Question 1

In the long run, a perfectly competitive market will

Accepted Answer

A) produce only the quantity of output that yields a long-run profit for the typical firm. 
B) supply whatever amount consumers will buy at a price which earns the market an economic profit. 
C) supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve. 
D) generate a long-run equilibrium where the typical firm operates at a loss. 
A) produce only the quantity of output that yields a long-run profit for the typical firm. 
B) supply whatever amount consumers will buy at a price which earns the market an economic profit. 
C) supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve. 
D) generate a long-run equilibrium where the typical firm operates at a loss.

Question 2

Figure 8.4   Figure 8.4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market.
-Refer to Figure 8.4.If the market price is $30, should the firm represented in the diagram continue to stay in business?

Accepted Answer

A) No, it should shut down because it is incurring a loss. 
B) No, it should shut down because it cannot cover its variable cost. 
C) Yes, because it is covering part of its fixed cost. 
D) Yes, because it is making a profit. 
A) No, it should shut down because it is incurring a loss. 
B) No, it should shut down because it cannot cover its variable cost. 
C) Yes, because it is covering part of its fixed cost. 
D) Yes, because it is making a profit.

Question 3

A perfectly competitive apple farm produces 1000 bushels of apples at a total cost of $36 000.The price of each bushel is $50.The firm's short-run profit or loss is

Accepted Answer

A) loss of $14 000 
B) profit of $14 000 
C) profit of $50 000 
D) There is insufficient information to answer the question. 
A) loss of $14 000 
B) profit of $14 000 
C) profit of $50 000 
D) There is insufficient information to answer the question.

Question 4

Which of the following is not a characteristic of a perfectly competitive market structure?

Accepted Answer

A) There are a very large number of firms that are small compared to the market. 
B) All firms sell identical products. 
C) There are no restrictions to entry by new firms. 
D) There are restrictions on exit of firms. 
A) There are a very large number of firms that are small compared to the market. 
B) All firms sell identical products. 
C) There are no restrictions to entry by new firms. 
D) There are restrictions on exit of firms.

Question 5

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102, then the firm is probably producing more than its profit-maximising quantity.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is true?

Accepted Answer

A) A long-run competitive equilibrium can only be achieved in constant-cost industries. 
B) When an industry achieves a long-run competitive equilibrium, industry output will not change in the future. 
C) A long-run competitive equilibrium outcome is not economically efficient. 
D) When an industry reaches a long-run competitive equilibrium, the typical firm in the industry breaks even. 
A) A long-run competitive equilibrium can only be achieved in constant-cost industries. 
B) When an industry achieves a long-run competitive equilibrium, industry output will not change in the future. 
C) A long-run competitive equilibrium outcome is not economically efficient. 
D) When an industry reaches a long-run competitive equilibrium, the typical firm in the industry breaks even.

Question 7

Profit is the difference between

Accepted Answer

A) marginal revenue and marginal cost. 
B) total revenue and variable cost. 
C) total revenue and total explicit cost. 
D) total revenue and total cost. 
A) marginal revenue and marginal cost. 
B) total revenue and variable cost. 
C) total revenue and total explicit cost. 
D) total revenue and total cost.

Question 8

In long-run competitive equilibrium, the perfectly competitive firm produces where price equals minimum average total cost.
a.What is this efficiency criterion called?
b.How does it benefit consumers?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

a.Productive efficiency
b.Productive eff

Question 9

A perfectly competitive firm's marginal revenue

Accepted Answer

A) is greater than price. 
B) is less than price because a firm must lower its price to sell more. 
C) is equal to price. 
D) may be either greater or less than price, depending on the quantity sold. 
A) is greater than price. 
B) is less than price because a firm must lower its price to sell more. 
C) is equal to price. 
D) may be either greater or less than price, depending on the quantity sold.

In the long run, a perfectly competitive market will

Figure 8.4 Figure 8.4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market. -Refer to Figure 8.4.If the market price is $30, should the firm represented in the diagram continue to stay in business?

A perfectly competitive apple farm produces 1000 bushels of apples at a total cost of $36 000.The price of each bushel is $50.The firm's short-run profit or loss is

Which of the following is not a characteristic of a perfectly competitive market structure?

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102, then the firm is probably producing more than its profit-maximising quantity.

Which of the following statements is true?

Profit is the difference between

A perfectly competitive firm's marginal revenue

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

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Exam 8: Firms in Perfectly Competitive Markets

In the long run, a perfectly competitive market will

Figure 8.4 Figure 8.4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market. -Refer to Figure 8.4.If the market price is $30, should the firm represented in the diagram continue to stay in business?

A perfectly competitive apple farm produces 1000 bushels of apples at a total cost of $36 000.The price of each bushel is $50.The firm's short-run profit or loss is

Which of the following is not a characteristic of a perfectly competitive market structure?

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102, then the firm is probably producing more than its profit-maximising quantity.

Which of the following statements is true?

Profit is the difference between

A perfectly competitive firm's marginal revenue

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Monopoly Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters