  suffering a loss to breaking even. 
C)  suffering a loss to earning a profit. 
D)  earning a profit to suffering a loss. 
A)  breaking even to earning a profit. 
B)  suffering a loss to breaking even. 
C)  suffering a loss to earning a profit. 
D)  earning a profit to suffering a loss.

Question 8

Table 9-4
 $\begin{array}{|c|c|c|c|}
\hline \text { Quantity } & \begin{array}{c}
\text { Average } \
\text { Fixed Cost }
\end{array} & \begin{array}{c}
\text { Average } \
\text { Variable Cost }
\end{array} & \begin{array}{c}
\text { Marginal } \
\text { Cost }
\end{array} \
\hline 20 & \$ 40 & \$ 18 & \$ 18 \
\hline 40 & 20 & 14 & 10 \
\hline 60 & 13.1 & 16 & 20 \
\hline 80 & 10 & 22 & 40 \
\hline 100 & 8 & 30 & 62 \
\hline 120 & 6.61 & 40 & 90 \
\hline
\end{array}$ Table 9-4 shows the short-run cost data of a perfectly competitive firm. Assume that output can only be increased in batches of 20 units.
-Refer to Table 9-4.If the market price is $45 the firm will produce

Accepted Answer

A)  60 units. 
B)  80 units. 
C)  100 units. 
D)  120 units. 
A)  60 units. 
B)  80 units. 
C)  100 units. 
D)  120 units.

Question 9

Figure 9-13
  
-Refer to Figure 9-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.In the long-run equilibrium

Accepted Answer

A)  there will be fewer firms in the industry and total industry output decreases. 
B)  there will be more firms in the industry and total industry output increases. 
C)  there will be fewer firms in the industry but total industry output increases. 
D)  there will be more firms in the industry and total industry output remains constant. 
A)  there will be fewer firms in the industry and total industry output decreases. 
B)  there will be more firms in the industry and total industry output increases. 
C)  there will be fewer firms in the industry but total industry output increases. 
D)  there will be more firms in the industry and total industry output remains constant.

Question 10

Marginal revenue is

Accepted Answer

A)  total revenue divided by the total quantity of output. 
B)  the change in profit divided by the change in the quantity of output. 
C)  the change in total revenue divided by the change in total cost. 
D)  the change in total revenue divided by the change in the quantity of output. 
A)  total revenue divided by the total quantity of output. 
B)  the change in profit divided by the change in the quantity of output. 
C)  the change in total revenue divided by the change in total cost. 
D)  the change in total revenue divided by the change in the quantity of output.

Question 11

The marginal revenue curve for a perfectly competitive firm

Accepted Answer

A)  is downward-sloping. 
B)  is the same as its demand curve. 
C)  is perfectly inelastic. 
D)  is the same as its marginal cost curve. 
A)  is downward-sloping. 
B)  is the same as its demand curve. 
C)  is perfectly inelastic. 
D)  is the same as its marginal cost curve.

Question 12

Figure 9-2
  
-Refer to Figure 9-2.Why is the total revenue curve a ray from the origin?

Accepted Answer

A)  because revenue increases at an increasing rate 
B)  because revenue increases at a decreasing rate 
C)  because the firm can sell its product at a constant price 
D)  because the firm must lower its price to sell more 
A)  because revenue increases at an increasing rate 
B)  because revenue increases at a decreasing rate 
C)  because the firm can sell its product at a constant price 
D)  because the firm must lower its price to sell more

Question 13

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102,then the firm is probably producing more than its profit-maximizing quantity.

Accepted Answer

A) True 
 B)False

Question 14

If a firm's total variable cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Accepted Answer

A) True 
 B)False

Question 15

In a graph with output on the horizontal axis and total revenue on the vertical axis,what is the shape of the total revenue curve for a perfectly competitive seller?

Accepted Answer

A)  U-shaped 
B)  inverted U-shaped 
C)  a horizontal line 
D)  a ray from the origin 
A)  U-shaped 
B)  inverted U-shaped 
C)  a horizontal line 
D)  a ray from the origin

Question 16

Figure 9-9
   Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 9-9.At price P₁,the firm would produce

Accepted Answer

A)  Q₁ units 
B)  Q₃ units. 
C)  Q₅ units. 
D)  zero units. 
A)  Q₁ units 
B)  Q₃ units. 
C)  Q₅ units. 
D)  zero units.

