Question 1

The total revenue of a perfectly competitive firm is calculated by

Accepted Answer

A)  multiplying average revenue by price. 
B)  dividing price by quantity. 
C)  multiplying price by quantity. 
D)  multiplying quantity by average total cost. 
A)  multiplying average revenue by price. 
B)  dividing price by quantity. 
C)  multiplying price by quantity. 
D)  multiplying quantity by average total cost.

Question 2

-In the above figure, when price is below E, this firm should

Accepted Answer

A)  lower prices. 
B)  continue to operate as-is. 
C)  attempt to lower ATC and to raise AVC. 
D)  shut down. 
A)  lower prices. 
B)  continue to operate as-is. 
C)  attempt to lower ATC and to raise AVC. 
D)  shut down.

Question 3

Marginal revenue equals

Accepted Answer

A)  total revenue divided by output. 
B)  price times quantity, divided by average revenue. 
C)  total revenue divided by average revenue. 
D)  the change in total revenue from selling one more unit. 
A)  total revenue divided by output. 
B)  price times quantity, divided by average revenue. 
C)  total revenue divided by average revenue. 
D)  the change in total revenue from selling one more unit.

Question 4

Explain what happens to the long-run supply curve of an industry when firm entry raises the price of inputs used in the industry.

Accepted Answer

When firm entry raises the price of inpu

Question 5

The demand curve for the product of a perfectly competitive firm is

Accepted Answer

A)  downward sloping. 
B)  upward sloping. 
C)  perfectly inelastic. 
D)  perfectly elastic. 
A)  downward sloping. 
B)  upward sloping. 
C)  perfectly inelastic. 
D)  perfectly elastic.

Question 6

-In the above figure, if d3 is the relevant demand curve for this firm, then which level of output will maximize this firm's profits or minimize its losses?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 7

In a perfectly competitive industry

Accepted Answer

A)  each firm is a price maker. 
B)  no buyer or seller can influence the market price. 
C)  there is apt to be a shortage of sellers of output. 
D)  firms can never make an economic profit. 
A)  each firm is a price maker. 
B)  no buyer or seller can influence the market price. 
C)  there is apt to be a shortage of sellers of output. 
D)  firms can never make an economic profit.

Question 8

Economic profits at the short-run break-even point are

Accepted Answer

A)  positive. 
B)  negative. 
C)  equal to zero. 
D)  indeterminate since they also depend on the size of the fixed costs. 
A)  positive. 
B)  negative. 
C)  equal to zero. 
D)  indeterminate since they also depend on the size of the fixed costs.

Question 9

The owner of a perfectly competitive firm that is earning economic losses in the short run

Accepted Answer

A)  should alter the rate of output in order to increase profitability. 
B)  should cut his own salary in order to reach the break-even point. 
C)  is actually losing more than he thinks because not all of the implicit costs have been considered. 
D)  is earning less than he would if he worked for someone else. 
A)  should alter the rate of output in order to increase profitability. 
B)  should cut his own salary in order to reach the break-even point. 
C)  is actually losing more than he thinks because not all of the implicit costs have been considered. 
D)  is earning less than he would if he worked for someone else.

Question 10

When marginal cost pricing occurs,

Accepted Answer

A)  price equals the additional cost society incurs in producing the next unit of an item. 
B)  the firm can only break even if it does not set price to marginal cost. 
C)  price equals average variable cost but exceeds average total cost. 
D)  the firm is at the shutdown point. 
A)  price equals the additional cost society incurs in producing the next unit of an item. 
B)  the firm can only break even if it does not set price to marginal cost. 
C)  price equals average variable cost but exceeds average total cost. 
D)  the firm is at the shutdown point.

Question 11

A firm seeking to maximize economic profits should produce at the output at which

Accepted Answer

A)  total revenue equals total cost. 
B)  marginal revenue equals marginal cost. 
C)  average revenue equals average cost. 
D)  marginal revenue equals average revenue. 
A)  total revenue equals total cost. 
B)  marginal revenue equals marginal cost. 
C)  average revenue equals average cost. 
D)  marginal revenue equals average revenue.

