Question 1

An industry in which an increase in output leads to a reduction in long-run per-unit costs is a(n)

Accepted Answer

A)  increasing-cost industry. 
B)  constant-cost industry. 
C)  break-even cost industry. 
D)  decreasing-cost industry. 
A)  increasing-cost industry. 
B)  constant-cost industry. 
C)  break-even cost industry. 
D)  decreasing-cost industry.

Question 2

Price equals the minimum of long-run average cost

Accepted Answer

A)  in a long-run equilibrium. 
B)  in a short-run equilibrium as well as in a long-run equilibrium. 
C)  whenever average revenue equals marginal cost. 
D)  along a horizontal long-run supply curve, but not along an upward sloping long-run supply curve. 
A)  in a long-run equilibrium. 
B)  in a short-run equilibrium as well as in a long-run equilibrium. 
C)  whenever average revenue equals marginal cost. 
D)  along a horizontal long-run supply curve, but not along an upward sloping long-run supply curve.

Question 3

-Refer to the above table. The table represents information on the costs for Ajax Corporation. Ajax operates in a perfectly competitive market and the price of the product is $9. What does profit equal when quantity equals 3?

Accepted Answer

A)  $13 
B)  $10 
C)  $6 
D)  $2 
A)  $13 
B)  $10 
C)  $6 
D)  $2

Question 4

For a perfect competitor, marginal revenue equals

Accepted Answer

A)  the slope of the demand curve. 
B)  average revenue divided by price. 
C)  price divided by average revenue. 
D)  the market price. 
A)  the slope of the demand curve. 
B)  average revenue divided by price. 
C)  price divided by average revenue. 
D)  the market price.

Question 5

-Refer to the above table. The table represents information on the costs for Ajax Corporation. Ajax operates in a perfectly competitive market and the price of the product is $9. What does total revenue equal when quantity equals 4?

Accepted Answer

A)  $4 
B)  $9 
C)  $30 
D)  $36 
A)  $4 
B)  $9 
C)  $30 
D)  $36

Question 6

-In the above figure, at output levels between 5 units and 13 units,

Accepted Answer

A)  the firm's accounting profits are negative. 
B)  total revenue equals total costs. 
C)  the firm's economic profits are positive. 
D)  the firm is breaking even. 
A)  the firm's accounting profits are negative. 
B)  total revenue equals total costs. 
C)  the firm's economic profits are positive. 
D)  the firm is breaking even.

Question 7

-In the above figure, the profit-maximizing rate of production for the perfectly competitive firm is

Accepted Answer

A)  5. 
B)  10. 
C)  13. 
D)  none of the above. 
A)  5. 
B)  10. 
C)  13. 
D)  none of the above.

Question 8

Which of the following is a characteristic of perfect competition?

Accepted Answer

A)  
A)

Question 9

We assume that firms, when they are deciding the best rate of output at which to produce,

Accepted Answer

A)  try to get the highest price possible. 
B)  want to maximize sales. 
C)  want to minimize costs. 
D)  want to maximize profits. 
A)  try to get the highest price possible. 
B)  want to maximize sales. 
C)  want to minimize costs. 
D)  want to maximize profits.

Question 10

The short-run industry supply curve is found by

Accepted Answer

A)  taking the inverse of the industry demand curve. 
B)  horizontally summing the average total cost curve of all firms in the industry. 
C)  adding up the quantities supplied at each price by each firm in the industry. 
D)  adding up the quantities supplied at each price by each of the firms in the industry that are making a profit. 
A)  taking the inverse of the industry demand curve. 
B)  horizontally summing the average total cost curve of all firms in the industry. 
C)  adding up the quantities supplied at each price by each firm in the industry. 
D)  adding up the quantities supplied at each price by each of the firms in the industry that are making a profit.

Question 11

-Refer to the above table. This firm operates in a perfectly competitive market in which the market price is $10 per unit. What is its profit-maximizing rate of production?

Accepted Answer

A)  104 units 
B)  106 units 
C)  108 units 
D)  110 units 
A)  104 units 
B)  106 units 
C)  108 units 
D)  110 units

Question 12

A firm's total explicit costs are $1,000. Its total implicit costs are $500, and it has a total revenue of $900. This firm receives

Accepted Answer

A)  an accounting profit only. 
B)  an economic profit only. 
C)  both an economic profit and an accounting profit. 
D)  neither an economic profit nor an accounting profit. 
A)  an accounting profit only. 
B)  an economic profit only. 
C)  both an economic profit and an accounting profit. 
D)  neither an economic profit nor an accounting profit.

