Question 1

Profit computed using explicit costs as the only measure of costs is:

Accepted Answer

A)  explicit profit. 
B)  accounting profit. 
C)  implicit profit. 
D)  economic profit. 
A)  explicit profit. 
B)  accounting profit. 
C)  implicit profit. 
D)  economic profit.

Question 2

Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Based on the information given, we can conclude that the marginal revenue for candy canes:

Accepted Answer

A)  is less than $0.10. 
B)  equals $0.10. 
C)  is greater than $0.10. 
D)  It is not possible to answer based on the information given. 
A)  is less than $0.10. 
B)  equals $0.10. 
C)  is greater than $0.10. 
D)  It is not possible to answer based on the information given.

Question 3

Use the following to answer question(s): 
Exhibit: Perfectly Competitive Firm
  
-(Exhibit: Perfectly Competitive Firm) The exhibit shows a perfectly competitive firm that faces demand curve d, has the cost curves shown, and maximizes profit. The firm's total revenue per day is:

Accepted Answer

A)  $475. 
B)  $600. 
C)  $900. 
D)  $1,200. 
A)  $475. 
B)  $600. 
C)  $900. 
D)  $1,200.

Question 4

Use the following to answer question(s): 
Exhibit: Profit Maximizing
  
-(Exhibit: Profit Maximizing) The exhibit shows cost curves for a firm operating in a perfectly competitive market. At quantity q5, AVC is the same as: _______ .

Accepted Answer

A)  P4.  
B)  P3.  
C)  P2.  
D)  P1.  
A)  P4.  
B)  P3.  
C)  P2.  
D)  P1.

Question 5

Suppose that some firms in a perfectly competitive industry are incurring negative economic profits. The:

Accepted Answer

A)  industry supply curve will not shift in the long run. 
B)  industry supply curve will shift to the right in the long run. 
C)  number of firms in the industry will not change in the long run. 
D)  industry is not in long-run equilibrium. 
A)  industry supply curve will not shift in the long run. 
B)  industry supply curve will shift to the right in the long run. 
C)  number of firms in the industry will not change in the long run. 
D)  industry is not in long-run equilibrium.

Question 6

In the model of perfect competition:

Accepted Answer

A)  the market forces of supply determine the price. 
B)  individual firms can influence the price, but only slightly. 
C)  no individual or firm has enough power to have any impact on price. 
D)  the market forces of demand determine the price. 
A)  the market forces of supply determine the price. 
B)  individual firms can influence the price, but only slightly. 
C)  no individual or firm has enough power to have any impact on price. 
D)  the market forces of demand determine the price.

Question 7

In the short run, if AVC < P < ATC, a perfectly competitive firm:

Accepted Answer

A)  produces output and earns an economic profit. 
B)  produces output and incurs an economic loss. 
C)  does not produce output and earns an economic profit. 
D)  does not produce output and earns zero economic profit. 
A)  produces output and earns an economic profit. 
B)  produces output and incurs an economic loss. 
C)  does not produce output and earns an economic profit. 
D)  does not produce output and earns zero economic profit.

Question 8

An increase in variable costs:

Accepted Answer

A)  will result in the firm's marginal, average total, and average variable cost curves shifting upward by less than the cost increase. 
B)  will result in the firm's marginal, average total, and average variable cost curves shifting upward by the amount of the cost increase. 
C)  will shift the industry supply curve upward (to the left) by a smaller amount. 
D)  will shift the industry supply curve upward (to the left) by a larger amount. 
A)  will result in the firm's marginal, average total, and average variable cost curves shifting upward by less than the cost increase. 
B)  will result in the firm's marginal, average total, and average variable cost curves shifting upward by the amount of the cost increase. 
C)  will shift the industry supply curve upward (to the left) by a smaller amount. 
D)  will shift the industry supply curve upward (to the left) by a larger amount.

Question 9

A firm's total revenue in perfect competition is:

Accepted Answer

A)  found by multiplying its output by the price at which it sells that output. 
B)  a linear, horizontal line. 
C)  a linear, downward-sloping line. 
D)  perfectly elastic. 
A)  found by multiplying its output by the price at which it sells that output. 
B)  a linear, horizontal line. 
C)  a linear, downward-sloping line. 
D)  perfectly elastic.

