Question 1

-The figure above shows the costs for a grower in the perfectly competitive turnip market. If the price is $1,200 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 2

-The apple market is perfectly competitive and is in long-run equilibrium. Now a disease kills 50 percent of the apple orchards. In the short run, the price of a bag of apples ________ and the remaining apple growers make ________ economic profit. In the long run, the ________.

Accepted Answer

A)  increases; zero; price of apples will return to their original level 
B)  remains the same; zero; orchards will be replanted and growers will make normal profits 
C)  increases; zero; orchards will be replanted and economic profit will return to zero 
D)  increases; positive; orchards will be replanted and economic profit will return to zero 
A)  increases; zero; price of apples will return to their original level 
B)  remains the same; zero; orchards will be replanted and growers will make normal profits 
C)  increases; zero; orchards will be replanted and economic profit will return to zero 
D)  increases; positive; orchards will be replanted and economic profit will return to zero

Question 3

"For a perfectly competitive market, an economic profit attracts new firms. But when these firms enter the market, the price falls and the economic profit is eliminated." Are the previous statements correct or incorrect? What is the long-run profit or loss outcome for firms in a perfectly competitive market?

Accepted Answer

The statements are correct. As the state

Question 4

-The market for milk is perfectly competitive. There are 1,000 farms in the industry and the relationship between a typical farm's output and total costs is the same as in Problem 2. The market demand schedule for milk is shown in the table above.
a) What is a typical farm's supply schedule and what is the market supply schedule?
b) What is the market price? What quantity of milk is sold?
c) What is the output produced by each farm? What type of profit or loss is made by each farm?
d) Do farms enter or exit the market?

Accepted Answer

@#IMG-DLM& a) A typical farm's supply schedule is

Question 5

-In the above figure, at what price does a perfectly competitive firm make zero economic profit?

Accepted Answer

A)  $4 per unit 
B)  $8 per unit 
C)  $12 per unit 
D)  $16 per unit 
A)  $4 per unit 
B)  $8 per unit 
C)  $12 per unit 
D)  $16 per unit

Question 6

-In the short run, a perfectly competitive firm

Accepted Answer

A)  can either make an economic profit, incur an economic loss, or make zero economic profit. 
B)  never incurs an economic loss larger than its average fixed costs. 
C)  produces at any price. 
D)  always makes an economic profit. 
A)  can either make an economic profit, incur an economic loss, or make zero economic profit. 
B)  never incurs an economic loss larger than its average fixed costs. 
C)  produces at any price. 
D)  always makes an economic profit.

Question 7

When Sidney's Sweaters, Inc. makes exactly zero economic profit, Sidney, the owner

Accepted Answer

A)  is taking a loss. 
B)  will shut down in the short run. 
C)  makes an income equal to his best alternative forgone income. 
D)  will boost output. 
A)  is taking a loss. 
B)  will shut down in the short run. 
C)  makes an income equal to his best alternative forgone income. 
D)  will boost output.

Question 8

-In the above table, if the firm sells 5 units of output, its total revenue is

Accepted Answer

A)  $15. 
B)  $30. 
C)  $75. 
D)  $90. 
A)  $15. 
B)  $30. 
C)  $75. 
D)  $90.

Question 9

-The figure above shows the marginal revenue and long-run cost curves for a perfectly competitive firm. All other firms in the industry have identical curves. Which of the following statements is TRUE?

Accepted Answer

A)  The firm's average cost exceeds the price. 
B)  Over time, firms will enter this industry. 
C)  The firm is earning economic profit. 
D)  None of the above is true. 
A)  The firm's average cost exceeds the price. 
B)  Over time, firms will enter this industry. 
C)  The firm is earning economic profit. 
D)  None of the above is true.

Question 10

-In the above figure, by increasing its output from Q2 to Q3, the firm

Accepted Answer

A)  reduces its marginal revenue. 
B)  increases its marginal revenue. 
C)  decreases its profit. 
D)  increases its profit. 
A)  reduces its marginal revenue. 
B)  increases its marginal revenue. 
C)  decreases its profit. 
D)  increases its profit.

Question 11

-Given the total cost and total revenue curves in the above figure, what are the output levels at which the perfect competitor will incur economic losses?

