Question 1

A perfectly competitive industry achieves allocative efficiency because

Accepted Answer

A) goods and services are produced at the lowest possible cost. 
B) goods and services are produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it. 
C) it produces where market price equals marginal production cost. 
D) firms carry production surpluses. 
A) goods and services are produced at the lowest possible cost. 
B) goods and services are produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it. 
C) it produces where market price equals marginal production cost. 
D) firms carry production surpluses.

Question 2

If a perfectly competitive firm achieves productive efficiency, then

Accepted Answer

A) it will raise its price in order to earn an economic profit. 
B) the price of the good it sells is equal to the benefit consumers receive from consuming the last unit of the good sold. 
C) it is producing at minimum efficient scale. 
D) it is producing the good it sells at the lowest possible cost. 
A) it will raise its price in order to earn an economic profit. 
B) the price of the good it sells is equal to the benefit consumers receive from consuming the last unit of the good sold. 
C) it is producing at minimum efficient scale. 
D) it is producing the good it sells at the lowest possible cost.

Question 3

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

Accepted Answer

A) MR AVC. C) MR > AVC. D) AFC < AVC. A) MR AVC. C) MR > AVC. D) AFC < AVC.

Question 4

Which of the following is a characteristic of an oligopolistic market structure?

Accepted Answer

A) There are few dominant sellers. 
B) Each firm sells a unique product. 
C) It is easy for new firms to enter the industry. 
D) Each firm need not react to the actions of rivals. 
A) There are few dominant sellers. 
B) Each firm sells a unique product. 
C) It is easy for new firms to enter the industry. 
D) Each firm need not react to the actions of rivals.

Question 5

Figure 8.3  
-Refer to Figure 8.3.Suppose the prevailing price is P1 and the firm is currently producing its loss-minimising quantity.Identify the area that represents the loss.

Accepted Answer

A) P2 deP1 
B) P3cbP1 
C) P3caP0 
D) 0P1 bQ1 
A) P2 deP1 
B) P3cbP1 
C) P3caP0 
D) 0P1 bQ1

Question 6

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?

Accepted Answer

A) productive efficiency 
B) allocative efficiency 
C) marginal efficiency 
D) profit maximisation 
A) productive efficiency 
B) allocative efficiency 
C) marginal efficiency 
D) profit maximisation

Question 7

The market demand curve in a perfectly competitive market is downward sloping.

Accepted Answer

A) True 
 B)False

Question 8

Table 8.1   Table 8.1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases.Assume that output can only be increased in batches of 100 units.
-Refer to Table 8.1.If the market price of each camera case is $8, the firm's total revenue is

Accepted Answer

A) $2400 
B) $3200 
C) $4000 
D) $4800 
A) $2400 
B) $3200 
C) $4000 
D) $4800

Question 9

A firm would decide to shut down if its production resulted in

Accepted Answer

A) MR AVC. C) AFC > AVC. D) MR < AVC. A) MR AVC. C) AFC > AVC. D) MR < AVC.

Question 10

What is meant by the term 'long-run competitive equilibrium'?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

Long-run competitive equilibri

Question 11

If a firm shuts down in the short run it will

Accepted Answer

A) break even. 
B) declare bankruptcy. 
C) suffer a loss equal to its variable costs. 
D) suffer a loss equal to its fixed costs. 
A) break even. 
B) declare bankruptcy. 
C) suffer a loss equal to its variable costs. 
D) suffer a loss equal to its fixed costs.

Question 12

If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing it, the firm

Accepted Answer

A) added more to total costs than it added to total revenue. 
B) added more to total revenue than it added to total cost. 
C) is maximising marginal profit. 
D) has minimised its losses. 
A) added more to total costs than it added to total revenue. 
B) added more to total revenue than it added to total cost. 
C) is maximising marginal profit. 
D) has minimised its losses.

Question 13

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit, then

Accepted Answer

A) marginal revenue is less than price. 
B) average total cost is at a minimum. 
C) total revenue equals total cost. 
D) price exceeds average total cost. 
A) marginal revenue is less than price. 
B) average total cost is at a minimum. 
C) total revenue equals total cost. 
D) price exceeds average total cost.

Question 14

By what is the price of a seller's product in perfect competition determined?

Accepted Answer

A) The individual seller. 
B) A few of the sellers. 
C) Market demand and market supply. 
D) The individual demander. 
A) The individual seller. 
B) A few of the sellers. 
C) Market demand and market supply. 
D) The individual demander.

Question 15

A perfectly competitive wheat farmer in a constant-cost industry produces 3000 bushels of wheat at a total cost of $36 000.The prevailing market price is $15.What will happen to the market price of wheat in the long run?

Accepted Answer

A) The price remains constant at $15. 
B) The price falls to $12. 
C) The price rises above $15. 
D) There is insufficient information to answer the question. 
A) The price remains constant at $15. 
B) The price falls to $12. 
C) The price rises above $15. 
D) There is insufficient information to answer the question.

