Question 1

Economic profit sends a signal to entrepreneurs by telling them where

Accepted Answer

A)  price exceeds marginal cost. 
B)  there are many buyers and many sellers. 
C)  the shutdown point is. 
D)  an above normal return on investment can be earned. 
A)  price exceeds marginal cost. 
B)  there are many buyers and many sellers. 
C)  the shutdown point is. 
D)  an above normal return on investment can be earned.

Question 2

Which of the following four firms would most likely NOT be part of a perfectly competitive market?

Accepted Answer

A)  Mark sells his tomatoes at the local farmers market. 
B)  The WaveHouse is the only place in San Diego where you can ride an indoor 10 foot wave. 
C)  Village Pizza sells pizza in a college town. 
D)  Space Age Fuel is a gas station in Bend, Oregon. 
A)  Mark sells his tomatoes at the local farmers market. 
B)  The WaveHouse is the only place in San Diego where you can ride an indoor 10 foot wave. 
C)  Village Pizza sells pizza in a college town. 
D)  Space Age Fuel is a gas station in Bend, Oregon.

Question 3

-The short-run market supply curve for a perfectly competitive market is obtained by summing the part of each firm's

Accepted Answer

A)  AVC curve that lies above its MC curve. 
B)  MC curve that lies above its AVC curve. 
C)  AVC curve that lies below the MC curve. 
D)  MC curve that lies below the AVC curve. 
A)  AVC curve that lies above its MC curve. 
B)  MC curve that lies above its AVC curve. 
C)  AVC curve that lies below the MC curve. 
D)  MC curve that lies below the AVC curve.

Question 4

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $15, what is Giuseppe's profit-maximizing output?

Accepted Answer

A)  2 pizzas per hour 
B)  3 pizzas per hour 
C)  4 pizzas per hour 
D)  0 pizzas per hour 
A)  2 pizzas per hour 
B)  3 pizzas per hour 
C)  4 pizzas per hour 
D)  0 pizzas per hour

Question 5

-The figure above shows a firm in a perfectly competitive market. If the price rises from P3 to P4 then output will increase by

Accepted Answer

A)  0 units. 
B)  1 unit. 
C)  2 units. 
D)  3 units. 
A)  0 units. 
B)  1 unit. 
C)  2 units. 
D)  3 units.

Question 6

"A perfectly competitive firm is called a price maker because all the firms together must make the market price." Is the previous statement correct or incorrect? Briefly explain your answer.

Accepted Answer

The statement is False. A perfectly comp

Question 7

Entry in a perfectly competitive market

Accepted Answer

A)  shifts the market supply curve rightward. 
B)  decreases the market price. 
C)  shifts the market supply curve leftward. 
D)  Both answers A and B are correct. 
A)  shifts the market supply curve rightward. 
B)  decreases the market price. 
C)  shifts the market supply curve leftward. 
D)  Both answers A and B are correct.

Question 8

Because of a decrease in the wage rate it must pay, a perfectly competitive firm's marginal costs decrease but its demand curve stays the same. As a result, the firm

Accepted Answer

A)  decreases the amount of output it produces and raises its price. 
B)  increases the amount of output it produces and lowers it price. 
C)  increases the amount of output it produces and does not change its price. 
D)  decreases the amount of output it produces and lowers its price. 
A)  decreases the amount of output it produces and raises its price. 
B)  increases the amount of output it produces and lowers it price. 
C)  increases the amount of output it produces and does not change its price. 
D)  decreases the amount of output it produces and lowers its price.

Question 9

The short-run supply curve for a perfectly competitive firm is its marginal cost curve

Accepted Answer

A)  above the horizontal axis. 
B)  above its shutdown point. 
C)  below its shutdown point. 
D)  everywhere. 
A)  above the horizontal axis. 
B)  above its shutdown point. 
C)  below its shutdown point. 
D)  everywhere.

Question 10

Define the shutdown point. Explain why the firm shuts down in the short run if the price falls below this point.

Accepted Answer

The shutdown point is the point at which

Question 11

The supply curve for a perfectly competitive firm is the portion of its marginal cost curve that lies above the average variable cost curve.

Accepted Answer

A) True 
 B)False

Question 12

Martha's Cleaning Services is a perfectly competitive firm that currently cleans 30 offices a week and charges $20 per office, which is the going market price. Martha's marginal cost is $15. What should Martha do to increase her economic profit? Clean more offices? Raise her price? Explain your answer.

Accepted Answer

Martha should increase the number of off

Question 13

-In the above table, the average fixed cost at 4 units of output is

Accepted Answer

A)  $1.00. 
B)  $4.50. 
C)  $4.70. 
D)  $4.80. 
A)  $1.00. 
B)  $4.50. 
C)  $4.70. 
D)  $4.80.

Question 14

-The above figure illustrates a firm's total revenue and total cost curves. Which one of the following statements is FALSE?

Accepted Answer

A)  Economic profit is the vertical distance between the total revenue curve and the total cost curve. 
B)  At output Q1 the firm makes zero economic profit. 
C)  At an output above Q3 the firm incurs an economic loss. 
D)  At output Q2 the firm incurs an economic loss. 
A)  Economic profit is the vertical distance between the total revenue curve and the total cost curve. 
B)  At output Q1 the firm makes zero economic profit. 
C)  At an output above Q3 the firm incurs an economic loss. 
D)  At output Q2 the firm incurs an economic loss.

