Question 1

An increase in demand in a perfectly competitive industry characterized by constant costs will cause a(n):

Accepted Answer

A)  permanent increase in price. 
B)  economic loss for firms. 
C)  increase in the quantity supplied in the short run and an increase in market supply in the long run. 
D)  decrease in firms' marginal revenue. 
A)  permanent increase in price. 
B)  economic loss for firms. 
C)  increase in the quantity supplied in the short run and an increase in market supply in the long run. 
D)  decrease in firms' marginal revenue.

Question 2

A price taker is a market participant who is able to accept or reject the market price but cannot alter it.

Accepted Answer

A) True 
 B)False

Question 3

Suppose that pasta is produced under conditions of perfect competition and that the constant-cost industry is initially in long-run equilibrium. Now suppose there is an increase in the price of wheat, which is a key ingredient in producing pasta. Further assume that the price elasticity of demand for pasta is -1.8. In the short run, we would expect to see:

Accepted Answer

A)  most firms in the industry earning positive economic profits. 
B)  most firms in the industry earning zero economic profits. 
C)  most firms in the industry earning negative economic profits. 
D)  not enough information is given to answer the question. 
A)  most firms in the industry earning positive economic profits. 
B)  most firms in the industry earning zero economic profits. 
C)  most firms in the industry earning negative economic profits. 
D)  not enough information is given to answer the question.

Question 4

For a firm in a perfectly competitive market:

Accepted Answer

A)  marginal revenue equals total revenue. 
B)  marginal revenue equals price and average revenue. 
C)  net revenue equals price. 
D)  net revenue equals marginal revenue. 
A)  marginal revenue equals total revenue. 
B)  marginal revenue equals price and average revenue. 
C)  net revenue equals price. 
D)  net revenue equals marginal revenue.

Question 5

When a perfectly competitive industry is in long-run equilibrium, its firms are:

Accepted Answer

A)  earning more than zero economic profits. 
B)  combining their variable and fixed resources inefficiently. 
C)  not in short-run equilibrium. 
D)  allocating all their resources efficiently. 
A)  earning more than zero economic profits. 
B)  combining their variable and fixed resources inefficiently. 
C)  not in short-run equilibrium. 
D)  allocating all their resources efficiently.

Question 6

Suppose that some firms in a perfectly competitive industry are earning positive economic profits. At this time, the:

Accepted Answer

A)  industry supply curve is shifting to the left. 
B)  number of firms in the industry will change in the short run. 
C)  number of firms in the industry will decrease. 
D)  industry is not in long-run equilibrium. 
A)  industry supply curve is shifting to the left. 
B)  number of firms in the industry will change in the short run. 
C)  number of firms in the industry will decrease. 
D)  industry is not in long-run equilibrium.

Question 7

A firm's shut-down point is the minimum value of:

Accepted Answer

A)  total cost. 
B)  average variable cost. 
C)  average total cost. 
D)  marginal cost. 
A)  total cost. 
B)  average variable cost. 
C)  average total cost. 
D)  marginal cost.

Question 8

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. Which of the following statements is true?

Accepted Answer

A)  AFC is represented in this exhibit by the vertical distance between Curve M and Curve N at any level of output. 
B)  AFC is represented in this exhibit by the vertical distance between Curve N and Curve O at any level of output. 
C)  This exhibit illustrates the long run because all costs are variable. 
D)  Quantity q2 is to the left of the shutdown point. 
A)  AFC is represented in this exhibit by the vertical distance between Curve M and Curve N at any level of output. 
B)  AFC is represented in this exhibit by the vertical distance between Curve N and Curve O at any level of output. 
C)  This exhibit illustrates the long run because all costs are variable. 
D)  Quantity q2 is to the left of the shutdown point.

Question 9

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. If the market price is P3, the firm will produce quantity _______ and _______ in the short run.

Accepted Answer

A)  q2; make a profit 
B)  q1; break even 
C)  q2; incur a loss 
D)  q4; incur a loss 
A)  q2; make a profit 
B)  q1; break even 
C)  q2; incur a loss 
D)  q4; incur a loss

Question 10

The supply curve found by summing up the short-run supply curves of all the firms in a perfectly competitive industry is called the:

Accepted Answer

A)  firm's marginal cost curve. 
B)  short-run market supply curve. 
C)  the interim market supply curve. 
D)  competitive curve. 
A)  firm's marginal cost curve. 
B)  short-run market supply curve. 
C)  the interim market supply curve. 
D)  competitive curve.

Question 11

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 must cross curves N and O:

Accepted Answer

A)  at their maximum. 
B)  to the left of their minimum. 
C)  at their minimum. 
D)  to the right of their minimum. 
A)  at their maximum. 
B)  to the left of their minimum. 
C)  at their minimum. 
D)  to the right of their minimum.

Question 12

Suppose that some firms in a perfectly competitive industry are incurring negative economic profits. In the long run, the:

Accepted Answer

A)  industry supply curve will not shift. 
B)  industry supply curve will shift to the left. 
C)  number of firms in the industry will not change. 
D)  number of firms in the industry will increase. 
A)  industry supply curve will not shift. 
B)  industry supply curve will shift to the left. 
C)  number of firms in the industry will not change. 
D)  number of firms in the industry will increase.

Question 13

An increase in demand in a perfectly competitive market will cause a(n):

Accepted Answer

A)  temporary increase in price in a constant-cost industry. 
B)  economic loss for firms. 
C)  decrease in supply. 
D)  decrease in firms' marginal revenue. 
A)  temporary increase in price in a constant-cost industry. 
B)  economic loss for firms. 
C)  decrease in supply. 
D)  decrease in firms' marginal revenue.

