Question 1

A perfectly competitive firm's economic profit is maximized by producing the amount of output such that

Accepted Answer

A)  total revenue equals total variable cost. 
B)  marginal revenue equals marginal cost. 
C)  total revenue equals total cost. 
D)  marginal revenue is equal to total revenue. 
A)  total revenue equals total variable cost. 
B)  marginal revenue equals marginal cost. 
C)  total revenue equals total cost. 
D)  marginal revenue is equal to total revenue.

Question 2

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 exit the market in the long run?

Accepted Answer

A)  yes, because he is incurring an economic loss 
B)  yes, because all costs are fixed in the long run 
C)  no, because he is making an economic profit 
D)  no, because all costs are variable in the long run 
A)  yes, because he is incurring an economic loss 
B)  yes, because all costs are fixed in the long run 
C)  no, because he is making an economic profit 
D)  no, because all costs are variable in the long run

Question 3

A perfectly competitive market is characterized by

Accepted Answer

A)  high barriers to entry. 
B)  firms that are price setters. 
C)  firms facing a downward sloping demand curve. 
D)  no restrictions on entry into the market. 
A)  high barriers to entry. 
B)  firms that are price setters. 
C)  firms facing a downward sloping demand curve. 
D)  no restrictions on entry into the market.

Question 4

-The table above shows output and costs of Evan's Subs, a typical perfectly competitive firm in a local market for sandwiches. Evan's fixed cost is $9 per hour. The current market price of a sandwich is $6. If the market price does not change, Evan's will

Accepted Answer

A)  continue to operate in the short run, but will exit the industry in the long run. 
B)  continue to operate in the short run and in the long run. 
C)  shut down. 
D)  increase its production in the long run. 
A)  continue to operate in the short run, but will exit the industry in the long run. 
B)  continue to operate in the short run and in the long run. 
C)  shut down. 
D)  increase its production in the long run.

Question 5

In the long run, perfectly competitive firms make zero economic profit, that is, their owners make a normal profit.

Accepted Answer

A) True 
 B)False

Question 6

In a perfectly competitive market in the short run, as the market demand increases, the firms ________ their output and their economic profit ________.

Accepted Answer

A)  increase; increases 
B)  increase; decreases 
C)  decrease; decreases 
D)  decrease; increases 
A)  increase; increases 
B)  increase; decreases 
C)  decrease; decreases 
D)  decrease; increases

Question 7

-In the above figure, when the firm produces output corresponding to point c, the firm's marginal cost

Accepted Answer

A)  is less than its marginal revenue. 
B)  equals its marginal revenue. 
C)  exceeds its marginal revenue. 
D)  equals its average revenue. 
A)  is less than its marginal revenue. 
B)  equals its marginal revenue. 
C)  exceeds its marginal revenue. 
D)  equals its average revenue.

Question 8

For prices above the minimum average variable cost, a perfectly competitive firm's supply curve is

Accepted Answer

A)  horizontal at the market price. 
B)  vertical at zero output. 
C)  the same as its marginal cost curve. 
D)  the same as its average variable cost curve. 
A)  horizontal at the market price. 
B)  vertical at zero output. 
C)  the same as its marginal cost curve. 
D)  the same as its average variable cost curve.

Question 9

Marginal revenue is equal to

Accepted Answer

A)  total revenue divided by price. 
B)  the change in total revenue divided by total output. 
C)  the change in total revenue divided by the change in quantity sold. 
D)  price divided by quantity sold. 
A)  total revenue divided by price. 
B)  the change in total revenue divided by total output. 
C)  the change in total revenue divided by the change in quantity sold. 
D)  price divided by quantity sold.

Question 10

What is a perfectly competitive firm's short-run supply curve?

Accepted Answer

A perfectly competitive firm's

Question 11

-Jimmy grows corn. His total revenue and total cost are in the above table. What quantity of corn maximizes his profit and what is his profit? What is the marginal revenue and marginal cost at this quantity?

Accepted Answer

Jimmy's profit is greatest if he grows e

Question 12

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

Accepted Answer

A)  would definitely shut down. 
B)  would incur an economic loss. 
C)  would increase its price. 
D)  has total costs less than $2,720. 
A)  would definitely shut down. 
B)  would incur an economic loss. 
C)  would increase its price. 
D)  has total costs less than $2,720.

Question 13

All along the beach in San Diego, California are shops which rent boogie boards for $3 per hour. Tourists perceive that all rental boogie boards are identical and there are no restrictions on entry and exit in the boogie board market. Suppose Surf's Up is a boogie board rental shop. To maximize profits, Surf's Up would produce a quantity where

Accepted Answer

A)  Marginal revenue is greater than marginal cost. 
B)  Marginal revenue is equal to marginal cost. 
C)  Marginal revenue is less than marginal cost. 
D)  Price is maximized. 
A)  Marginal revenue is greater than marginal cost. 
B)  Marginal revenue is equal to marginal cost. 
C)  Marginal revenue is less than marginal cost. 
D)  Price is maximized.

Question 14

In the long run, perfectly competitive firms make zero economic profit (their owners earn a normal profit) because

Accepted Answer

A)  any economic profit would attract newcomers to the industry. 
B)  the firms are incompetent. 
C)  any economic loss would increase the demand for the good, thereby raising its price. 
D)  there are many buyers and sellers. 
A)  any economic profit would attract newcomers to the industry. 
B)  the firms are incompetent. 
C)  any economic loss would increase the demand for the good, thereby raising its price. 
D)  there are many buyers and sellers.