Question 15

-Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy's cost curves. If the market price is 4 cents per page, what is Fast Copy's profit maximizing level of output?

Accepted Answer

A)  16 pages per hour 
B)  32 pages per hour 
C)  48 pages per hour 
D)  64 pages per hour 
A)  16 pages per hour 
B)  32 pages per hour 
C)  48 pages per hour 
D)  64 pages per hour

Question 16

-The figure above shows the marginal revenue and costs of a perfectly competitive firm. When the firm produces 170 units

Accepted Answer

A)  marginal cost is less than marginal revenue. 
B)  marginal revenue equals marginal cost. 
C)  total revenue is less than total cost. 
D)  total revenue equals total cost. 
A)  marginal cost is less than marginal revenue. 
B)  marginal revenue equals marginal cost. 
C)  total revenue is less than total cost. 
D)  total revenue equals total cost.

Question 17

In perfect competition, restrictions on entry into an market

Accepted Answer

A)  apply to both capital and labor. 
B)  apply to labor but not to capital. 
C)  apply to capital but not to labor. 
D)  do not exist. 
A)  apply to both capital and labor. 
B)  apply to labor but not to capital. 
C)  apply to capital but not to labor. 
D)  do not exist.

Question 18

If the market price faced by a perfectly competitive firm increases, in the short run how does the firm respond?

Accepted Answer

If the market price rises, a p

Question 19

A competitive firm's total revenue minus its total opportunity cost equals its ________.

Accepted Answer

A)  marginal revenue 
B)  economic profit 
C)  opportunity cost 
D)  normal profit 
A)  marginal revenue 
B)  economic profit 
C)  opportunity cost 
D)  normal profit

Question 20

A perfectly competitive firm's marginal revenue

Accepted Answer

A)  increases as the firm produces more output. 
B)  decreases as the firm produces more output. 
C)  is less than the market price of its product. 
D)  equals the market price of its product. 
A)  increases as the firm produces more output. 
B)  decreases as the firm produces more output. 
C)  is less than the market price of its product. 
D)  equals the market price of its product.

Economic profit sends a signal to entrepreneurs by telling them where

Which of the following four firms would most likely NOT be part of a perfectly competitive market?

-The short-run market supply curve for a perfectly competitive market is obtained by summing the part of each firm's

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $15, what is Giuseppe's profit-maximizing output?

-The figure above shows a firm in a perfectly competitive market. If the price rises from P₃ to P₄ then output will increase by

"A perfectly competitive firm is called a price maker because all the firms together must make the market price." Is the previous statement correct or incorrect? Briefly explain your answer.

Entry in a perfectly competitive market

Because of a decrease in the wage rate it must pay, a perfectly competitive firm's marginal costs decrease but its demand curve stays the same. As a result, the firm

The short-run supply curve for a perfectly competitive firm is its marginal cost curve

Define the shutdown point. Explain why the firm shuts down in the short run if the price falls below this point.

The supply curve for a perfectly competitive firm is the portion of its marginal cost curve that lies above the average variable cost curve.

-In the above table, the average fixed cost at 4 units of output is

-The above figure illustrates a firm's total revenue and total cost curves. Which one of the following statements is FALSE?

-Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy's cost curves. If the market price is 4 cents per page, what is Fast Copy's profit maximizing level of output?

-The figure above shows the marginal revenue and costs of a perfectly competitive firm. When the firm produces 170 units

In perfect competition, restrictions on entry into an market

If the market price faced by a perfectly competitive firm increases, in the short run how does the firm respond?

A competitive firm's total revenue minus its total opportunity cost equals its ________.

A perfectly competitive firm's marginal revenue

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

Economic profit sends a signal to entrepreneurs by telling them where

Which of the following four firms would most likely NOT be part of a perfectly competitive market?

-The short-run market supply curve for a perfectly competitive market is obtained by summing the part of each firm's

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $15, what is Giuseppe's profit-maximizing output?

-The figure above shows a firm in a perfectly competitive market. If the price rises from P3 to P4 then output will increase by

"A perfectly competitive firm is called a price maker because all the firms together must make the market price." Is the previous statement correct or incorrect? Briefly explain your answer.

Entry in a perfectly competitive market

Because of a decrease in the wage rate it must pay, a perfectly competitive firm's marginal costs decrease but its demand curve stays the same. As a result, the firm

The short-run supply curve for a perfectly competitive firm is its marginal cost curve

Define the shutdown point. Explain why the firm shuts down in the short run if the price falls below this point.

The supply curve for a perfectly competitive firm is the portion of its marginal cost curve that lies above the average variable cost curve.

-In the above table, the average fixed cost at 4 units of output is

-The above figure illustrates a firm's total revenue and total cost curves. Which one of the following statements is FALSE?

-Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy's cost curves. If the market price is 4 cents per page, what is Fast Copy's profit maximizing level of output?

-The figure above shows the marginal revenue and costs of a perfectly competitive firm. When the firm produces 170 units

In perfect competition, restrictions on entry into an market

If the market price faced by a perfectly competitive firm increases, in the short run how does the firm respond?

A competitive firm's total revenue minus its total opportunity cost equals its ________.

A perfectly competitive firm's marginal revenue

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 figure above shows a firm in a perfectly competitive market. If the price rises from P₃ to P₄ then output will increase by