Question 1

Along an industry's long-run supply curve,

Accepted Answer

A)  economic profits are positive. 
B)  economic profits are zero. 
C)  entrepreneurs earn an above-average rate of return. 
D)  the number of firms is constant. 
A)  economic profits are positive. 
B)  economic profits are zero. 
C)  entrepreneurs earn an above-average rate of return. 
D)  the number of firms is constant.

Question 2

In a perfectly competitive market, a firm in long-run equilibrium will be operating

Accepted Answer

A)  to the right of the minimum of the long-run average cost curve. 
B)  to the left of the minimum of the long-run average cost curve. 
C)  at the minimum of the long-run average cost curve. 
D)  at the minimum of the marginal cost curve. 
A)  to the right of the minimum of the long-run average cost curve. 
B)  to the left of the minimum of the long-run average cost curve. 
C)  at the minimum of the long-run average cost curve. 
D)  at the minimum of the marginal cost curve.

Question 3

-Refer to the above table. If the price is $3 the maximum profit this firm could earn is

Accepted Answer

A)  $99. 
B)  $306. 
C)  -$100. 
D)  -$99. 
A)  $99. 
B)  $306. 
C)  -$100. 
D)  -$99.

Question 4

Suppose a perfectly competitive firm faces the following cost and revenue conditions: ATC = $25.50; AVC = $20.50; MC = $25.50; MR = $28.50. The firm should

Accepted Answer

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

Question 5

Using a graph, show a short-run equilibrium for the industry and the firm. Explain the graph.

Accepted Answer

@#IMG-DLM& In the above figure, the industry deman

Question 6

Consider an industry that is in long-run equilibrium. An increase in demand leads to no change in the price of the good. We know that this is

Accepted Answer

A)  a decreasing cost industry. 
B)  a constant cost industry. 
C)  an increasing cost industry. 
D)  not a competitive industry. 
A)  a decreasing cost industry. 
B)  a constant cost industry. 
C)  an increasing cost industry. 
D)  not a competitive industry.

Question 7

For a perfectly competitive firm,

Accepted Answer

A)  price is greater than marginal revenue. 
B)  price equals marginal revenue. 
C)  price is less than marginal revenue. 
D)  there is no relationship between price and marginal revenue. 
A)  price is greater than marginal revenue. 
B)  price equals marginal revenue. 
C)  price is less than marginal revenue. 
D)  there is no relationship between price and marginal revenue.

Question 8

-In the above figure, assume d1 is the demand curve faced by this firm. Which is true?

Accepted Answer

A)  This firm is earning an economic profit. 
B)  This firm is experiencing an economic loss. 
C)  This firm is breaking even. 
D)  This firm's total costs equal EJA0. 
A)  This firm is earning an economic profit. 
B)  This firm is experiencing an economic loss. 
C)  This firm is breaking even. 
D)  This firm's total costs equal EJA0.

Question 9

In a decreasing-cost industry, an increase in output will lead to

Accepted Answer

A)  an upward shift in the ATC curve. 
B)  an upward shift in the MC curve. 
C)  a reduction in long-run per-unit costs. 
D)  an increase in long-run per-unit costs. 
A)  an upward shift in the ATC curve. 
B)  an upward shift in the MC curve. 
C)  a reduction in long-run per-unit costs. 
D)  an increase in long-run per-unit costs.

Question 10

What is the short-run shutdown price? Using a graph and a market price of P, show that losses are less when shutting down than when producing.

Accepted Answer

@#IMG-DLM& The short-run shutdown price is the pri

Question 11

For a perfectly competitive firm at its long-run competitive equilibrium point,

Accepted Answer

A)  P = AR = MR = LATC = SATC = MC. 
B)  P = AR = MR = LATC > SATC = MC. 
C)  P = AR = MR = MC = LATC = AVC. 
D)  P > MR > AR > MC > LATC > SATC. 
A)  P = AR = MR = LATC = SATC = MC. 
B)  P = AR = MR = LATC > SATC = MC. 
C)  P = AR = MR = MC = LATC = AVC. 
D)  P > MR > AR > MC > LATC > SATC.

