Question 1

The marginal revenue curve for a perfectly competitive firm is

Accepted Answer

A)  an upward sloping curve. 
B)  a downward sloping curve. 
C)  a horizontal line. 
D)  None of the above answers is correct. 
A)  an upward sloping curve. 
B)  a downward sloping curve. 
C)  a horizontal line. 
D)  None of the above answers is correct.

Question 2

The firms in a perfectly competitive are making an economic profit when new firms enter. The entry shifts the short-run market supply curve ________, the market price ________, and each firm's economic profit ________.

Accepted Answer

A)  leftward; rises; decreases 
B)  rightward; rises; increases 
C)  rightward; falls; decreases 
D)  leftward; falls; decreases 
A)  leftward; rises; decreases 
B)  rightward; rises; increases 
C)  rightward; falls; decreases 
D)  leftward; falls; decreases

Question 3

-If there are 1,000 rutabaga farms, all perfectly competitive, an increase in the price of fertilizer used for growing rutabagas will

Accepted Answer

A)  have no effect on the total quantity of rutabagas supplied, because no farm has enough market power to raise the price. 
B)  have no effect on the total quantity of rutabagas supplied, because each farm's supply curve is a vertical line. 
C)  decrease the total quantity of rutabagas supplied, because each farm's supply curve shifts leftward. 
D)  reduce the total quantity of rutabagas supplied, because each farm's supply curve is a horizontal line and will shift upward. 
A)  have no effect on the total quantity of rutabagas supplied, because no farm has enough market power to raise the price. 
B)  have no effect on the total quantity of rutabagas supplied, because each farm's supply curve is a vertical line. 
C)  decrease the total quantity of rutabagas supplied, because each farm's supply curve shifts leftward. 
D)  reduce the total quantity of rutabagas supplied, because each farm's supply curve is a horizontal line and will shift upward.

Question 4

The owners will shut down a perfectly competitive firm if the price of its good falls below its minimum

Accepted Answer

A)  average total cost. 
B)  average marginal cost. 
C)  average variable cost. 
D)  wage rate. 
A)  average total cost. 
B)  average marginal cost. 
C)  average variable cost. 
D)  wage rate.

Question 5

A worldwide hops (a flowers used in brewing) shortage made stouts, ales and other specialty microbrews more pricy in 2008. Gayle Goshie, a hops farmer, blames overproduction for hops' previously cheap place on the agricultural market. The glut pushed many hop farmers out business, which gradually helped hop prices recover. Suppose farming hops is a perfectly competitive market. Why would some hop farmers go out of business?

Accepted Answer

A)  because the price of hops was below the minimum of average fixed cost 
B)  because the price of hops was lower than the minimum of average variable cost 
C)  because the price of hops was higher than the minimum of average variable cost 
D)  because the price of hops was lower than the minimum of average total cost 
A)  because the price of hops was below the minimum of average fixed cost 
B)  because the price of hops was lower than the minimum of average variable cost 
C)  because the price of hops was higher than the minimum of average variable cost 
D)  because the price of hops was lower than the minimum of average total cost

Question 6

A worldwide hops (a flower used in brewing) shortage made stouts, ales and other specialty microbrews more pricy in 2008. Gayle Goshie, a hops farmer, blames overproduction for hops' previously cheap place on the agricultural market. The glut pushed many hops farmers out business, which gradually helped hops prices recover. Suppose farming hops is a perfectly competitive market. How did farmers going out of business help hops prices recover?

Accepted Answer

A)  Fewer farmers cause the market supply curve to shift leftward, causing price to rise. 
B)  Fewer farmers cause an increase in market demand, causing price to rise. 
C)  Fewer farmers cause an increase in the surviving firms' costs, causing higher prices. 
D)  Fewer farmers cause the individual firms' supply curves to decrease, causing higher prices. 
A)  Fewer farmers cause the market supply curve to shift leftward, causing price to rise. 
B)  Fewer farmers cause an increase in market demand, causing price to rise. 
C)  Fewer farmers cause an increase in the surviving firms' costs, causing higher prices. 
D)  Fewer farmers cause the individual firms' supply curves to decrease, causing higher prices.

