Question 1

In the long-run equilibrium, perfectly competitive firms produce where

Accepted Answer

A)  marginal cost is minimized. 
B)  average total cost is minimized. 
C)  average revenue is zero. 
D)  All of the above are correct. 
A)  marginal cost is minimized. 
B)  average total cost is minimized. 
C)  average revenue is zero. 
D)  All of the above are correct.

Question 2

-For a perfectly competitive firm, curve A in the above figure is the firm's

Accepted Answer

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

Question 3

An individual perfectly competitive firm has a supply curve

Accepted Answer

A)  with a positive slope. 
B)  with a negative slope. 
C)  that is parallel to the quantity axis. 
D)  that has a positive slope at lower output levels and a negative slope at higher output levels. 
A)  with a positive slope. 
B)  with a negative slope. 
C)  that is parallel to the quantity axis. 
D)  that has a positive slope at lower output levels and a negative slope at higher output levels.

Question 4

-In the long run, perfectly competitive firms earn just enough revenue to

Accepted Answer

A)  pay all fixed costs. 
B)  pay all accounting costs. 
C)  pay all opportunity costs. 
D)  attract entry. 
A)  pay all fixed costs. 
B)  pay all accounting costs. 
C)  pay all opportunity costs. 
D)  attract entry.

Question 5

"Higher ethanol production definitely and directly raises the price of corn," said USDA economist Ephraim Leibtag. In the short run, what is TRUE if the production of ethanol increases?

Accepted Answer

A)  The demand for corn will increase. 
B)  The supply of ethanol will decrease. 
C)  The supply of corn will increase. 
D)  The demand for ethanol will increase. 
A)  The demand for corn will increase. 
B)  The supply of ethanol will decrease. 
C)  The supply of corn will increase. 
D)  The demand for ethanol will increase.

Question 6

If the price exceeds the average variable cost, by producing the level of output such that marginal revenue equals marginal cost, the firm ensures that it will

Accepted Answer

A)  earn an economic profit. 
B)  not suffer any losses. 
C)  earn the largest profit possible. 
D)  survive in the long run. 
A)  earn an economic profit. 
B)  not suffer any losses. 
C)  earn the largest profit possible. 
D)  survive in the long run.

Question 7

Suppose a perfectly competitive market is in a long-run equilibrium when a permanent decrease in the market demand occurs. In the long run, which of the following definitely occurs?

Accepted Answer

A)  The price decreases. 
B)  The number of firms decreases. 
C)  The firms' marginal cost increases. 
D)  Marginal revenue increases. 
A)  The price decreases. 
B)  The number of firms decreases. 
C)  The firms' marginal cost increases. 
D)  Marginal revenue increases.

Question 8

Which of the following is NOT an assumption of perfectly competitive markets?

Accepted Answer

A)  many buyers and many sellers 
B)  no restriction on entry 
C)  complete information about prices 
D)  new entrants have higher costs 
A)  many buyers and many sellers 
B)  no restriction on entry 
C)  complete information about prices 
D)  new entrants have higher costs

Question 9

-The figure above portrays a total revenue curve for a perfectly competitive firm. Curve A is straight because the firm

Accepted Answer

A)  is a price taker. 
B)  faces constant returns to scale. 
C)  wants to maximize its profits. 
D)  has perfect information. 
A)  is a price taker. 
B)  faces constant returns to scale. 
C)  wants to maximize its profits. 
D)  has perfect information.

Question 10

Today, firms in a perfectly competitive market are making an economic profit. In the long run, firms will ________ the market until all firms in the market are ________.

Accepted Answer

A)  exit; covering only their total fixed costs 
B)  enter; making zero economic profit 
C)  exit; producing at the minimum point on their long-run average cost curve 
D)  enter; making zero normal profit 
A)  exit; covering only their total fixed costs 
B)  enter; making zero economic profit 
C)  exit; producing at the minimum point on their long-run average cost curve 
D)  enter; making zero normal profit

Question 11

Ellen's Painting Services is a perfectly competitive firm that currently paints 10 houses a month and charges $100 per house, which is the going market price. Ellen's marginal cost is positively related with the quantity of service she provides and is currently $120. What should Ellen do to increase her economic profit? Paint more houses? Raise her price? Explain your answer.

Accepted Answer

Ellen should decrease the number of hous

Question 12

-The above figure shows the cost curves of a profit-maximizing perfectly competitive firm. If the price equals $7,
a) how much will the firm produce?
b) how much is the firm's average total, average variable, and marginal costs?
c) how much is the firm's total, total variable, and total fixed costs?
d) how much is the firm's total revenue and economic profit?
e) what will happen in this market in the long run?

Accepted Answer

a) The firm will produce 40 units of out

Question 13

A perfectly competitive firm is definitely making an economic profit when

Accepted Answer

A)  MR  ATC. 
C)  P  AVC. 
A)  MR  ATC. 
C)  P  AVC.

Question 14

For a firm in perfect competition, a diagram shows quantity on the horizontal axis and both the firm's marginal cost (MC) and its marginal revenue (MR) on the vertical axis. The firm's profit-maximizing quantity occurs at the point where the

Accepted Answer

A)  slope of the MC curve is zero. 
B)  MC and MR curves are parallel. 
C)  MC curve intersects the MR curve from below, going from left to right. 
D)  MC curve intersects the MR curve from above, going from left to right. 
A)  slope of the MC curve is zero. 
B)  MC and MR curves are parallel. 
C)  MC curve intersects the MR curve from below, going from left to right. 
D)  MC curve intersects the MR curve from above, going from left to right.