Question 10

Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Now suppose that the price of sugar rises, increasing the marginal and average total cost of producing candy canes by $0.05; there are no other changes in production costs. Based on the information given, we can conclude that once all the adjustments to long-run equilibrium are achieved, the price of candy canes will equal:

Accepted Answer

A)  five cents. 
B)  ten cents. 
C)  fifteen cents 
D)  It is impossible to answer without knowing exactly how many firms entered and/or left the industry. 
A)  five cents. 
B)  ten cents. 
C)  fifteen cents 
D)  It is impossible to answer without knowing exactly how many firms entered and/or left the industry.

Question 11

Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the short run, we expect that the typical firm is likely to begin:

Accepted Answer

A)  earning an economic profit. 
B)  incurring an economic loss. 
C)  experiencing no change in its economic profit. 
D)  experiencing neither an economic profit nor an economic loss. 
A)  earning an economic profit. 
B)  incurring an economic loss. 
C)  experiencing no change in its economic profit. 
D)  experiencing neither an economic profit nor an economic loss.

Question 12

The shutdown point is:

Accepted Answer

A)  the point at which economic profit is zero. 
B)  the minimum level of AVC. 
C)  the intersection of the MC and ATC curves. 
D)  the minimum level of AFC. 
A)  the point at which economic profit is zero. 
B)  the minimum level of AVC. 
C)  the intersection of the MC and ATC curves. 
D)  the minimum level of AFC.

Question 13

Use the following to answer question(s): 
Exhibit: Supply: Short and Long Run
  
-(Exhibit: Supply: Short and Long Run) S1 is a short-run supply curve and is the _______ of individual firms' _______ .

Accepted Answer

A)  sum; average total costs 
B)  sum; marginal cost curves 
C)  average; marginal cost 
D)  market average; total costs 
A)  sum; average total costs 
B)  sum; marginal cost curves 
C)  average; marginal cost 
D)  market average; total costs

Question 14

Total revenue is a firm's:

Accepted Answer

A)  change in revenue resulting from a unit change in output. 
B)  ratio of revenue to quantity. 
C)  difference between revenue and cost. 
D)  total output times the price at which it sells that output. 
A)  change in revenue resulting from a unit change in output. 
B)  ratio of revenue to quantity. 
C)  difference between revenue and cost. 
D)  total output times the price at which it sells that output.

Question 15

Use the following to answer question(s): 
Exhibit: Profit Maximizing
  
-(Exhibit: Profit Maximizing) The exhibit shows cost curves for a firm operating in a perfectly competitive market. Curve M is the _______ curve.

Accepted Answer

A)  ATC 
B)  MR 
C)  MC 
D)  AVC 
A)  ATC 
B)  MR 
C)  MC 
D)  AVC

Question 16

Accounting costs include both explicit and implicit costs.

Accepted Answer

A) True 
 B)False

Question 17

Use the following to answer question(s): 
Exhibit: Total Revenue and Total Cost
  
-(Exhibit: Total Revenue and Cost) Total cost at the most profitable level of output is given by point:

Accepted Answer

A)  G. 
B)  H. 
C)  I. 
D)  J. 
A)  G. 
B)  H. 
C)  I. 
D)  J.

Question 18

Explain why each of the following statements is false. What needs to be changed in each case to make the statement correct?
a. The competitive firm sets its price so that P = MC.
b. A firm will shut down when price is less than average cost.
c. Profits are profits, whether they are accounting or economic profits.
d. Costs are costs, whether they are implicit or explicit-they are still costs.
e. The supply curve for the firm in perfect competition is its marginal cost curve.

Accepted Answer

a. The statement is false because a comp

Question 19

Suppose that the market for computers is dominated by a single firm, like Dell, that is able to exert influence over prices and output. This situation violates the perfect competition assumption of:

Accepted Answer

A)  many buyers and sellers. 
B)  easy entry and exit. 
C)  complete information. 
D)  no discrimination. 
A)  many buyers and sellers. 
B)  easy entry and exit. 
C)  complete information. 
D)  no discrimination.

Question 20

If a perfectly competitive firm is producing a quantity that generates MC = MR, then profit:

Accepted Answer

A)  is maximized. 
B)  can be increased by increasing production. 
C)  can be increased by decreasing production. 
D)  can be increased by increasing the price. 
A)  is maximized. 
B)  can be increased by increasing production. 
C)  can be increased by decreasing production. 
D)  can be increased by increasing the price.