Question 7

In the long-run equilibrium, perfectly competitive firms produce the level of output such that

Accepted Answer

A)  marginal cost is minimized. 
B)  average total cost is minimized. 
C)  marginal cost equals the price. 
D)  Both answers B and C are correct. 
A)  marginal cost is minimized. 
B)  average total cost is minimized. 
C)  marginal cost equals the price. 
D)  Both answers B and C are correct.

Question 8

In a perfectly competitive market

Accepted Answer

A)  each firm sets its own price so that it is different from its competitors. 
B)  an economic profit is certain. 
C)  each firm takes the good's price as given to it by the market. 
D)  consumers are persuaded by advertising. 
A)  each firm sets its own price so that it is different from its competitors. 
B)  an economic profit is certain. 
C)  each firm takes the good's price as given to it by the market. 
D)  consumers are persuaded by advertising.

Question 9

What role does economic profit play in a competitive market?

Accepted Answer

Economic profit acts as a signal to entr

Question 10

-In the above figure, if the price is P1, the firm is

Accepted Answer

A)  making an economic profit. 
B)  incurring an economic loss. 
C)  making zero economic profit. 
D)  earning enough revenue to pay all of its opportunity costs. 
A)  making an economic profit. 
B)  incurring an economic loss. 
C)  making zero economic profit. 
D)  earning enough revenue to pay all of its opportunity costs.

Question 11

In the short run, a firm will

Accepted Answer

A)  not produce if its total revenue does not cover its total cost. 
B)  produce and incur an economic loss if its total revenue covers its total variable cost but not its total cost. 
C)  produce and break even if its total revenue covers its total fixed cost but not its total variable cost. 
D)  produce and earn an economic profit if its total revenue is equal to its total cost. 
A)  not produce if its total revenue does not cover its total cost. 
B)  produce and incur an economic loss if its total revenue covers its total variable cost but not its total cost. 
C)  produce and break even if its total revenue covers its total fixed cost but not its total variable cost. 
D)  produce and earn an economic profit if its total revenue is equal to its total cost.

Question 12

In a perfectly competitive market, a permanent decrease in demand initially brings a lower price, economic

Accepted Answer

A)  loss, and entry into the market. 
B)  loss, and exit from the market. 
C)  profit, and entry into the market. 
D)  profit, and exit from the market. 
A)  loss, and entry into the market. 
B)  loss, and exit from the market. 
C)  profit, and entry into the market. 
D)  profit, and exit from the market.

Question 13

A perfectly competitive firm's marginal cost exceeds its marginal revenue 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 14

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 ________ and its profit will ________.

Accepted Answer

A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall 
A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall

Question 15

Homer's Holesome Donuts has determined that its profit-maximizing quantity is 10,000 donuts per year. Homer's earns $12,000 in revenue from the sale of those donuts. Homer's has two costs. First he pays $16,000 in annual rental payments for its five-year lease on its store. Second Homer incurs an additional cost of $5,000 for ingredients. Should Homer's shut down in the short run?

Accepted Answer

A)  Yes, because he is incurring an economic loss. 
B)  Yes, because he cannot cover all of his fixed costs. 
C)  No, because is making positive economic profit. 
D)  No, because he can cover all of his variable costs. 
A)  Yes, because he is incurring an economic loss. 
B)  Yes, because he cannot cover all of his fixed costs. 
C)  No, because is making positive economic profit. 
D)  No, because he can cover all of his variable costs.

Question 16

If a perfectly competitive market is in long-run equilibrium and there is a permanent decrease in demand, then

Accepted Answer

A)  some firms will incur economic losses. 
B)  firms are no longer maximizing profits. 
C)  some firms must immediately exit. 
D)  each firm must produce less output in the new long run equilibrium and earn less economic profit. 
A)  some firms will incur economic losses. 
B)  firms are no longer maximizing profits. 
C)  some firms must immediately exit. 
D)  each firm must produce less output in the new long run equilibrium and earn less economic profit.

Question 17

-Consider the perfectly competitive firm in the above figure. The shutdown point occurs at a price of

Accepted Answer

A)  $11.00. 
B)  $12.00. 
C)  $16.00. 
D)  $22.00. 
A)  $11.00. 
B)  $12.00. 
C)  $16.00. 
D)  $22.00.