Accepted Answer

A)  below 80,000 bushels 
B)  from 30,000 to 80,000 bushels 
C)  below 30,000 bushels and over 80,000 bushels 
D)  at 30,000 bushels and at 80,000 bushels 
A)  below 80,000 bushels 
B)  from 30,000 to 80,000 bushels 
C)  below 30,000 bushels and over 80,000 bushels 
D)  at 30,000 bushels and at 80,000 bushels

Question 12

-In the above table, the firm

Accepted Answer

A)  must be in a perfectly competitive market because its marginal revenue is constant. 
B)  must be in a perfectly competitive market because its marginal cost curve eventually rises. 
C)  cannot be in a perfectly competitive market because its short-run economic profits are greater than zero. 
D)  cannot be in a perfectly competitive market because its long-run economic profits are greater than zero. 
A)  must be in a perfectly competitive market because its marginal revenue is constant. 
B)  must be in a perfectly competitive market because its marginal cost curve eventually rises. 
C)  cannot be in a perfectly competitive market because its short-run economic profits are greater than zero. 
D)  cannot be in a perfectly competitive market because its long-run economic profits are greater than zero.

Question 13

Suppose a perfectly competitive market is in long-run equilibrium. If there is a permanent increase in demand,

Accepted Answer

A)  at least in the short run, some firms will increase their output. 
B)  at least in the short run, the price will increase initially. 
C)  new firms will enter the market. 
D)  All of the above answers are correct. 
A)  at least in the short run, some firms will increase their output. 
B)  at least in the short run, the price will increase initially. 
C)  new firms will enter the market. 
D)  All of the above answers are correct.

Question 14

-The figure above shows a typical perfectly competitive corn farm, whose marginal cost curve is MC and average total cost curve is ATC. The market is initially in a long-run equilibrium, where the price is $3.00 per bushel. Then, the market demand for corn decreases and, in the short run, the price falls to $2.50 per bushel. In the long run, the price of corn is ________ and a typical farm produces ________ bushels of corn.

Accepted Answer

A)  $2.00; 200,000 
B)  $3.50; 250,000 
C)  $2.50; 250,000 
D)  $3.00; 300,000 
A)  $2.00; 200,000 
B)  $3.50; 250,000 
C)  $2.50; 250,000 
D)  $3.00; 300,000

Question 15

In the short run, a perfectly competitive firm might

Accepted Answer

A)  set its price above marginal cost. 
B)  set its price above marginal revenue. 
C)  adjust the size of its fixed inputs. 
D)  operate even though it is incurring an economic loss. 
A)  set its price above marginal cost. 
B)  set its price above marginal revenue. 
C)  adjust the size of its fixed inputs. 
D)  operate even though it is incurring an economic loss.

Question 16

In a perfectly competitive market, many firms sell an identical product.

Accepted Answer

A) True 
 B)False

Question 17

As firms enter a perfectly competitive market, the price

Accepted Answer

A)  falls and the existing firms' economic profits do not change. 
B)  rises and the existing firms' economic profits decrease. 
C)  falls and the existing firms' economic profits decrease. 
D)  falls and the existing firms' economic losses do not change. 
A)  falls and the existing firms' economic profits do not change. 
B)  rises and the existing firms' economic profits decrease. 
C)  falls and the existing firms' economic profits decrease. 
D)  falls and the existing firms' economic losses do not change.

Question 18

Suppose that newspaper companies are now required to use recycled paper, which is more expensive than new paper. Which of the following is most likely to result if the newspaper industry is highly competitive?

Accepted Answer

A)  The firms' costs rise, resulting in positive economic profit in the short run and, hence, the industry supply curve shifts rightward in the long run. 
B)  The firms' costs rise, resulting in economic losses in the short run and, hence, the industry supply curve shifts rightward in the long run. 
C)  The firms' costs rise, resulting in economic losses in the short run and, hence, the industry supply curve shifts leftward in the long run. 
D)  The industry supply curve shifts leftward in the short run, causing permanent long-run economic losses. 
A)  The firms' costs rise, resulting in positive economic profit in the short run and, hence, the industry supply curve shifts rightward in the long run. 
B)  The firms' costs rise, resulting in economic losses in the short run and, hence, the industry supply curve shifts rightward in the long run. 
C)  The firms' costs rise, resulting in economic losses in the short run and, hence, the industry supply curve shifts leftward in the long run. 
D)  The industry supply curve shifts leftward in the short run, causing permanent long-run economic losses.

