Question 1

In the long run, for a perfectly competitive market, if economic profit is

Accepted Answer

A)  less than zero, then some firms will exit the market and the market supply curve will shift leftward. 
B)  greater than zero, then some firms will enter the market and the market supply curve will shift rightward. 
C)  equal to zero, then there is no entry or exit of firms into or out of the market. 
D)  All of the above answers are correct. 
A)  less than zero, then some firms will exit the market and the market supply curve will shift leftward. 
B)  greater than zero, then some firms will enter the market and the market supply curve will shift rightward. 
C)  equal to zero, then there is no entry or exit of firms into or out of the market. 
D)  All of the above answers are correct.

Question 2

Which of the following is NOT a defining characteristic of perfectly competitive industries?

Accepted Answer

A)  many buyers and sellers 
B)  unrestricted entry and exit 
C)  consumer knowledge about prices charged by each firm 
D)  higher prices being charged for certain name brands 
A)  many buyers and sellers 
B)  unrestricted entry and exit 
C)  consumer knowledge about prices charged by each firm 
D)  higher prices being charged for certain name brands

Question 3

Bob's Lawn Care Services is a perfectly competitive firm that currently mows 22 lawns a week. Bob's marginal cost exceeds the price he charges. Bob can increase his profit if he

Accepted Answer

A)  charges a higher price. 
B)  charges a lower price. 
C)  mows fewer than 22 lawns a week. 
D)  mows more than 22 lawns a week. 
A)  charges a higher price. 
B)  charges a lower price. 
C)  mows fewer than 22 lawns a week. 
D)  mows more than 22 lawns a week.

Question 4

-Suppose the cost curves in the above figure apply to all firms in the market. Then, if the initial price is P1, in the long run the market

Accepted Answer

A)  demand will increase. 
B)  demand will decrease. 
C)  supply will increase. 
D)  supply will decrease. 
A)  demand will increase. 
B)  demand will decrease. 
C)  supply will increase. 
D)  supply will decrease.

Question 5

-In the above figure, the line represented by the "2" is the

Accepted Answer

A)  average fixed cost. 
B)  average variable cost. 
C)  total cost. 
D)  average total cost. 
A)  average fixed cost. 
B)  average variable cost. 
C)  total cost. 
D)  average total cost.

Question 6

In a perfectly competitive market that is in long-run equilibrium, which of the following will NOT occur?

Accepted Answer

A)  Firms make only zero economic profit. 
B)  Firms' owners earn a normal profit. 
C)  The price equals the minimum average total cost. 
D)  Entrepreneurs want to enter this industry. 
A)  Firms make only zero economic profit. 
B)  Firms' owners earn a normal profit. 
C)  The price equals the minimum average total cost. 
D)  Entrepreneurs want to enter this industry.

Question 7

-For a perfectly competitive firm, in the long-run equilibrium

Accepted Answer

A)  P = MC = ATC = MR. 
B)  MR = MC = AFC. 
C)  MR = P = ATC = AFC. 
D)  P = MC > ATC. 
A)  P = MC = ATC = MR. 
B)  MR = MC = AFC. 
C)  MR = P = ATC = AFC. 
D)  P = MC > ATC.

Question 8

-In the above figure, if the price is $12, a profit-maximizing perfectly competitive firm will have an economic profit

Accepted Answer

A)  of less than $100 but more than $0. 
B)  of more than $100. 
C)  that is negative, that is, it will have an economic loss. 
D)  of zero, that is, it will break even with a normal profit. 
A)  of less than $100 but more than $0. 
B)  of more than $100. 
C)  that is negative, that is, it will have an economic loss. 
D)  of zero, that is, it will break even with a normal profit.

Question 9

-In the above table, if the quantity sold by the firm rises from 5 to 6, its marginal revenue is

Accepted Answer

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

Question 10

In perfect competition, the market demand for the good ________ perfectly elastic and the demand for the output of one firm ________ perfectly elastic.

Accepted Answer

A)  is; is 
B)  is; is not 
C)  is not; is 
D)  is not; is not 
A)  is; is 
B)  is; is not 
C)  is not; is 
D)  is not; is not

Question 11

-Based on the table above which shows Chip's costs, if Chip shuts down in the short run, his total cost will be

Accepted Answer

A)  $0. 
B)  $1,000. 
C)  $1,200. 
D)  $4,000. 
A)  $0. 
B)  $1,000. 
C)  $1,200. 
D)  $4,000.

Question 12

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 variable cost is equal to

Accepted Answer

A)  0. 
B)  $5,000. 
C)  $16,000. 
D)  $21,000. 
A)  0. 
B)  $5,000. 
C)  $16,000. 
D)  $21,000.

Question 13

The difference between a perfectly competitive firm's total revenue and its total cost is

Accepted Answer

A)  always positive. 
B)  always negative. 
C)  always zero. 
D)  greatest at the profit-maximizing level of output. 
A)  always positive. 
B)  always negative. 
C)  always zero. 
D)  greatest at the profit-maximizing level of output.

Question 14

-The table above shows some of the costs for a perfectly competitive firm. If the price is $160 per unit, how many units of output will the firm produce?