Question 17

Figure 9-20
  
-Refer to Figure 9-20.If the market price is P₁,what is the allocatively efficient output level?

Accepted Answer

A)  Q₀ 
B)  Q₁ 
C)  Q₂ 
D)  There is no allocatively efficient output level because the firm is making a loss. 
A)  Q₀ 
B)  Q₁ 
C)  Q₂ 
D)  There is no allocatively efficient output level because the firm is making a loss.

Question 18

If price is equal to average variable cost,then a perfectly competitive firm breaks even.

Accepted Answer

A) True 
 B)False

Question 19

In the long run,a perfectly competitive market will

Accepted Answer

A)  produce only the quantity of output that yields a long-run profit for the typical firm. 
B)  supply whatever amount consumers will buy at a price which earns the market an economic profit. 
C)  supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve. 
D)  generate a long-run equilibrium where the typical firm operates at a loss. 
A)  produce only the quantity of output that yields a long-run profit for the typical firm. 
B)  supply whatever amount consumers will buy at a price which earns the market an economic profit. 
C)  supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve. 
D)  generate a long-run equilibrium where the typical firm operates at a loss.

Question 20

In a perfectly competitive market the term "price taker" applies to

Accepted Answer

A)  sellers and buyers. 
B)  sellers but not buyers. 
C)  buyers but not sellers. 
D)  only the smallest sellers and buyers. 
A)  sellers and buyers. 
B)  sellers but not buyers. 
C)  buyers but not sellers. 
D)  only the smallest sellers and buyers.

If a firm shuts down in the short run,its maximum loss equals the amount of its fixed cost.

At the profit-maximizing level of output for a perfectly competitive firm,

Profit is the difference between

In the mid-1990s,cattle ranchers in the United States kept raising cattle even though prices were at a ten-year low and below average total cost.What is the likely explanation for this?

Suppose the equilibrium price in a perfectly competitive industry is $10 and a firm in the industry charges $12.Which of the following will happen?

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

Figure 9-13 -Refer to Figure 9-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.In the long-run equilibrium

Marginal revenue is

The marginal revenue curve for a perfectly competitive firm

Figure 9-2 -Refer to Figure 9-2.Why is the total revenue curve a ray from the origin?

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102,then the firm is probably producing more than its profit-maximizing quantity.

If a firm's total variable cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

In a graph with output on the horizontal axis and total revenue on the vertical axis,what is the shape of the total revenue curve for a perfectly competitive seller?

Figure 9-9 Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 9-9.At price P₁,the firm would produce

Figure 9-20 -Refer to Figure 9-20.If the market price is P₁,what is the allocatively efficient output level?

If price is equal to average variable cost,then a perfectly competitive firm breaks even.

In the long run,a perfectly competitive market will

In a perfectly competitive market the term "price taker" applies to

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,Production,and Costs

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

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Exam 9: Firms in Perfectly Competitive Markets

If a firm shuts down in the short run,its maximum loss equals the amount of its fixed cost.

At the profit-maximizing level of output for a perfectly competitive firm,

Profit is the difference between

In the mid-1990s,cattle ranchers in the United States kept raising cattle even though prices were at a ten-year low and below average total cost.What is the likely explanation for this?

Suppose the equilibrium price in a perfectly competitive industry is $10 and a firm in the industry charges $12.Which of the following will happen?

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

Figure 9-13 -Refer to Figure 9-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.In the long-run equilibrium

Marginal revenue is

The marginal revenue curve for a perfectly competitive firm

Figure 9-2 -Refer to Figure 9-2.Why is the total revenue curve a ray from the origin?

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102,then the firm is probably producing more than its profit-maximizing quantity.

If a firm's total variable cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

In a graph with output on the horizontal axis and total revenue on the vertical axis,what is the shape of the total revenue curve for a perfectly competitive seller?

Figure 9-9 Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 9-9.At price P₁,the firm would produce

Figure 9-20 -Refer to Figure 9-20.If the market price is P₁,what is the allocatively efficient output level?

If price is equal to average variable cost,then a perfectly competitive firm breaks even.

In the long run,a perfectly competitive market will

In a perfectly competitive market the term "price taker" applies to

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: The Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, The Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology,Production,and Costs

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, The Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money,Banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, International Trade, and Exchange Rates

Filters