Profit computed using explicit costs as the only measure of costs is:

Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Based on the information given, we can conclude that the marginal revenue for candy canes:

Use the following to answer question(s): Exhibit: Perfectly Competitive Firm -(Exhibit: Perfectly Competitive Firm) The exhibit shows a perfectly competitive firm that faces demand curve d, has the cost curves shown, and maximizes profit. The firm's total revenue per day is:

Use the following to answer question(s): Exhibit: Profit Maximizing -(Exhibit: Profit Maximizing) The exhibit shows cost curves for a firm operating in a perfectly competitive market. At quantity q₅, AVC is the same as: _______ .

Suppose that some firms in a perfectly competitive industry are incurring negative economic profits. The:

In the model of perfect competition:

In the short run, if AVC < P < ATC, a perfectly competitive firm:

An increase in variable costs:

A firm's total revenue in perfect competition is:

Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the short run, we expect that the typical firm is likely to begin:

The shutdown point is:

Use the following to answer question(s): Exhibit: Supply: Short and Long Run -(Exhibit: Supply: Short and Long Run) S₁ is a short-run supply curve and is the _ of individual firms' _ .

Total revenue is a firm's:

Use the following to answer question(s): Exhibit: Profit Maximizing -(Exhibit: Profit Maximizing) The exhibit shows cost curves for a firm operating in a perfectly competitive market. Curve M is the _______ curve.

Accounting costs include both explicit and implicit costs.

Use the following to answer question(s): Exhibit: Total Revenue and Total Cost -(Exhibit: Total Revenue and Cost) Total cost at the most profitable level of output is given by point:

Suppose that the market for computers is dominated by a single firm, like Dell, that is able to exert influence over prices and output. This situation violates the perfect competition assumption of:

If a perfectly competitive firm is producing a quantity that generates MC = MR, then profit:

Economics: The Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Elasticity: a Measure of Response

Markets, Maximizers, and Efficiency

The Analysis of Consumer Choice

Production and Cost

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Antitrust Policy and Business Regulation

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Filters

Exam 9: Competitive Markets for Goods and Services

Profit computed using explicit costs as the only measure of costs is:

Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Based on the information given, we can conclude that the marginal revenue for candy canes:

Use the following to answer question(s): Exhibit: Perfectly Competitive Firm -(Exhibit: Perfectly Competitive Firm) The exhibit shows a perfectly competitive firm that faces demand curve d, has the cost curves shown, and maximizes profit. The firm's total revenue per day is:

Use the following to answer question(s): Exhibit: Profit Maximizing -(Exhibit: Profit Maximizing) The exhibit shows cost curves for a firm operating in a perfectly competitive market. At quantity q5, AVC is the same as: _______ .

Suppose that some firms in a perfectly competitive industry are incurring negative economic profits. The:

In the model of perfect competition:

In the short run, if AVC < P < ATC, a perfectly competitive firm:

An increase in variable costs:

A firm's total revenue in perfect competition is:

Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the short run, we expect that the typical firm is likely to begin:

The shutdown point is:

Use the following to answer question(s): Exhibit: Supply: Short and Long Run -(Exhibit: Supply: Short and Long Run) S1 is a short-run supply curve and is the _______ of individual firms' _______ .

Total revenue is a firm's:

Use the following to answer question(s): Exhibit: Profit Maximizing -(Exhibit: Profit Maximizing) The exhibit shows cost curves for a firm operating in a perfectly competitive market. Curve M is the _______ curve.

Accounting costs include both explicit and implicit costs.

Use the following to answer question(s): Exhibit: Total Revenue and Total Cost -(Exhibit: Total Revenue and Cost) Total cost at the most profitable level of output is given by point:

Suppose that the market for computers is dominated by a single firm, like Dell, that is able to exert influence over prices and output. This situation violates the perfect competition assumption of:

If a perfectly competitive firm is producing a quantity that generates MC = MR, then profit:

Economics: The Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Elasticity: a Measure of Response

Markets, Maximizers, and Efficiency

The Analysis of Consumer Choice

Production and Cost

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Antitrust Policy and Business Regulation

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Filters

Use the following to answer question(s): Exhibit: Profit Maximizing -(Exhibit: Profit Maximizing) The exhibit shows cost curves for a firm operating in a perfectly competitive market. At quantity q₅, AVC is the same as: _______ .

Use the following to answer question(s): Exhibit: Supply: Short and Long Run -(Exhibit: Supply: Short and Long Run) S₁ is a short-run supply curve and is the _ of individual firms' _ .