Question 15

-Sue's Sea Shells by the Sea Shore is a perfectly competitive firm selling sea shells at the market price of $2 per dozen. Sue's Sea Shells by the Sea Shore has fixed costs of $40 per day and a variable cost schedule in the table above. Based on this information, we can expect the number of firms in the sea shell market to

Accepted Answer

A)  decrease. 
B)  increase. 
C)  remain constant. 
D)  It is impossible to say. 
A)  decrease. 
B)  increase. 
C)  remain constant. 
D)  It is impossible to say.

Question 16

In the long-run equilibrium in a perfectly competitive market, the firms produce at the ________ possible average total cost and the price equals the ________ possible average total cost.

Accepted Answer

A)  highest; highest 
B)  lowest; lowest 
C)  highest; lowest 
D)  lowest; highest 
A)  highest; highest 
B)  lowest; lowest 
C)  highest; lowest 
D)  lowest; highest

Question 17

A perfectly competitive firm's demand curve is

Accepted Answer

A)  upward sloping. 
B)  downward sloping. 
C)  a vertical line. 
D)  a horizontal line. 
A)  upward sloping. 
B)  downward sloping. 
C)  a vertical line. 
D)  a horizontal line.

Question 18

-Based on the table above which shows Chip's costs, if rice sells for $600 a ton, Chip's profit-maximizing output is

Accepted Answer

A)  less than one ton. 
B)  between two and three tons. 
C)  between three and four tons. 
D)  between one and two tons. 
A)  less than one ton. 
B)  between two and three tons. 
C)  between three and four tons. 
D)  between one and two tons.

Question 19

The demand for wheat from farm A is perfectly elastic because wheat from farm A is

Accepted Answer

A)  a perfect complement for wheat from farm B. 
B)  a normal good. 
C)  a perfect substitute for wheat from farm B. 
D)  an inferior good. 
A)  a perfect complement for wheat from farm B. 
B)  a normal good. 
C)  a perfect substitute for wheat from farm B. 
D)  an inferior good.

Question 20

The demand for a product produced in a perfectly competitive market permanently increases. In the short run, the price

Accepted Answer

A)  rises and each firm produces less output. 
B)  rises and each firm produces more output. 
C)  does not change as new firms enter the industry. 
D)  does not change because each firm produces more output. 
A)  rises and each firm produces less output. 
B)  rises and each firm produces more output. 
C)  does not change as new firms enter the industry. 
D)  does not change because each firm produces more output.

In the long-run equilibrium, perfectly competitive firms produce where

-For a perfectly competitive firm, curve A in the above figure is the firm's

An individual perfectly competitive firm has a supply curve

-In the long run, perfectly competitive firms earn just enough revenue to

"Higher ethanol production definitely and directly raises the price of corn," said USDA economist Ephraim Leibtag. In the short run, what is TRUE if the production of ethanol increases?

If the price exceeds the average variable cost, by producing the level of output such that marginal revenue equals marginal cost, the firm ensures that it will

Suppose a perfectly competitive market is in a long-run equilibrium when a permanent decrease in the market demand occurs. In the long run, which of the following definitely occurs?

Which of the following is NOT an assumption of perfectly competitive markets?

-The figure above portrays a total revenue curve for a perfectly competitive firm. Curve A is straight because the firm

Today, firms in a perfectly competitive market are making an economic profit. In the long run, firms will the market until all firms in the market are .

A perfectly competitive firm is definitely making an economic profit when

For a firm in perfect competition, a diagram shows quantity on the horizontal axis and both the firm's marginal cost (MC) and its marginal revenue (MR) on the vertical axis. The firm's profit-maximizing quantity occurs at the point where the

In the long-run equilibrium in a perfectly competitive market, the firms produce at the possible average total cost and the price equals the possible average total cost.

A perfectly competitive firm's demand curve is

-Based on the table above which shows Chip's costs, if rice sells for $600 a ton, Chip's profit-maximizing output is

The demand for wheat from farm A is perfectly elastic because wheat from farm A is

The demand for a product produced in a perfectly competitive market permanently increases. In the short run, the price

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 equilibrium, perfectly competitive firms produce where

-For a perfectly competitive firm, curve A in the above figure is the firm's

An individual perfectly competitive firm has a supply curve

-In the long run, perfectly competitive firms earn just enough revenue to

"Higher ethanol production definitely and directly raises the price of corn," said USDA economist Ephraim Leibtag. In the short run, what is TRUE if the production of ethanol increases?

If the price exceeds the average variable cost, by producing the level of output such that marginal revenue equals marginal cost, the firm ensures that it will

Suppose a perfectly competitive market is in a long-run equilibrium when a permanent decrease in the market demand occurs. In the long run, which of the following definitely occurs?

Which of the following is NOT an assumption of perfectly competitive markets?

-The figure above portrays a total revenue curve for a perfectly competitive firm. Curve A is straight because the firm

Today, firms in a perfectly competitive market are making an economic profit. In the long run, firms will ________ the market until all firms in the market are ________.

A perfectly competitive firm is definitely making an economic profit when

For a firm in perfect competition, a diagram shows quantity on the horizontal axis and both the firm's marginal cost (MC) and its marginal revenue (MR) on the vertical axis. The firm's profit-maximizing quantity occurs at the point where the

In the long-run equilibrium in a perfectly competitive market, the firms produce at the ________ possible average total cost and the price equals the ________ possible average total cost.

A perfectly competitive firm's demand curve is

-Based on the table above which shows Chip's costs, if rice sells for $600 a ton, Chip's profit-maximizing output is

The demand for wheat from farm A is perfectly elastic because wheat from farm A is

The demand for a product produced in a perfectly competitive market permanently increases. In the short run, the price

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

Today, firms in a perfectly competitive market are making an economic profit. In the long run, firms will the market until all firms in the market are .

In the long-run equilibrium in a perfectly competitive market, the firms produce at the possible average total cost and the price equals the possible average total cost.