Question 14

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

Accepted Answer

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

Question 15

In perfect competition, P = MR = MC because that is where firms maximize profits.

Accepted Answer

A) True 
 B)False

Question 16

The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where:

Accepted Answer

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

Question 17

When a perfectly competitive firm is in long-run equilibrium, the firm is:

Accepted Answer

A)  producing at maximum average total cost. 
B)  producing at maximum average variable cost. 
C)  producing at minimum marginal cost. 
D)  producing at minimum long-run average total cost. 
A)  producing at maximum average total cost. 
B)  producing at maximum average variable cost. 
C)  producing at minimum marginal cost. 
D)  producing at minimum long-run average total cost.

Question 18

Use the following to answer question(s): 
Exhibit: Short-Run Costs
  
-(Exhibit: Short-Run Costs) If the price declines, the minimum quantity of output supplied in the short run is quantity:

Accepted Answer

A)  O. 
B)  Q. 
C)  R. 
D)  S. 
A)  O. 
B)  Q. 
C)  R. 
D)  S.

Question 19

Use the following to answer question(s): 
Exhibit: Total Revenue, Total Cost, and Economic Profit
  
-(Exhibit: Total Revenue, Total Costs, and Economic Profit) At approximately 4,500 pounds of carrots:

Accepted Answer

A)  total economic profit is the greatest. 
B)  total revenue is equal to total cost. 
C)  marginal revenue is equal to marginal cost. 
D)  marginal cost is at its maximum. 
A)  total economic profit is the greatest. 
B)  total revenue is equal to total cost. 
C)  marginal revenue is equal to marginal cost. 
D)  marginal cost is at its maximum.

Question 20

Use the following to answer question(s): 
Exhibit: Marginal Decision Rule
  
-(Exhibit: Marginal Decision Rule) To the left of Point C (e.g., at q1):

Accepted Answer

A)  economic profit is the vertical distance between Curve B and MC. 
B)  the firm is not maximizing profits. 
C)  the firm is maximizing profits. 
D)  the firm should produce less. 
A)  economic profit is the vertical distance between Curve B and MC. 
B)  the firm is not maximizing profits. 
C)  the firm is maximizing profits. 
D)  the firm should produce less.

An increase in demand in a perfectly competitive industry characterized by constant costs will cause a(n):

A price taker is a market participant who is able to accept or reject the market price but cannot alter it.

For a firm in a perfectly competitive market:

When a perfectly competitive industry is in long-run equilibrium, its firms are:

Suppose that some firms in a perfectly competitive industry are earning positive economic profits. At this time, the:

A firm's shut-down point is the minimum value of:

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. Which of the following statements is true?

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. If the market price is P₃, the firm will produce quantity _ and _ in the short run.

The supply curve found by summing up the short-run supply curves of all the firms in a perfectly competitive industry is called the:

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 must cross curves N and O:

Suppose that some firms in a perfectly competitive industry are incurring negative economic profits. In the long run, the:

An increase in demand in a perfectly competitive market will cause a(n):

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

In perfect competition, P = MR = MC because that is where firms maximize profits.

The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where:

When a perfectly competitive firm is in long-run equilibrium, the firm is:

Use the following to answer question(s): Exhibit: Short-Run Costs -(Exhibit: Short-Run Costs) If the price declines, the minimum quantity of output supplied in the short run is quantity:

Use the following to answer question(s): Exhibit: Total Revenue, Total Cost, and Economic Profit -(Exhibit: Total Revenue, Total Costs, and Economic Profit) At approximately 4,500 pounds of carrots:

Use the following to answer question(s): Exhibit: Marginal Decision Rule -(Exhibit: Marginal Decision Rule) To the left of Point C (e.g., at q₁):

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

An increase in demand in a perfectly competitive industry characterized by constant costs will cause a(n):

A price taker is a market participant who is able to accept or reject the market price but cannot alter it.

For a firm in a perfectly competitive market:

When a perfectly competitive industry is in long-run equilibrium, its firms are:

Suppose that some firms in a perfectly competitive industry are earning positive economic profits. At this time, the:

A firm's shut-down point is the minimum value of:

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. Which of the following statements is true?

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. If the market price is P3, the firm will produce quantity _______ and _______ in the short run.

The supply curve found by summing up the short-run supply curves of all the firms in a perfectly competitive industry is called the:

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 must cross curves N and O:

Suppose that some firms in a perfectly competitive industry are incurring negative economic profits. In the long run, the:

An increase in demand in a perfectly competitive market will cause a(n):

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

In perfect competition, P = MR = MC because that is where firms maximize profits.

The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where:

When a perfectly competitive firm is in long-run equilibrium, the firm is:

Use the following to answer question(s): Exhibit: Short-Run Costs -(Exhibit: Short-Run Costs) If the price declines, the minimum quantity of output supplied in the short run is quantity:

Use the following to answer question(s): Exhibit: Total Revenue, Total Cost, and Economic Profit -(Exhibit: Total Revenue, Total Costs, and Economic Profit) At approximately 4,500 pounds of carrots:

Use the following to answer question(s): Exhibit: Marginal Decision Rule -(Exhibit: Marginal Decision Rule) To the left of Point C (e.g., at q1):

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. If the market price is P₃, the firm will produce quantity _ and _ in the short run.

Use the following to answer question(s): Exhibit: Marginal Decision Rule -(Exhibit: Marginal Decision Rule) To the left of Point C (e.g., at q₁):