Question 1

-Consider the perfectly competitive firm in the above figure. The profit maximizing level of output for the firm is equal to

Accepted Answer

A)  0 units. 
B)  14 units. 
C)  17 units. 
D)  19 units. 
A)  0 units. 
B)  14 units. 
C)  17 units. 
D)  19 units.

Question 2

-Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price of a tattoo is $17.50, what is the firm's economic profit?

Accepted Answer

A)  zero 
B)  $2.50 per hour 
C)  $12.50 per hour 
D)  -$10.00 per hour 
A)  zero 
B)  $2.50 per hour 
C)  $12.50 per hour 
D)  -$10.00 per hour

Question 3

What must be the case if a perfectly competitive firm's economic loss is less by shutting down rather than by producing and selling some output?

Accepted Answer

If a firm's economic loss is greater whe

Question 4

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

Accepted Answer

A)  P = MR 
B)  P = ATC 
C)  MR = ATC 
D)  P = AVC 
A)  P = MR 
B)  P = ATC 
C)  MR = ATC 
D)  P = AVC

Question 5

For a perfectly competitive firm, no matter how much the firm produces, price always equals

Accepted Answer

A)  marginal product. 
B)  average total cost. 
C)  minimum average total cost. 
D)  marginal revenue. 
A)  marginal product. 
B)  average total cost. 
C)  minimum average total cost. 
D)  marginal revenue.

Question 6

-In the above figure, if the price is P1, the firm maximizes its profit by producing

Accepted Answer

A)  nothing. 
B)  where MC equals ATC. 
C)  where MC equals P1. 
D)  where ATC equals P1. 
A)  nothing. 
B)  where MC equals ATC. 
C)  where MC equals P1. 
D)  where ATC equals P1.

Question 7

Why does the profit-maximizing level of production occur at the point where marginal revenue equals marginal cost?

Accepted Answer

If a firm produces at a level where marg

Question 8

Bubba's BBQ has fallen on some hard times. Bubba has analyzed his past revenue and cost information and knows that if he shuts down, he will incur an economic loss equal to $20,000 in remaining lease payments. Apparently, Bubba's current planning horizon is

Accepted Answer

A)  the short run because he still faces some fixed costs. 
B)  the long run because he faces only variable costs. 
C)  the short run because he faces only variable costs. 
D)  neither the short run nor the long run because lease payments do not figure into cost determinations. 
A)  the short run because he still faces some fixed costs. 
B)  the long run because he faces only variable costs. 
C)  the short run because he faces only variable costs. 
D)  neither the short run nor the long run because lease payments do not figure into cost determinations.

Question 9

In the long run, a perfectly competitive firm can

Accepted Answer

A)  only make an economic profit. 
B)  only make zero economic profit. 
C)  only incur an economic loss. 
D)  make an economic profit, make zero economic profit, or incur an economic loss. 
A)  only make an economic profit. 
B)  only make zero economic profit. 
C)  only incur an economic loss. 
D)  make an economic profit, make zero economic profit, or incur an economic loss.

Question 10

In the long run, perfectly competitive firms cannot make an economic profit. Why?

Accepted Answer

An economic profit attracts entry by new

Question 11

In perfect competition, ________.

Accepted Answer

A)  there are restrictions on entry into the market 
B)  firms in the market have advantages over firms that plan to enter the market 
C)  only firms know their competitors' prices 
D)  there are many firms that sell identical products 
A)  there are restrictions on entry into the market 
B)  firms in the market have advantages over firms that plan to enter the market 
C)  only firms know their competitors' prices 
D)  there are many firms that sell identical products

Question 12

The economic profit of a perfectly competitive firm

Accepted Answer

A)  is less than its total revenue. 
B)  equals its total revenue. 
C)  is greater than its total revenue. 
D)  is less than its total revenue if its supply curve is inelastic and is greater than its total revenue if its supply curve is elastic. 
A)  is less than its total revenue. 
B)  equals its total revenue. 
C)  is greater than its total revenue. 
D)  is less than its total revenue if its supply curve is inelastic and is greater than its total revenue if its supply curve is elastic.

Question 13

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

Accepted Answer

If the demand for wheat decreases, the p

Question 14

-In the above figure, the vertical distance between the ATC and AVC curves is

Accepted Answer

A)  the marginal cost. 
B)  the total cost. 
C)  the average fixed costs. 
D)  None of the above answers is correct. 
A)  the marginal cost. 
B)  the total cost. 
C)  the average fixed costs. 
D)  None of the above answers is correct.

Question 15

A perfectly competitive firm's marginal revenue exceeds its marginal cost at its current output. To increase its profit, the firm will

Accepted Answer

A)  lower its price. 
B)  raise its price. 
C)  decrease its output. 
D)  increase its output. 
A)  lower its price. 
B)  raise its price. 
C)  decrease its output. 
D)  increase its output.