Question 15

-In the long run, fixed costs are

Accepted Answer

A)  zero and variable costs are zero. 
B)  zero and variable costs are positive. 
C)  positive and variable costs are zero. 
D)  positive and variable costs are positive. 
A)  zero and variable costs are zero. 
B)  zero and variable costs are positive. 
C)  positive and variable costs are zero. 
D)  positive and variable costs are positive.

Question 16

Entry by competitive firms decreases the market price, while exit by competitive firms increases the market price. Explain why firms enter or exit an industry and why these price changes occur.

Accepted Answer

Competitive firms will enter an industry

Question 17

-In the long run, the economic profit of a firm in a perfectly competitive market

Accepted Answer

A)  will be above zero. 
B)  will be below zero. 
C)  will equal zero. 
D)  can be above, below, or equal to zero. 
A)  will be above zero. 
B)  will be below zero. 
C)  will equal zero. 
D)  can be above, below, or equal to zero.

Question 18

-In the long run, perfectly competitive firms make zero economic profit. This result is due mainly to which of the following assumptions?

Accepted Answer

A)  few buyers and sellers 
B)  unrestricted entry and exit 
C)  firms must act as price takers 
D)  demand for the firm's output is perfectly elastic 
A)  few buyers and sellers 
B)  unrestricted entry and exit 
C)  firms must act as price takers 
D)  demand for the firm's output is perfectly elastic

Question 19

-In the above figure, if the price is $12 per unit, how many units will a profit maximizing perfectly competitive firm produce?

Accepted Answer

A)  0 
B)  20 
C)  30 
D)  35 
A)  0 
B)  20 
C)  30 
D)  35

Question 20

-The figure above shows the costs for a grower in the perfectly competitive turnip market. If the price is $1,000 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.

A perfectly competitive firm's economic profit is maximized by producing the amount of output such that

A perfectly competitive market is characterized by

-The table above shows output and costs of Evan's Subs, a typical perfectly competitive firm in a local market for sandwiches. Evan's fixed cost is $9 per hour. The current market price of a sandwich is $6. If the market price does not change, Evan's will

In the long run, perfectly competitive firms make zero economic profit, that is, their owners make a normal profit.

In a perfectly competitive market in the short run, as the market demand increases, the firms their output and their economic profit .

-In the above figure, when the firm produces output corresponding to point c, the firm's marginal cost

For prices above the minimum average variable cost, a perfectly competitive firm's supply curve is

Marginal revenue is equal to

What is a perfectly competitive firm's short-run supply curve?

-Jimmy grows corn. His total revenue and total cost are in the above table. What quantity of corn maximizes his profit and what is his profit? What is the marginal revenue and marginal cost at this quantity?

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

In the long run, perfectly competitive firms make zero economic profit (their owners earn a normal profit) because

-In the long run, fixed costs are

Entry by competitive firms decreases the market price, while exit by competitive firms increases the market price. Explain why firms enter or exit an industry and why these price changes occur.

-In the long run, the economic profit of a firm in a perfectly competitive market

-In the long run, perfectly competitive firms make zero economic profit. This result is due mainly to which of the following assumptions?

-In the above figure, if the price is $12 per unit, how many units will a profit maximizing perfectly competitive firm produce?

-The figure above shows the costs for a grower in the perfectly competitive turnip market. If the price is $1,000 for a ton of turnips, the firm is

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

A perfectly competitive firm's economic profit is maximized by producing the amount of output such that

A perfectly competitive market is characterized by

-The table above shows output and costs of Evan's Subs, a typical perfectly competitive firm in a local market for sandwiches. Evan's fixed cost is $9 per hour. The current market price of a sandwich is $6. If the market price does not change, Evan's will

In the long run, perfectly competitive firms make zero economic profit, that is, their owners make a normal profit.

In a perfectly competitive market in the short run, as the market demand increases, the firms ________ their output and their economic profit ________.

-In the above figure, when the firm produces output corresponding to point c, the firm's marginal cost

For prices above the minimum average variable cost, a perfectly competitive firm's supply curve is

Marginal revenue is equal to

What is a perfectly competitive firm's short-run supply curve?

-Jimmy grows corn. His total revenue and total cost are in the above table. What quantity of corn maximizes his profit and what is his profit? What is the marginal revenue and marginal cost at this quantity?

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

In the long run, perfectly competitive firms make zero economic profit (their owners earn a normal profit) because

-In the long run, fixed costs are

Entry by competitive firms decreases the market price, while exit by competitive firms increases the market price. Explain why firms enter or exit an industry and why these price changes occur.

-In the long run, the economic profit of a firm in a perfectly competitive market

-In the long run, perfectly competitive firms make zero economic profit. This result is due mainly to which of the following assumptions?

-In the above figure, if the price is $12 per unit, how many units will a profit maximizing perfectly competitive firm produce?

-The figure above shows the costs for a grower in the perfectly competitive turnip market. If the price is $1,000 for a ton of turnips, the firm is

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 a perfectly competitive market in the short run, as the market demand increases, the firms their output and their economic profit .