Question 13

The perfectly competitive firm's total revenue curve

Accepted Answer

A)  is linear and upward sloping. 
B)  has a constant slope. 
C)  has a positive slope. 
D)  all of the above 
A)  is linear and upward sloping. 
B)  has a constant slope. 
C)  has a positive slope. 
D)  all of the above

Question 14

In the short run, the perfectly competitive firm will always earn an economic profit when

Accepted Answer

A)  P = ATC. 
B)  P > AVC. 
C)  P = MC. 
D)  P > ATC. 
A)  P = ATC. 
B)  P > AVC. 
C)  P = MC. 
D)  P > ATC.

Question 15

When a firm has an accounting profit that is negative, it

Accepted Answer

A)  will never produce output, even in the short run. 
B)  may still have economic profit. 
C)  has total revenue that is less than total cost. 
D)  cannot be producing where price equals marginal cost. 
A)  will never produce output, even in the short run. 
B)  may still have economic profit. 
C)  has total revenue that is less than total cost. 
D)  cannot be producing where price equals marginal cost.

Question 16

If price is $5, marginal cost is $5, average total cost is $3, and the quantity produced is 150 units, then the perfectly competitive firm is

Accepted Answer

A)  not maximizing economic profit. 
B)  earning $2 in economic profits and is maximizing economic profits. 
C)  earning $150 in economic profits and is not maximizing economic profits. 
D)  earning $300 in economic profits and is maximizing economic profits. 
A)  not maximizing economic profit. 
B)  earning $2 in economic profits and is maximizing economic profits. 
C)  earning $150 in economic profits and is not maximizing economic profits. 
D)  earning $300 in economic profits and is maximizing economic profits.

Question 17

Which of the following is closest to a perfectly competitive market?

Accepted Answer

A)  the soda pop market 
B)  the market for bread 
C)  the market for sugar 
D)  the market for fast food 
A)  the soda pop market 
B)  the market for bread 
C)  the market for sugar 
D)  the market for fast food

Question 18

-In the above figure, assuming Firm 1 and Firm 2 are the sole producers in the industry, the industry quantity supplied at price P2 is equal to

Accepted Answer

A)  Q1 + Q2. 
B)  Q1 + Q3. 
C)  Q2 + Q4. 
D)  Q4 - Q2. 
A)  Q1 + Q2. 
B)  Q1 + Q3. 
C)  Q2 + Q4. 
D)  Q4 - Q2.

Question 19

Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $8.00; AVC = $5.00; MC = $8.00; MR = $9.00. The firm should

Accepted Answer

A)  decrease output. 
B)  increase output. 
C)  increase price. 
D)  continue to produce its current output. 
A)  decrease output. 
B)  increase output. 
C)  increase price. 
D)  continue to produce its current output.

Question 20

The short-run break-even price is the point at which

Accepted Answer

A)  price is less than marginal cost. 
B)  marginal cost, average total cost and marginal revenue are all equal. 
C)  average variable cost is at a minimum. 
D)  marginal cost, price and average variable cost are all equal. 
A)  price is less than marginal cost. 
B)  marginal cost, average total cost and marginal revenue are all equal. 
C)  average variable cost is at a minimum. 
D)  marginal cost, price and average variable cost are all equal.

Exam 23: Perfect Competition

An industry in which an increase in output leads to a reduction in long-run per-unit costs is a(n)

Price equals the minimum of long-run average cost

-Refer to the above table. The table represents information on the costs for Ajax Corporation. Ajax operates in a perfectly competitive market and the price of the product is $9. What does profit equal when quantity equals 3?

For a perfect competitor, marginal revenue equals

-Refer to the above table. The table represents information on the costs for Ajax Corporation. Ajax operates in a perfectly competitive market and the price of the product is $9. What does total revenue equal when quantity equals 4?

-In the above figure, at output levels between 5 units and 13 units,

-In the above figure, the profit-maximizing rate of production for the perfectly competitive firm is

Which of the following is a characteristic of perfect competition?

We assume that firms, when they are deciding the best rate of output at which to produce,

The short-run industry supply curve is found by

-Refer to the above table. This firm operates in a perfectly competitive market in which the market price is $10 per unit. What is its profit-maximizing rate of production?

A firm's total explicit costs are $1,000. Its total implicit costs are $500, and it has a total revenue of $900. This firm receives

The perfectly competitive firm's total revenue curve

In the short run, the perfectly competitive firm will always earn an economic profit when

When a firm has an accounting profit that is negative, it

If price is $5, marginal cost is $5, average total cost is $3, and the quantity produced is 150 units, then the perfectly competitive firm is

Which of the following is closest to a perfectly competitive market?

-In the above figure, assuming Firm 1 and Firm 2 are the sole producers in the industry, the industry quantity supplied at price P2 is equal to

Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $8.00; AVC = $5.00; MC = $8.00; MR = $9.00. The firm should

The short-run break-even price is the point at which

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters

-In the above figure, assuming Firm 1 and Firm 2 are the sole producers in the industry, the industry quantity supplied at price P₂ is equal to