Question 16

If firms in a perfectly competitive industry are making zero economic profit, then

Accepted Answer

A)  some of those firms will leave the industry, because firms cannot persistently go without making economic profit. 
B)  new firms will enter the industry, because the new entrants would be ensured of doing as well as in their best foregone alternative. 
C)  there is no incentive for either entry or exit. 
D)  some of the firms will temporarily shut down. 
A)  some of those firms will leave the industry, because firms cannot persistently go without making economic profit. 
B)  new firms will enter the industry, because the new entrants would be ensured of doing as well as in their best foregone alternative. 
C)  there is no incentive for either entry or exit. 
D)  some of the firms will temporarily shut down.

Question 17

A perfectly competitive firm definitely will shut down in the short run if its price is below its average total cost.

Accepted Answer

A) True 
 B)False

Question 18

-Which of the following is NOT present in a perfectly competitive market?

Accepted Answer

A)  profit maximizing firms 
B)  an economic profit in the long run 
C)  price taking behavior 
D)  identical products 
A)  profit maximizing firms 
B)  an economic profit in the long run 
C)  price taking behavior 
D)  identical products

Question 19

Fresno County, California is the largest agricultural producing county in the country and almonds are an important crop with more than 99,000 acres harvested. Each acre produces about a ton of almonds and sold at a price of $4300 a ton. The Sagardia Brothers grew 600 acres of almonds that year and they are price takers. What is the Brother's total revenue?

Accepted Answer

A)  $4300 
B)  $4900 
C)  $59.4 million 
D)  $2.58 million 
A)  $4300 
B)  $4900 
C)  $59.4 million 
D)  $2.58 million

Question 20

A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue will

Accepted Answer

A)  rise and its total variable cost will rise even more. 
B)  rise and its total variable cost will rise, but not by as much. 
C)  fall but its total variable cost will rise. 
D)  fall and its total variable cost will fall, but not by as much. 
A)  rise and its total variable cost will rise even more. 
B)  rise and its total variable cost will rise, but not by as much. 
C)  fall but its total variable cost will rise. 
D)  fall and its total variable cost will fall, but not by as much.

-Consider the perfectly competitive firm in the above figure. The profit maximizing level of output for the firm is equal to

-Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price of a tattoo is $17.50, what is the firm's economic profit?

What must be the case if a perfectly competitive firm's economic loss is less by shutting down rather than by producing and selling some output?

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

For a perfectly competitive firm, no matter how much the firm produces, price always equals

-In the above figure, if the price is P₁, the firm maximizes its profit by producing

Why does the profit-maximizing level of production occur at the point where marginal revenue equals marginal cost?

Bubba's BBQ has fallen on some hard times. Bubba has analyzed his past revenue and cost information and knows that if he shuts down, he will incur an economic loss equal to $20,000 in remaining lease payments. Apparently, Bubba's current planning horizon is

In the long run, a perfectly competitive firm can

In the long run, perfectly competitive firms cannot make an economic profit. Why?

In perfect competition, ________.

The economic profit of a perfectly competitive firm

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

-In the above figure, the vertical distance between the ATC and AVC curves is

A perfectly competitive firm's marginal revenue exceeds its marginal cost at its current output. To increase its profit, the firm will

If firms in a perfectly competitive industry are making zero economic profit, then

A perfectly competitive firm definitely will shut down in the short run if its price is below its average total cost.

-Which of the following is NOT present in a perfectly competitive market?

A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue will

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 12: Perfect Competition

-Consider the perfectly competitive firm in the above figure. The profit maximizing level of output for the firm is equal to

-Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price of a tattoo is $17.50, what is the firm's economic profit?

What must be the case if a perfectly competitive firm's economic loss is less by shutting down rather than by producing and selling some output?

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

For a perfectly competitive firm, no matter how much the firm produces, price always equals

-In the above figure, if the price is P1, the firm maximizes its profit by producing

Why does the profit-maximizing level of production occur at the point where marginal revenue equals marginal cost?

Bubba's BBQ has fallen on some hard times. Bubba has analyzed his past revenue and cost information and knows that if he shuts down, he will incur an economic loss equal to $20,000 in remaining lease payments. Apparently, Bubba's current planning horizon is

In the long run, a perfectly competitive firm can

In the long run, perfectly competitive firms cannot make an economic profit. Why?

In perfect competition, ________.

The economic profit of a perfectly competitive firm

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

-In the above figure, the vertical distance between the ATC and AVC curves is

A perfectly competitive firm's marginal revenue exceeds its marginal cost at its current output. To increase its profit, the firm will

If firms in a perfectly competitive industry are making zero economic profit, then

A perfectly competitive firm definitely will shut down in the short run if its price is below its average total cost.

-Which of the following is NOT present in a perfectly competitive market?

A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue will

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

-In the above figure, if the price is P₁, the firm maximizes its profit by producing