Accepted Answer

A)  8 
B)  9 
C)  10 
D)  more than 10 
A)  8 
B)  9 
C)  10 
D)  more than 10

Question 15

A perfectly competitive firm will operate and incur an economic loss in the short run if

Accepted Answer

A)  the loss is smaller than its total fixed costs. 
B)  it knows it can recoup the loss in the long run. 
C)  shareholders do not know about the loss. 
D)  the loss can offset future profits. 
A)  the loss is smaller than its total fixed costs. 
B)  it knows it can recoup the loss in the long run. 
C)  shareholders do not know about the loss. 
D)  the loss can offset future profits.

Question 16

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

Accepted Answer

A)  firm has total revenue of $2,720. 
B)  firm's total costs are less than $2,720. 
C)  firm is making an economic profit. 
D)  All of the above are true. 
A)  firm has total revenue of $2,720. 
B)  firm's total costs are less than $2,720. 
C)  firm is making an economic profit. 
D)  All of the above are true.

Question 17

In a perfectly competitive industry, the demand for a single firm's product is perfectly elastic

Accepted Answer

A)  because this firm's output is a perfect substitute for any other firm's output. 
B)  because this firm is a price maker. 
C)  only in the long run. 
D)  because there are many buyers in this market. 
A)  because this firm's output is a perfect substitute for any other firm's output. 
B)  because this firm is a price maker. 
C)  only in the long run. 
D)  because there are many buyers in this market.

Question 18

-In the above table, the price of the product is

Accepted Answer

A)  $30. 
B)  $147. 
C)  $150. 
D)  $180. 
A)  $30. 
B)  $147. 
C)  $150. 
D)  $180.

Question 19

When a firm is considered to be a "price taker" that means that the firm

Accepted Answer

A)  can charge any price that it wants to charge, that is, "take" any price it wants. 
B)  pays a fixed price for all of its inputs. 
C)  will accept ("take") the lowest price that its customers offer. 
D)  cannot influence the market price of the good that it sells. 
A)  can charge any price that it wants to charge, that is, "take" any price it wants. 
B)  pays a fixed price for all of its inputs. 
C)  will accept ("take") the lowest price that its customers offer. 
D)  cannot influence the market price of the good that it sells.

Question 20

In the long run, a perfectly competitive firm will exit a market when

Accepted Answer

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

In the long run, for a perfectly competitive market, if economic profit is

Which of the following is NOT a defining characteristic of perfectly competitive industries?

Bob's Lawn Care Services is a perfectly competitive firm that currently mows 22 lawns a week. Bob's marginal cost exceeds the price he charges. Bob can increase his profit if he

-Suppose the cost curves in the above figure apply to all firms in the market. Then, if the initial price is P₁, in the long run the market

-In the above figure, the line represented by the "2" is the

In a perfectly competitive market that is in long-run equilibrium, which of the following will NOT occur?

-For a perfectly competitive firm, in the long-run equilibrium

-In the above figure, if the price is $12, a profit-maximizing perfectly competitive firm will have an economic profit

-In the above table, if the quantity sold by the firm rises from 5 to 6, its marginal revenue is

In perfect competition, the market demand for the good perfectly elastic and the demand for the output of one firm perfectly elastic.

-Based on the table above which shows Chip's costs, if Chip shuts down in the short run, his total cost will be

The difference between a perfectly competitive firm's total revenue and its total cost is

-The table above shows some of the costs for a perfectly competitive firm. If the price is $160 per unit, how many units of output will the firm produce?

A perfectly competitive firm will operate and incur an economic loss in the short run if

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

In a perfectly competitive industry, the demand for a single firm's product is perfectly elastic

-In the above table, the price of the product is

When a firm is considered to be a "price taker" that means that the firm

In the long run, a perfectly competitive firm will exit a market 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

In the long run, for a perfectly competitive market, if economic profit is

Which of the following is NOT a defining characteristic of perfectly competitive industries?

Bob's Lawn Care Services is a perfectly competitive firm that currently mows 22 lawns a week. Bob's marginal cost exceeds the price he charges. Bob can increase his profit if he

-Suppose the cost curves in the above figure apply to all firms in the market. Then, if the initial price is P1, in the long run the market

-In the above figure, the line represented by the "2" is the

In a perfectly competitive market that is in long-run equilibrium, which of the following will NOT occur?

-For a perfectly competitive firm, in the long-run equilibrium

-In the above figure, if the price is $12, a profit-maximizing perfectly competitive firm will have an economic profit

-In the above table, if the quantity sold by the firm rises from 5 to 6, its marginal revenue is

In perfect competition, the market demand for the good ________ perfectly elastic and the demand for the output of one firm ________ perfectly elastic.

-Based on the table above which shows Chip's costs, if Chip shuts down in the short run, his total cost will be

The difference between a perfectly competitive firm's total revenue and its total cost is

-The table above shows some of the costs for a perfectly competitive firm. If the price is $160 per unit, how many units of output will the firm produce?

A perfectly competitive firm will operate and incur an economic loss in the short run if

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

In a perfectly competitive industry, the demand for a single firm's product is perfectly elastic

-In the above table, the price of the product is

When a firm is considered to be a "price taker" that means that the firm

In the long run, a perfectly competitive firm will exit a market 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

-Suppose the cost curves in the above figure apply to all firms in the market. Then, if the initial price is P₁, in the long run the market

In perfect competition, the market demand for the good perfectly elastic and the demand for the output of one firm perfectly elastic.