Question 16

In a graph with output on the horizontal axis and total revenue on the vertical axis, the shape of the total revenue curve for a perfectly competitive seller is

Accepted Answer

A) U-shaped 
B) inverted U-shaped 
C) a horizontal line 
D) a ray from the origin 
A) U-shaped 
B) inverted U-shaped 
C) a horizontal line 
D) a ray from the origin

Question 17

If a typical firm in a perfectly competitive industry is incurring losses, then

Accepted Answer

A) all firms will continue to lose money. 
B) some firms will exit in the long run, causing market supply to decrease and market price to rise, increasing profits for the remaining firms. 
C) some firms will exit in the long run, causing market supply to decrease and market price to fall, increasing losses for the remaining firms. 
D) some firms will enter in the long run, causing market supply to increase and market price to rise, increasing profit for all firms. 
A) all firms will continue to lose money. 
B) some firms will exit in the long run, causing market supply to decrease and market price to rise, increasing profits for the remaining firms. 
C) some firms will exit in the long run, causing market supply to decrease and market price to fall, increasing losses for the remaining firms. 
D) some firms will enter in the long run, causing market supply to increase and market price to rise, increasing profit for all firms.

Question 18

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

Accepted Answer

A) There is a large number of independently acting small sellers. 
B) All sellers sell products that are differentiated. 
C) There are low barriers to entry of new firms. 
D) Each firm must react to actions of other firms. 
A) There is a large number of independently acting small sellers. 
B) All sellers sell products that are differentiated. 
C) There are low barriers to entry of new firms. 
D) Each firm must react to actions of other firms.

Question 19

What is always true at the quantity where a firm's average total cost equals average revenue?

Accepted Answer

A) The firm's revenue is maximised. 
B) The firm's profit is maximised. 
C) The firm breaks even. 
D) Marginal cost equals marginal revenue. 
A) The firm's revenue is maximised. 
B) The firm's profit is maximised. 
C) The firm breaks even. 
D) Marginal cost equals marginal revenue.

Question 20

Why would a company continue to operate for many years while never once turning a profit rather than shut down immediately? Using revenue and cost analysis, explain when the company would shut down.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

A company would continue to op

A perfectly competitive industry achieves allocative efficiency because

If a perfectly competitive firm achieves productive efficiency, then

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

Which of the following is a characteristic of an oligopolistic market structure?

Figure 8.3 -Refer to Figure 8.3.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimising quantity.Identify the area that represents the loss.

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?

The market demand curve in a perfectly competitive market is downward sloping.

Table 8.1 Table 8.1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases.Assume that output can only be increased in batches of 100 units. -Refer to Table 8.1.If the market price of each camera case is $8, the firm's total revenue is

A firm would decide to shut down if its production resulted in

What is meant by the term 'long-run competitive equilibrium'? __________________________________________________________________________________________________________________________________________________________________________________________

If a firm shuts down in the short run it will

If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing it, the firm

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit, then

By what is the price of a seller's product in perfect competition determined?

A perfectly competitive wheat farmer in a constant-cost industry produces 3000 bushels of wheat at a total cost of $36 000.The prevailing market price is $15.What will happen to the market price of wheat in the long run?

In a graph with output on the horizontal axis and total revenue on the vertical axis, the shape of the total revenue curve for a perfectly competitive seller is

If a typical firm in a perfectly competitive industry is incurring losses, then

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

What is always true at the quantity where a firm's average total cost equals average 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

Exam 8: Firms in Perfectly Competitive Markets

A perfectly competitive industry achieves allocative efficiency because

If a perfectly competitive firm achieves productive efficiency, then

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

Which of the following is a characteristic of an oligopolistic market structure?

Figure 8.3 -Refer to Figure 8.3.Suppose the prevailing price is P1 and the firm is currently producing its loss-minimising quantity.Identify the area that represents the loss.

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?

The market demand curve in a perfectly competitive market is downward sloping.

Table 8.1 Table 8.1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases.Assume that output can only be increased in batches of 100 units. -Refer to Table 8.1.If the market price of each camera case is $8, the firm's total revenue is

A firm would decide to shut down if its production resulted in

What is meant by the term 'long-run competitive equilibrium'? __________________________________________________________________________________________________________________________________________________________________________________________

If a firm shuts down in the short run it will

If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing it, the firm

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit, then

By what is the price of a seller's product in perfect competition determined?

A perfectly competitive wheat farmer in a constant-cost industry produces 3000 bushels of wheat at a total cost of $36 000.The prevailing market price is $15.What will happen to the market price of wheat in the long run?

In a graph with output on the horizontal axis and total revenue on the vertical axis, the shape of the total revenue curve for a perfectly competitive seller is

If a typical firm in a perfectly competitive industry is incurring losses, then

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

What is always true at the quantity where a firm's average total cost equals average 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

Figure 8.3 -Refer to Figure 8.3.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimising quantity.Identify the area that represents the loss.