Question 19

A market is perfectly competitive if

Accepted Answer

A)  each firm in it can influence the price of its product. 
B)  there are many firms in it, each selling a slightly different product. 
C)  there are many firms in it, each selling an identical product. 
D)  there are few firms in the market. 
A)  each firm in it can influence the price of its product. 
B)  there are many firms in it, each selling a slightly different product. 
C)  there are many firms in it, each selling an identical product. 
D)  there are few firms in the market.

Question 20

A perfectly competitive firm is making an economic profit when

Accepted Answer

A)  its total revenue is greater than its total cost. 
B)  the price is greater than the minimum of its average total cost. 
C)  the price is greater than the minimum of its average variable cost. 
D)  Both answers A and B are correct. 
A)  its total revenue is greater than its total cost. 
B)  the price is greater than the minimum of its average total cost. 
C)  the price is greater than the minimum of its average variable cost. 
D)  Both answers A and B are correct.

-The figure above shows the costs for a grower in the perfectly competitive turnip market. If the price is $1,200 for a ton of turnips, the firm is

-The apple market is perfectly competitive and is in long-run equilibrium. Now a disease kills 50 percent of the apple orchards. In the short run, the price of a bag of apples and the remaining apple growers make economic profit. In the long run, the .

-In the above figure, at what price does a perfectly competitive firm make zero economic profit?

-In the short run, a perfectly competitive firm

When Sidney's Sweaters, Inc. makes exactly zero economic profit, Sidney, the owner

-In the above table, if the firm sells 5 units of output, its total revenue is

-The figure above shows the marginal revenue and long-run cost curves for a perfectly competitive firm. All other firms in the industry have identical curves. Which of the following statements is TRUE?

-In the above figure, by increasing its output from Q₂ to Q₃, the firm

-Given the total cost and total revenue curves in the above figure, what are the output levels at which the perfect competitor will incur economic losses?

-In the above table, the firm

Suppose a perfectly competitive market is in long-run equilibrium. If there is a permanent increase in demand,

In the short run, a perfectly competitive firm might

In a perfectly competitive market, many firms sell an identical product.

As firms enter a perfectly competitive market, the price

Suppose that newspaper companies are now required to use recycled paper, which is more expensive than new paper. Which of the following is most likely to result if the newspaper industry is highly competitive?

A market is perfectly competitive if

A perfectly competitive firm is making an economic profit when

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 figure above shows the costs for a grower in the perfectly competitive turnip market. If the price is $1,200 for a ton of turnips, the firm is

-The apple market is perfectly competitive and is in long-run equilibrium. Now a disease kills 50 percent of the apple orchards. In the short run, the price of a bag of apples ________ and the remaining apple growers make ________ economic profit. In the long run, the ________.

-In the above figure, at what price does a perfectly competitive firm make zero economic profit?

-In the short run, a perfectly competitive firm

When Sidney's Sweaters, Inc. makes exactly zero economic profit, Sidney, the owner

-In the above table, if the firm sells 5 units of output, its total revenue is

-The figure above shows the marginal revenue and long-run cost curves for a perfectly competitive firm. All other firms in the industry have identical curves. Which of the following statements is TRUE?

-In the above figure, by increasing its output from Q2 to Q3, the firm

-Given the total cost and total revenue curves in the above figure, what are the output levels at which the perfect competitor will incur economic losses?

-In the above table, the firm

Suppose a perfectly competitive market is in long-run equilibrium. If there is a permanent increase in demand,

In the short run, a perfectly competitive firm might

In a perfectly competitive market, many firms sell an identical product.

As firms enter a perfectly competitive market, the price

Suppose that newspaper companies are now required to use recycled paper, which is more expensive than new paper. Which of the following is most likely to result if the newspaper industry is highly competitive?

A market is perfectly competitive if

A perfectly competitive firm is making an economic profit when

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 apple market is perfectly competitive and is in long-run equilibrium. Now a disease kills 50 percent of the apple orchards. In the short run, the price of a bag of apples and the remaining apple growers make economic profit. In the long run, the .

-In the above figure, by increasing its output from Q₂ to Q₃, the firm