Question 1

Charges that are paid for factors of production are called implicit costs.

Accepted Answer

A) True 
 B)False

Question 2

If some firms in a perfectly competitive industry are earning positive economic profits, then in the long run, the:

Accepted Answer

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

Question 3

When production costs change in a perfectly competitive industry, price will change by ________ than the change in production cost in the _______ .

Accepted Answer

A)  more; long run 
B)  less; short run 
C)  less; long 
D)  more; long 
A)  more; long run 
B)  less; short run 
C)  less; long 
D)  more; long

Question 4

In a perfectly competitive industry in long-run equilibrium, all firms will have:

Accepted Answer

A)  identical plant sizes but may be producing different levels of output. 
B)  equal marginal costs. 
C)  equal fixed costs. 
D)  marginal cost equal average fixed cost. 
A)  identical plant sizes but may be producing different levels of output. 
B)  equal marginal costs. 
C)  equal fixed costs. 
D)  marginal cost equal average fixed cost.

Question 5

An assumption of the model of perfect competition is:

Accepted Answer

A)  identical goods. 
B)  difficult entry and exit. 
C)  few buyers and sellers. 
D)  limited information. 
A)  identical goods. 
B)  difficult entry and exit. 
C)  few buyers and sellers. 
D)  limited information.

Question 6

When a firm's total revenue exceeds its total cost:

Accepted Answer

A)  average revenue is less than average total cost. 
B)  total cost falls with increases in output. 
C)  total cost rises with increases in output. 
D)  marginal cost is negative. 
A)  average revenue is less than average total cost. 
B)  total cost falls with increases in output. 
C)  total cost rises with increases in output. 
D)  marginal cost is negative.

Question 7

Which of the following is true?

Accepted Answer

A)  If price falls below average total cost the firm will shut down in the short run. 
B)  Price and marginal revenue are the same in perfect competition. 
C)  Economic profit per unit is found by subtracting AVC from price. 
D)  Economic profit is always positive in the short run. 
A)  If price falls below average total cost the firm will shut down in the short run. 
B)  Price and marginal revenue are the same in perfect competition. 
C)  Economic profit per unit is found by subtracting AVC from price. 
D)  Economic profit is always positive in the short run.

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. If the market price is P4:

Accepted Answer

A)  marginal revenue and price are the same. 
B)  marginal revenue is less than P4. 
C)  marginal revenue is greater than P4. 
D)  none of the above is true. 
A)  marginal revenue and price are the same. 
B)  marginal revenue is less than P4. 
C)  marginal revenue is greater than P4. 
D)  none of the above is true.

Question 9

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 will produce _______ units of output per day.

Accepted Answer

A)  100 
B)  250 
C)  300 
D)  400 
A)  100 
B)  250 
C)  300 
D)  400

Question 10

Use the following to answer question(s): 
Exhibit: Marginal Decision Rule
  
-(Exhibit: Marginal Decision Rule) If P1 is the market price, and if this firm has decided to produce any output, it should produce:

Accepted Answer

A)  where MR > MC. 
B)  quantity q2. 
C)  quantity q1 where MR > MC. 
D)  a quantity greater than q1 but less than q2. 
A)  where MR > MC. 
B)  quantity q2. 
C)  quantity q1 where MR > MC. 
D)  a quantity greater than q1 but less than q2.

Question 11

At any level of output less than the most profitable one, an increase in output adds more to a firm's total cost than to its total revenue.

Accepted Answer

A) True 
 B)False

Question 12

Suppose life is discovered on Mars and that it turns out to be quite sophisticated. In fact, perfect competition prevails everywhere on the planet. Which of the following characteristics of Martian firms are we likely to observe?

Accepted Answer

A)  None of them ever experiences diminishing marginal returns. 
B)  They all try to operate where price equals average variable cost. 
C)  They all try to operate where price equals total cost. 
D)  They are all price takers. 
A)  None of them ever experiences diminishing marginal returns. 
B)  They all try to operate where price equals average variable cost. 
C)  They all try to operate where price equals total cost. 
D)  They are all price takers.

Question 13

Compare and contrast and/or explain the difference between each of the following pairs of terms:
a. economic profit and accounting profit.
b. long run and short run.
c. implicit costs and explicit costs.
d. short-run market supply and long-run industry supply.

Accepted Answer

a. Economic profit and accounting profit

Question 14

If a perfectly competitive industry is characterized by constant costs in the long run, its long-run:

Accepted Answer

A)  marginal revenue curve is vertical. 
B)  marginal cost curve is vertical. 
C)  industry supply curve is horizontal. 
D)  average fixed cost curve is horizontal. 
A)  marginal revenue curve is vertical. 
B)  marginal cost curve is vertical. 
C)  industry supply curve is horizontal. 
D)  average fixed cost curve is horizontal.