Question 18

-The figure above shows the costs for a grower in the perfectly competitive turnip industry. If the price is $1,400 for a ton of turnips, the firm is

Accepted Answer

A)  making an economic profit. 
B)  making zero economic profit. 
C)  incurring an economic loss. 
D)  More information is needed to determine if the firm is making a positive economic profit, zero economic profit, or incurring an economic loss. 
A)  making an economic profit. 
B)  making zero economic profit. 
C)  incurring an economic loss. 
D)  More information is needed to determine if the firm is making a positive economic profit, zero economic profit, or incurring an economic loss.

Question 19

Homer's Holesome Donuts has determined that its profit-maximizing quantity is 10,000 donuts per year. Homer's earns $12,000 in revenue from the sale of those donuts. Homer's has two costs. First he pays $16,000 in annual rental payments for its five-year lease on its store. Second Homer incurs an additional cost of $5,000 for ingredients. Homer's economic profit is equal to

Accepted Answer

A)  -$16,000, that is, an economic loss of $16,000. 
B)  -$9,000, that is, an economic loss of $9,000. 
C)  +$9,000. 
D)  +$12,000. 
A)  -$16,000, that is, an economic loss of $16,000. 
B)  -$9,000, that is, an economic loss of $9,000. 
C)  +$9,000. 
D)  +$12,000.

Question 20

-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 $12.50 and if Archibald's does not shut down, what is the firm's profit-maximizing output?

Accepted Answer

A)  2 tattoos per hour 
B)  3 tattoos per hour 
C)  4 tattoos per hour 
D)  5 tattoos per hour 
A)  2 tattoos per hour 
B)  3 tattoos per hour 
C)  4 tattoos per hour 
D)  5 tattoos per hour

The marginal revenue curve for a perfectly competitive firm is

The firms in a perfectly competitive are making an economic profit when new firms enter. The entry shifts the short-run market supply curve , the market price , and each firm's economic profit .

-If there are 1,000 rutabaga farms, all perfectly competitive, an increase in the price of fertilizer used for growing rutabagas will

The owners will shut down a perfectly competitive firm if the price of its good falls below its minimum

In the long-run equilibrium, perfectly competitive firms produce the level of output such that

In a perfectly competitive market

What role does economic profit play in a competitive market?

-In the above figure, if the price is P₁, the firm is

In the short run, a firm will

In a perfectly competitive market, a permanent decrease in demand initially brings a lower price, economic

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

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 and its profit will .

If a perfectly competitive market is in long-run equilibrium and there is a permanent decrease in demand, then

-Consider the perfectly competitive firm in the above figure. The shutdown point occurs at a price of

-The figure above shows the costs for a grower in the perfectly competitive turnip industry. If the price is $1,400 for a ton of turnips, the firm is

-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 $12.50 and if Archibald's does not shut down, what is the firm's profit-maximizing output?

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

The marginal revenue curve for a perfectly competitive firm is

The firms in a perfectly competitive are making an economic profit when new firms enter. The entry shifts the short-run market supply curve ________, the market price ________, and each firm's economic profit ________.

-If there are 1,000 rutabaga farms, all perfectly competitive, an increase in the price of fertilizer used for growing rutabagas will

The owners will shut down a perfectly competitive firm if the price of its good falls below its minimum

In the long-run equilibrium, perfectly competitive firms produce the level of output such that

In a perfectly competitive market

What role does economic profit play in a competitive market?

-In the above figure, if the price is P1, the firm is

In the short run, a firm will

In a perfectly competitive market, a permanent decrease in demand initially brings a lower price, economic

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

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 ________ and its profit will ________.

If a perfectly competitive market is in long-run equilibrium and there is a permanent decrease in demand, then

-Consider the perfectly competitive firm in the above figure. The shutdown point occurs at a price of

-The figure above shows the costs for a grower in the perfectly competitive turnip industry. If the price is $1,400 for a ton of turnips, the firm is

-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 $12.50 and if Archibald's does not shut down, what is the firm's profit-maximizing output?

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

The firms in a perfectly competitive are making an economic profit when new firms enter. The entry shifts the short-run market supply curve , the market price , and each firm's economic profit .

-In the above figure, if the price is P₁, the firm is

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 and its profit will .