Question 12

For a firm in a perfectly competitive industry, which of the following is TRUE?

Accepted Answer

A)  MR = P 
B)  MR  P 
A)  MR = P 
B)  MR  P

Question 13

-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 will be the value of total revenue when quantity sold equals 3?

Accepted Answer

A)  $27 
B)  $21 
C)  $3 
D)  $9 
A)  $27 
B)  $21 
C)  $3 
D)  $9

Question 14

A situation in which the price charged is less than society's opportunity cost would lead to

Accepted Answer

A)  too little being produced. 
B)  too much being produced. 
C)  an efficient amount being produced. 
D)  marginal cost pricing. 
A)  too little being produced. 
B)  too much being produced. 
C)  an efficient amount being produced. 
D)  marginal cost pricing.

Question 15

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

Accepted Answer

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

Question 16

-Refer to the above table. If the price is $5, the maximum economic profits this firm could earn is

Accepted Answer

A)  $520. 
B)  $420. 
C)  $414. 
D)  $106. 
A)  $520. 
B)  $420. 
C)  $414. 
D)  $106.

Question 17

Which of the following is always true for a perfectly competitive firm?

Accepted Answer

A)  P = d = MR 
B)  P = d = AVC 
C)  MC = MR = AVC 
D)  AVC = ATC = P 
A)  P = d = MR 
B)  P = d = AVC 
C)  MC = MR = AVC 
D)  AVC = ATC = P

Question 18

A firm that shuts down in the short run experiences losses equal to

Accepted Answer

A)  zero. 
B)  total variable costs. 
C)  total fixed costs. 
D)  total marginal costs. 
A)  zero. 
B)  total variable costs. 
C)  total fixed costs. 
D)  total marginal costs.

Question 19

Which is always true at a firm's profit-maximizing rate of production?

Accepted Answer

A)  Total Revenue = Total Costs 
B)  The total revenue curve lies below the total cost curve. 
C)  Marginal Revenue > Marginal Cost 
D)  Marginal Revenue = Marginal Cost 
A)  Total Revenue = Total Costs 
B)  The total revenue curve lies below the total cost curve. 
C)  Marginal Revenue > Marginal Cost 
D)  Marginal Revenue = Marginal Cost

Question 20

If a firm is producing an output rate at which marginal cost is equal price, the firm

Accepted Answer

A)  is maximizing profits. 
B)  should increase its output level. 
C)  should reduce its output level. 
D)  will not be covering its fixed cost. 
A)  is maximizing profits. 
B)  should increase its output level. 
C)  should reduce its output level. 
D)  will not be covering its fixed cost.

Exam 23: Perfect Competition

The total revenue of a perfectly competitive firm is calculated by

-In the above figure, when price is below E, this firm should

Marginal revenue equals

Explain what happens to the long-run supply curve of an industry when firm entry raises the price of inputs used in the industry.

The demand curve for the product of a perfectly competitive firm is

-In the above figure, if d3 is the relevant demand curve for this firm, then which level of output will maximize this firm's profits or minimize its losses?

In a perfectly competitive industry

Economic profits at the short-run break-even point are

The owner of a perfectly competitive firm that is earning economic losses in the short run

When marginal cost pricing occurs,

A firm seeking to maximize economic profits should produce at the output at which

For a firm in a perfectly competitive industry, which of the following is TRUE?

-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 will be the value of total revenue when quantity sold equals 3?

A situation in which the price charged is less than society's opportunity cost would lead to

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

-Refer to the above table. If the price is $5, the maximum economic profits this firm could earn is

Which of the following is always true for a perfectly competitive firm?

A firm that shuts down in the short run experiences losses equal to

Which is always true at a firm's profit-maximizing rate of production?

If a firm is producing an output rate at which marginal cost is equal price, the firm

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