Question 1

To maximize profits in the short run,a perfectly competitive firm will produce that output at which:

Accepted Answer

A) marginal revenue equals demand. 
B) price equals marginal revenue. 
C) price equals marginal cost. 
D) marginal revenue equals average total cost. 
E) total revenue equals total cost. 
A) marginal revenue equals demand. 
B) price equals marginal revenue. 
C) price equals marginal cost. 
D) marginal revenue equals average total cost. 
E) total revenue equals total cost.

Question 2

When the marginal costs,of firms in perfect competition increases,the short-run supply curve of the industry will shift to the left.

Accepted Answer

A) True 
 B)False

Question 3

If losses are incurred in a competitive industry,then over the long run we can expect a greater quantity supplied because market price will rise.

Accepted Answer

A) True 
 B)False

Question 4

If in the short run,at the profit maximizing level of output,the average revenue curve of a competitive firm lies above the average cost curve:

Accepted Answer

A) the firm is incurring losses. 
B) the firm is just able to cover its total cost. 
C) the firm enjoys above-normal profits. 
D) the firm must shut down. 
E) the firm is barely able to cover its variable costs. 
A) the firm is incurring losses. 
B) the firm is just able to cover its total cost. 
C) the firm enjoys above-normal profits. 
D) the firm must shut down. 
E) the firm is barely able to cover its variable costs.

Question 5

A perfectly competitive firm produces 50 units of output at equilibrium in the short run.The total cost borne by the firm is $300 and the average revenue is $2.Therefore:

Accepted Answer

A) is just breaking even. 
B) is earning positive profits. 
C) is facing a positively sloped demand curve. 
D) is suffering losses. 
E) is experiencing diseconomies of scale. 
A) is just breaking even. 
B) is earning positive profits. 
C) is facing a positively sloped demand curve. 
D) is suffering losses. 
E) is experiencing diseconomies of scale.

Question 6

The figure given below shows the revenue and the cost curves of a perfectly competitive firm. Figure 9.3  
- Refer to Figure 9.3 and identify the price level at which the firm earns only normal profit.

Accepted Answer

A) $4 
B) $8 
C) $10 
D) $2 
E) $14 
A) $4 
B) $8 
C) $10 
D) $2 
E) $14

Question 7

Graphically,producer surplus is the area:

Accepted Answer

A) above the equilibrium price and below the demand curve. 
B) below the equilibrium price and below the supply curve. 
C) above the supply curve and below the demand curve. 
D) below the equilibrium price and above the supply curve. 
E) below the equilibrium price and above the demand curve. 
A) above the equilibrium price and below the demand curve. 
B) below the equilibrium price and below the supply curve. 
C) above the supply curve and below the demand curve. 
D) below the equilibrium price and above the supply curve. 
E) below the equilibrium price and above the demand curve.

Question 8

The market-demand curve for a product in a perfectly competitive market:

Accepted Answer

A) is horizontal. 
B) is downward sloping. 
C) is vertical. 
D) has elasticity equal to 1. 
E) is positively sloped. 
A) is horizontal. 
B) is downward sloping. 
C) is vertical. 
D) has elasticity equal to 1. 
E) is positively sloped.

Question 9

The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 9.1   In Figure 9.1,the firm maximizes its profit at an output level of _____ units.

Accepted Answer

A) R 
B) S 
C) T 
D) U 
E) V 
A) R 
B) S 
C) T 
D) U 
E) V

Question 10

In the short run a competitive firm is said to break-even if,at the equilibrium:

Accepted Answer

A) price is equal to marginal revenue. 
B) price is equal to average revenue. 
C) price is equal to average variable cost. 
D) price is equal to the average total cost. 
E) price is equal to marginal cost. 
A) price is equal to marginal revenue. 
B) price is equal to average revenue. 
C) price is equal to average variable cost. 
D) price is equal to the average total cost. 
E) price is equal to marginal cost.

Question 11

In which of the following situations will a perfectly competitive firm's profit always increase when it increases its output?

Accepted Answer

A) When price is greater than marginal revenue 
B) When price is less than marginal revenue 
C) When price is greater than marginal cost 
D) When price is less than marginal cost 
E) When price is equal to marginal cost 
A) When price is greater than marginal revenue 
B) When price is less than marginal revenue 
C) When price is greater than marginal cost 
D) When price is less than marginal cost 
E) When price is equal to marginal cost

Question 12

In the long run,a perfectly competitive firm will produce:

Accepted Answer

A) in the upward-sloping portion of its LRAC curve. 
B) where P = minimum AVC. 
C) in the downward-sloping portion of its LRAC curve. 
D) where P is greater than minimum ATC. 
E) where P = minimum ATC. 
A) in the upward-sloping portion of its LRAC curve. 
B) where P = minimum AVC. 
C) in the downward-sloping portion of its LRAC curve. 
D) where P is greater than minimum ATC. 
E) where P = minimum ATC.