Question 15

Use the following to answer question(s): 
Exhibit: Total Revenue, Total Cost, and Economic Profit
  
-(Exhibit: Total Revenue, Total Costs, and Economic Profit) Total economic profit:

Accepted Answer

A)  at its maximum is approximately $550. 
B)  is at its maximum when output is approximately 4,300 pounds. 
C)  is maximized at an output of approximately 1,500 pounds. 
D)  is at a maximum at total revenue of $2,800 and an output of 10,000 pounds. 
A)  at its maximum is approximately $550. 
B)  is at its maximum when output is approximately 4,300 pounds. 
C)  is maximized at an output of approximately 1,500 pounds. 
D)  is at a maximum at total revenue of $2,800 and an output of 10,000 pounds.

Question 16

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.

Question 17

Use the following to answer question(s): 
Exhibit: A Perfectly Competitive Firm in the Short Run
  
-(Exhibit: A Perfectly Competitive Firm in the Short Run) The firm will shut down in the short run if the price falls below:

Accepted Answer

A)  0G. 
B)  0F. 
C)  0E. 
D)  0P. 
A)  0G. 
B)  0F. 
C)  0E. 
D)  0P.

Question 18

A perfectly competitive firm's short-run supply curve is its short-run marginal cost curve above the average total cost curve.

Accepted Answer

A) True 
 B)False

Question 19

MC must cross ATC and AVC at their minimums.

Accepted Answer

A) True 
 B)False

Question 20

The slope of the total revenue curve is marginal revenue.

Accepted Answer

A) True 
 B)False

Charges that are paid for factors of production are called implicit costs.

If some firms in a perfectly competitive industry are earning positive economic profits, then in the long run, the:

When production costs change in a perfectly competitive industry, price will change by __ than the change in production cost in the _ .

In a perfectly competitive industry in long-run equilibrium, all firms will have:

An assumption of the model of perfect competition is:

When a firm's total revenue exceeds its total cost:

Which of the following 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 P₄:

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 will produce _______ units of output per day.

Use the following to answer question(s): Exhibit: Marginal Decision Rule -(Exhibit: Marginal Decision Rule) If P₁ is the market price, and if this firm has decided to produce any output, it should produce:

At any level of output less than the most profitable one, an increase in output adds more to a firm's total cost than to its total revenue.

Suppose life is discovered on Mars and that it turns out to be quite sophisticated. In fact, perfect competition prevails everywhere on the planet. Which of the following characteristics of Martian firms are we likely to observe?

Compare and contrast and/or explain the difference between each of the following pairs of terms: a. economic profit and accounting profit. b. long run and short run. c. implicit costs and explicit costs. d. short-run market supply and long-run industry supply.

If a perfectly competitive industry is characterized by constant costs in the long run, its long-run:

Use the following to answer question(s): Exhibit: Total Revenue, Total Cost, and Economic Profit -(Exhibit: Total Revenue, Total Costs, and Economic Profit) Total economic profit:

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

Use the following to answer question(s): Exhibit: A Perfectly Competitive Firm in the Short Run -(Exhibit: A Perfectly Competitive Firm in the Short Run) The firm will shut down in the short run if the price falls below:

A perfectly competitive firm's short-run supply curve is its short-run marginal cost curve above the average total cost curve.

MC must cross ATC and AVC at their minimums.

The slope of the total revenue curve is marginal revenue.

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

Charges that are paid for factors of production are called implicit costs.

If some firms in a perfectly competitive industry are earning positive economic profits, then in the long run, the:

When production costs change in a perfectly competitive industry, price will change by ________ than the change in production cost in the _______ .

In a perfectly competitive industry in long-run equilibrium, all firms will have:

An assumption of the model of perfect competition is:

When a firm's total revenue exceeds its total cost:

Which of the following 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 P4:

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 will produce _______ units of output per day.

Use the following to answer question(s): Exhibit: Marginal Decision Rule -(Exhibit: Marginal Decision Rule) If P1 is the market price, and if this firm has decided to produce any output, it should produce:

At any level of output less than the most profitable one, an increase in output adds more to a firm's total cost than to its total revenue.

Suppose life is discovered on Mars and that it turns out to be quite sophisticated. In fact, perfect competition prevails everywhere on the planet. Which of the following characteristics of Martian firms are we likely to observe?

Compare and contrast and/or explain the difference between each of the following pairs of terms: a. economic profit and accounting profit. b. long run and short run. c. implicit costs and explicit costs. d. short-run market supply and long-run industry supply.

If a perfectly competitive industry is characterized by constant costs in the long run, its long-run:

Use the following to answer question(s): Exhibit: Total Revenue, Total Cost, and Economic Profit -(Exhibit: Total Revenue, Total Costs, and Economic Profit) Total economic profit:

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

Use the following to answer question(s): Exhibit: A Perfectly Competitive Firm in the Short Run -(Exhibit: A Perfectly Competitive Firm in the Short Run) The firm will shut down in the short run if the price falls below:

A perfectly competitive firm's short-run supply curve is its short-run marginal cost curve above the average total cost curve.

MC must cross ATC and AVC at their minimums.

The slope of the total revenue curve is marginal revenue.

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

When production costs change in a perfectly competitive industry, price will change by __ than the change in production cost in 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. If the market price is P₄:

Use the following to answer question(s): Exhibit: Marginal Decision Rule -(Exhibit: Marginal Decision Rule) If P₁ is the market price, and if this firm has decided to produce any output, it should produce: