Question 1

A long run supply curve:

Accepted Answer

A)  will rise if diminishing returns are encountered. 
B)  will rise if diseconomies of scale are encountered. 
C)  assumes that all resources are variable. 
D)  is characterized by both (b) and (c). 
A)  will rise if diminishing returns are encountered. 
B)  will rise if diseconomies of scale are encountered. 
C)  assumes that all resources are variable. 
D)  is characterized by both (b) and (c).

Question 2

The most socially efficient market structure in the long run is:

Accepted Answer

A)  perfect competition. 
B)  monopolistic competition. 
C)  oligopoly. 
D)  monopoly. 
A)  perfect competition. 
B)  monopolistic competition. 
C)  oligopoly. 
D)  monopoly.

Question 3

When economic profits are negative in a perfectly competitive industry,

Accepted Answer

A)  we would expect the market supply curve to shift to the left as a result. 
B)  we would expect the market supply curve to shift to the right as a result. 
C)  we would not expect any change in the market supply curve to result. 
D)  we would expect that the market demand curve to shift left as a result 
A)  we would expect the market supply curve to shift to the left as a result. 
B)  we would expect the market supply curve to shift to the right as a result. 
C)  we would not expect any change in the market supply curve to result. 
D)  we would expect that the market demand curve to shift left as a result

Question 4

If input prices rise as industry output expands,then a perfectly competitive firm's marginal cost and average cost curves will:

Accepted Answer

A)  shift upward. 
B)  shift downward. 
C)  not shift. As the firm increases production, however, costs increase as the firm moves upward to the right along these curves. 
D)  not shift. As the firm increases production, however, costs decrease as the firm moves downward to the left along these curves. 
A)  shift upward. 
B)  shift downward. 
C)  not shift. As the firm increases production, however, costs increase as the firm moves upward to the right along these curves. 
D)  not shift. As the firm increases production, however, costs decrease as the firm moves downward to the left along these curves.

Question 5

Exhibit 12-5   Refer to Exhibit 12-5.If the market price equals $45,the maximum profit that the firm can earn is:

Accepted Answer

A)  approximately $29,250. 
B)  approximately $9,750. 
C)  approximately $19,500. 
D)  zero dollars. 
A)  approximately $29,250. 
B)  approximately $9,750. 
C)  approximately $19,500. 
D)  zero dollars.

Question 6

Which of the following most closely resembles a perfectly competitive market?

Accepted Answer

A)  the airline industry 
B)  the soft drink industry 
C)  the wheat market 
D)  long-distance telephone service 
A)  the airline industry 
B)  the soft drink industry 
C)  the wheat market 
D)  long-distance telephone service

Question 7

In long-run perfectly competitive equilibrium:

Accepted Answer

A)  all firms suffer economic losses. 
B)  all firms earn zero economic profits. 
C)  all firms earn positive economic profits. 
D)  barriers prevent the entry of new firms. 
A)  all firms suffer economic losses. 
B)  all firms earn zero economic profits. 
C)  all firms earn positive economic profits. 
D)  barriers prevent the entry of new firms.

Question 8

Exhibit 12-8 The long-run total cost schedule of a perfectly competitive firm that produces walnuts is as follows:
  Refer to Exhibit 12-8.If input costs are constant and there are no barriers to entry,the long-run equilibrium price of a pound of walnuts will be about:

Accepted Answer

A)  $2.00 
B)  $2.20. 
C)  $2.50. 
D)  $2.75. 
A)  $2.00 
B)  $2.20. 
C)  $2.50. 
D)  $2.75.

Question 9

In the perfectly competitive model,all firms are assumed to be producing:

Accepted Answer

A)  products that are heavily advertised. 
B)  differentiated products. 
C)  identical products. 
D)  complementary products. 
A)  products that are heavily advertised. 
B)  differentiated products. 
C)  identical products. 
D)  complementary products.

Question 10

When price exceeds average variable cost for a firm,it is possible that:

Accepted Answer

A)  it is earning an economic profit. 
B)  it is breaking even. 
C)  it is suffering an economic loss. 
D)  any of the above is true. 
A)  it is earning an economic profit. 
B)  it is breaking even. 
C)  it is suffering an economic loss. 
D)  any of the above is true.

Question 11

Exhibit 12-7 The figure shows the price,marginal cost,and average cost curves of a perfectly competitive firm.   Refer to Exhibit 12-7.How many units of output per day should the firm produce if it wants to maximize its profits (i.e.,minimize its losses)?

Accepted Answer

A)  30 
B)  70 
C)  100 
D)  0 
A)  30 
B)  70 
C)  100 
D)  0

Question 12

Exhibit 12-8 The long-run total cost schedule of a perfectly competitive firm that produces walnuts is as follows:
  Refer to Exhibit 12-8.A firm expanding from producing 5,000 to 6,000 pounds of walnuts in the long run is experiencing:

Accepted Answer

A)  diseconomies of scale. 
B)  economies of scale. 
C)  an increasing marginal product. 
D)  constant returns to scale. 
A)  diseconomies of scale. 
B)  economies of scale. 
C)  an increasing marginal product. 
D)  constant returns to scale.

Question 13

The long-run supply curve for a decreasing-cost industry is:

Accepted Answer

A)  upward sloping. 
B)  downward sloping. 
C)  vertical. 
D)  horizontal. 
A)  upward sloping. 
B)  downward sloping. 
C)  vertical. 
D)  horizontal.

Question 14

"I'm losing money,but since my fixed costs are so high,I simply cannot afford to shut down." If the firm were attempting to maximize profit,this decision may be:

Accepted Answer

A)  correct if price is less than average variable cost. 
B)  incorrect because a firm experiencing economic losses should never continue to operate. 
C)  correct if the firm is covering all of its variable costs. 
D)  incorrect since a firm should shut down whenever price falls below average total cost in the short run. 
A)  correct if price is less than average variable cost. 
B)  incorrect because a firm experiencing economic losses should never continue to operate. 
C)  correct if the firm is covering all of its variable costs. 
D)  incorrect since a firm should shut down whenever price falls below average total cost in the short run.

Question 15

If the long-run industry supply curve in a perfectly competitive market slopes upward,then very likely input prices will ____ as industry output expands.

Accepted Answer

A)  increase 
B)  decrease 
C)  remain constant 
D)  first increase and then decrease 
A)  increase 
B)  decrease 
C)  remain constant 
D)  first increase and then decrease

Question 16

Perfect competition is characterized by a large number of buyers and sellers with identical products and no significant barriers to entry.

Accepted Answer

A) True 
 B)False

Question 17

Exhibit 12-6   Refer to Exhibit 12-6.The short run ____ for this firm is represented by the area of ____.

Accepted Answer

A)  profit; OP1Bq 
B)  loss; OP1Bq 
C)  profit; PABP1 
D)  loss; PABP1 
A)  profit; OP1Bq 
B)  loss; OP1Bq 
C)  profit; PABP1 
D)  loss; PABP1

Question 18

Exhibit 12-5   Refer to Exhibit 12-5.The lowest price at which the firm can earn at least zero economic profit is:

Accepted Answer

A)  $60. 
B)  $45. 
C)  $30. 
D)  $10. 
A)  $60. 
B)  $45. 
C)  $30. 
D)  $10.

Question 19

In perfect competition,at the firm's profit maximizing short run output,which of the following is true?

Accepted Answer

A)  Marginal revenue equals marginal cost. 
B)  Price equals marginal cost. 
C)  It could be earning either economic profits or losses. 
D)  All of the above are true. 
A)  Marginal revenue equals marginal cost. 
B)  Price equals marginal cost. 
C)  It could be earning either economic profits or losses. 
D)  All of the above are true.

Question 20

If a particular perfectly competitive industry uses only a small fraction of the supply of any of its inputs,the long run supply curve for that industry will tend to be:

Accepted Answer

A)  vertical. 
B)  upward sloping. 
C)  horizontal. 
D)  downward sloping. 
A)  vertical. 
B)  upward sloping. 
C)  horizontal. 
D)  downward sloping.

Exam 12: Firms in Perfectly Competitive Markets

A long run supply curve:

The most socially efficient market structure in the long run is:

When economic profits are negative in a perfectly competitive industry,

If input prices rise as industry output expands,then a perfectly competitive firm's marginal cost and average cost curves will:

Exhibit 12-5 Refer to Exhibit 12-5.If the market price equals $45,the maximum profit that the firm can earn is:

Which of the following most closely resembles a perfectly competitive market?

In long-run perfectly competitive equilibrium:

Exhibit 12-8 The long-run total cost schedule of a perfectly competitive firm that produces walnuts is as follows: Refer to Exhibit 12-8.If input costs are constant and there are no barriers to entry,the long-run equilibrium price of a pound of walnuts will be about:

In the perfectly competitive model,all firms are assumed to be producing:

When price exceeds average variable cost for a firm,it is possible that:

Exhibit 12-7 The figure shows the price,marginal cost,and average cost curves of a perfectly competitive firm. Refer to Exhibit 12-7.How many units of output per day should the firm produce if it wants to maximize its profits (i.e.,minimize its losses)?

Exhibit 12-8 The long-run total cost schedule of a perfectly competitive firm that produces walnuts is as follows: Refer to Exhibit 12-8.A firm expanding from producing 5,000 to 6,000 pounds of walnuts in the long run is experiencing:

The long-run supply curve for a decreasing-cost industry is:

"I'm losing money,but since my fixed costs are so high,I simply cannot afford to shut down." If the firm were attempting to maximize profit,this decision may be:

If the long-run industry supply curve in a perfectly competitive market slopes upward,then very likely input prices will ____ as industry output expands.

Perfect competition is characterized by a large number of buyers and sellers with identical products and no significant barriers to entry.

Exhibit 12-6 Refer to Exhibit 12-6.The short run ____ for this firm is represented by the area of ____.

Exhibit 12-5 Refer to Exhibit 12-5.The lowest price at which the firm can earn at least zero economic profit is:

In perfect competition,at the firm's profit maximizing short run output,which of the following is true?

If a particular perfectly competitive industry uses only a small fraction of the supply of any of its inputs,the long run supply curve for that industry will tend to be:

The Role and Method of Economics

Economics: Eight Powerful Ideas

Scarcity, Trade-Offs, and Production Possibilities

Demand, Supply, and Market Equilibrium

Markets in Motion and Price Controls

Elasticities

Market Efficiency and Welfare

Market Failure

Public Finance and Public Choice

Consumer Choice Theory

The Firm: Production and Costs

Monopoly and Antitrust

Monopolistic Competition and Product Differentiation

Oligopoly and Strategic Behavior

The Markets for Labor, Capital, and Land

Income, Poverty, and Health Care

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Measuring Economic Performance

Economic Growth in the Global Economy

Financial Markets, Saving, and Investment

Aggregate Demand and Aggregate Supply

The Aggregate Expenditure Model

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Trade

International Finance

Filters

Exhibit 12-6 Refer to Exhibit 12-6.The short run for this firm is represented by the area of .