Question 13

The figure given below shows the demand and cost curves of a perfectly competitive firm. Figure: 9.4   
D: Demand curve
MC: Marginal cost curve
ATC: Average-total cost curve
AVC: Average-variable-cost curve
-Refer to Figure 9.4.The presence of the average-variable-cost curve suggests that the firm is operating:

Accepted Answer

A) in the short run. 
B) in the long run. 
C) at a gain. 
D) in a monopoly. 
E) at a zero profit. 
A) in the short run. 
B) in the long run. 
C) at a gain. 
D) in a monopoly. 
E) at a zero profit.

Question 14

If a perfectly competitive firm's price increases,then:

Accepted Answer

A) the marginal-cost curve will shift up. 
B) the demand curve faced by the firm will shift to the left. 
C) marginal cost will fall as output declines. 
D) the marginal-revenue curve for the firm will shift up. 
E) the marginal-cost curve for the firm will shift down. 
A) the marginal-cost curve will shift up. 
B) the demand curve faced by the firm will shift to the left. 
C) marginal cost will fall as output declines. 
D) the marginal-revenue curve for the firm will shift up. 
E) the marginal-cost curve for the firm will shift down.

Question 15

At the twenty-fifth anniversary of the Woodstock Festival in 1994,there were many vendors who sold tie-dyed t-shirts.No matter where one went,each vendor was selling these t-shirts for $15 apiece.Which market structure model would best characterize such a situation?

Accepted Answer

A) Perfect competition 
B) Monopolistic competition 
C) Monopoly 
D) Oligopoly 
E) Duopoly 
A) Perfect competition 
B) Monopolistic competition 
C) Monopoly 
D) Oligopoly 
E) Duopoly

Question 16

A perfectly competitive firm faces the downward sloping market demand curve.

Accepted Answer

A) True 
 B)False

Question 17

A perfectly competitive firm incurs loss in the short run if at the profit maximizing level of output:

Accepted Answer

A) the marginal revenue curve lies below the marginal cost curve. 
B) the marginal revenue curve lies above the average revenue curve. 
C) the average cost curve lies below the average revenue curve. 
D) the average revenue curve lies below the average cost curve. 
E) marginal revenue curve lies above the marginal cost curve. 
A) the marginal revenue curve lies below the marginal cost curve. 
B) the marginal revenue curve lies above the average revenue curve. 
C) the average cost curve lies below the average revenue curve. 
D) the average revenue curve lies below the average cost curve. 
E) marginal revenue curve lies above the marginal cost curve.

Question 18

A firm's break-even price is the price that is just equal to the minimum point of the AVC curve in the short run.

Accepted Answer

A) True 
 B)False

Question 19

An individual firm in perfect competition can exercise a significant control over the market price of the good.

Accepted Answer

A) True 
 B)False

Question 20

The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 9.2   
MC: Marginal cost curve
MR: Marginal revenue curve
ATC: Average-total-cost curve
AVC: Average-variable-cost curve
-According to Figure 9.2,the break-even price of the firm is:

Accepted Answer

A) $30. 
B) $50. 
C) $20. 
D) $10. 
E) $35. 
A) $30. 
B) $50. 
C) $20. 
D) $10. 
E) $35.

Exam 9: Perfect Competition

To maximize profits in the short run,a perfectly competitive firm will produce that output at which:

When the marginal costs,of firms in perfect competition increases,the short-run supply curve of the industry will shift to the left.

If losses are incurred in a competitive industry,then over the long run we can expect a greater quantity supplied because market price will rise.

If in the short run,at the profit maximizing level of output,the average revenue curve of a competitive firm lies above the average cost curve:

A perfectly competitive firm produces 50 units of output at equilibrium in the short run.The total cost borne by the firm is $300 and the average revenue is $2.Therefore:

The figure given below shows the revenue and the cost curves of a perfectly competitive firm. Figure 9.3 - Refer to Figure 9.3 and identify the price level at which the firm earns only normal profit.

Graphically,producer surplus is the area:

The market-demand curve for a product in a perfectly competitive market:

The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 9.1 In Figure 9.1,the firm maximizes its profit at an output level of _____ units.

In the short run a competitive firm is said to break-even if,at the equilibrium:

In which of the following situations will a perfectly competitive firm's profit always increase when it increases its output?

In the long run,a perfectly competitive firm will produce:

If a perfectly competitive firm's price increases,then:

At the twenty-fifth anniversary of the Woodstock Festival in 1994,there were many vendors who sold tie-dyed t-shirts.No matter where one went,each vendor was selling these t-shirts for $15 apiece.Which market structure model would best characterize such a situation?

A perfectly competitive firm faces the downward sloping market demand curve.

A perfectly competitive firm incurs loss in the short run if at the profit maximizing level of output:

A firm's break-even price is the price that is just equal to the minimum point of the AVC curve in the short run.

An individual firm in perfect competition can exercise a significant control over the market price of the good.

The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 9.2 MC: Marginal cost curve MR: Marginal revenue curve ATC: Average-total-cost curve AVC: Average-variable-cost curve -According to Figure 9.2,the break-even price of the firm is:

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Consumer Choice

Supply: The Costs of Doing Business

Profit Maximization

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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