Question 12

Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $7.00; AVC = $5.00; MC = $6.50; MR = $6.50. The firm should

Accepted Answer

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

Question 13

If the long-run supply curve slopes upward, we know that this is

Accepted Answer

A)  a decreasing-cost industry. 
B)  a constant-cost industry. 
C)  an increasing-cost industry. 
D)  a situation in which no input prices change as firms enter and exit the industry. 
A)  a decreasing-cost industry. 
B)  a constant-cost industry. 
C)  an increasing-cost industry. 
D)  a situation in which no input prices change as firms enter and exit the industry.

Question 14

The firm in a perfectly competitive industry is a

Accepted Answer

A)  price taker. 
B)  price maker. 
C)  price seeker. 
D)  price dealer. 
A)  price taker. 
B)  price maker. 
C)  price seeker. 
D)  price dealer.

Question 15

Why does the industry short-run supply curve slope upward?

Accepted Answer

The industry short-run supply curve slop

Question 16

-Refer to the above figure. If the market price is equal to A, which statement can be made about economic profits?

Accepted Answer

A)  Economic profits are positive and equal to ABCG. 
B)  Economic profits are positive and equal to ABEF. 
C)  Economic profits are negative and equal to GCEF. 
D)  Economic profits are negative and equal to ABQ   0. 
A)  Economic profits are positive and equal to ABCG. 
B)  Economic profits are positive and equal to ABEF. 
C)  Economic profits are negative and equal to GCEF. 
D)  Economic profits are negative and equal to ABQ   0.

Question 17

Which of the following is the best example of a decreasing-cost industry?

Accepted Answer

A)  the health care industry 
B)  the personal computer industry 
C)  the college-education industry 
D)  the oil industry 
A)  the health care industry 
B)  the personal computer industry 
C)  the college-education industry 
D)  the oil industry

Question 18

At the short-run break-even price, the firm

Accepted Answer

A)  is earning positive economic profits. 
B)  is earning negative economic profits. 
C)  is making a normal rate of return on its capital investment. 
D)  may be earning a positive or negative profit economic depending upon costs. 
A)  is earning positive economic profits. 
B)  is earning negative economic profits. 
C)  is making a normal rate of return on its capital investment. 
D)  may be earning a positive or negative profit economic depending upon costs.

Question 19

-In the above figure, assume d3 is the demand curve faced by this firm. Which is true?

Accepted Answer

A)  This firm is earning an economic profit. 
B)  This firm is experiencing an economic loss. 
C)  This firm is breaking even. 
D)  This firm's total revenues equal HRD0. 
A)  This firm is earning an economic profit. 
B)  This firm is experiencing an economic loss. 
C)  This firm is breaking even. 
D)  This firm's total revenues equal HRD0.

Question 20

-Refer to the above figure. The firm's short-run shutdown price is

Accepted Answer

A)  at $1. 
B)  at $2. 
C)  at $4. 
D)  above $4. 
A)  at $1. 
B)  at $2. 
C)  at $4. 
D)  above $4.

Exam 23: Perfect Competition

Along an industry's long-run supply curve,

In a perfectly competitive market, a firm in long-run equilibrium will be operating

-Refer to the above table. If the price is $3 the maximum profit this firm could earn is

Suppose a perfectly competitive firm faces the following cost and revenue conditions: ATC = $25.50; AVC = $20.50; MC = $25.50; MR = $28.50. The firm should

Using a graph, show a short-run equilibrium for the industry and the firm. Explain the graph.

Consider an industry that is in long-run equilibrium. An increase in demand leads to no change in the price of the good. We know that this is

For a perfectly competitive firm,

-In the above figure, assume d1 is the demand curve faced by this firm. Which is true?

In a decreasing-cost industry, an increase in output will lead to

What is the short-run shutdown price? Using a graph and a market price of P, show that losses are less when shutting down than when producing.

For a perfectly competitive firm at its long-run competitive equilibrium point,

Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $7.00; AVC = $5.00; MC = $6.50; MR = $6.50. The firm should

If the long-run supply curve slopes upward, we know that this is

The firm in a perfectly competitive industry is a

Why does the industry short-run supply curve slope upward?

-Refer to the above figure. If the market price is equal to A, which statement can be made about economic profits?

Which of the following is the best example of a decreasing-cost industry?

At the short-run break-even price, the firm

-In the above figure, assume d3 is the demand curve faced by this firm. Which is true?

-Refer to the above figure. The firm's short-run shutdown price is

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, assume d₁ is the demand curve faced by this firm. Which is true?

-In the above figure, assume d₃ is the demand curve faced by this firm. Which is true?