Question 1

If price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

Accepted Answer

A)  produce at a loss. 
B)  produce at a profit. 
C)  shut down production. 
D)  produce more than the profit-maximizing quantity. 
A)  produce at a loss. 
B)  produce at a profit. 
C)  shut down production. 
D)  produce more than the profit-maximizing quantity.

Question 2

Economic profit in long-run equilibrium in perfect competition is zero.

Accepted Answer

A) True 
 B)False

Question 3

A perfectly competitive firm will continue producing in the short run as long as it can cover its:

Accepted Answer

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

Question 4

If firms are experiencing economic losses in the short run, firms will leave the industry and industry output will _______ and economic losses will _______ in the long run.

Accepted Answer

A)  fall; fall 
B)  rise; fall 
C)  rise; rise 
D)  fall; rise 
A)  fall; fall 
B)  rise; fall 
C)  rise; rise 
D)  fall; rise

Question 5

A perfectly competitive firm will shut down production in the short run if the price is below average total cost.

Accepted Answer

A) True 
 B)False

Question 6

A perfectly competitive firm's marginal cost curve above the average variable cost curve is its:

Accepted Answer

A)  input demand curve. 
B)  short-run supply curve. 
C)  marginal revenue curve. 
D)  total revenue curve. 
A)  input demand curve. 
B)  short-run supply curve. 
C)  marginal revenue curve. 
D)  total revenue curve.

Question 7

In perfect competition, a change in fixed cost:

Accepted Answer

A)  will have no effect on price in the short run. 
B)  will have no effect on output in the short run. 
C)  will induce entry or exit in the long run so that price will change enough to leave firms earning zero profits. 
D)  is described by all of the above. 
A)  will have no effect on price in the short run. 
B)  will have no effect on output in the short run. 
C)  will induce entry or exit in the long run so that price will change enough to leave firms earning zero profits. 
D)  is described by all of the above.

Question 8

Which of the following is true?

Accepted Answer

A)  Since there are few firms that match the conditions assumed in perfect competition, the model is not very useful. 
B)  The model of perfect competition is a good example of the old adage, "That's O.K. in theory, but not in practice." 
C)  Although few world markets meet the assumptions of perfect competition, the model is useful in analyzing real world forces that affect prices and outputs. 
D)  The model of perfect competition comes very close to describing the real world. 
A)  Since there are few firms that match the conditions assumed in perfect competition, the model is not very useful. 
B)  The model of perfect competition is a good example of the old adage, "That's O.K. in theory, but not in practice." 
C)  Although few world markets meet the assumptions of perfect competition, the model is useful in analyzing real world forces that affect prices and outputs. 
D)  The model of perfect competition comes very close to describing the real world.

Question 9

Perfect competition is a model of the market that assumes a large number of buyers and sellers engaged in the purchase and sale of identical goods.

Accepted Answer

A) True 
 B)False

Question 10

Use the following to answer question(s): 
Exhibit: Marginal Decision Rule
  
-(Exhibit: Marginal Decision Rule) To maximize economic profit, this firm should produce quantity ________ where _______ = _______ .

Accepted Answer

A)  q1; MR ; MC 
B)  q2; price; MC 
C)  q2; MR; TR 
D)  q1; TR; TC 
A)  q1; MR ; MC 
B)  q2; price; MC 
C)  q2; MR; TR 
D)  q1; TR; TC

Question 11

The Case in Point on the Iridium satellite phone indicated that the improved profitability was the result of:

Accepted Answer

A)  decreased fixed costs. 
B)  decreased variable costs. 
C)  increased demand. 
D)  all of the above. 
A)  decreased fixed costs. 
B)  decreased variable costs. 
C)  increased demand. 
D)  all of the above.

Question 12

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

Accepted Answer

A)  industry is in long-run equilibrium. 
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 is in long-run equilibrium. 
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

Profit for the firm is maximized when the firm produces the level of output where MR = MC.

Accepted Answer

A) True 
 B)False

Question 14

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's total cost of producing its most profitable level of output is:

Accepted Answer

A)  BS. 
B)  DK. 
C)  0FKD. 
D)  0ESB. 
A)  BS. 
B)  DK. 
C)  0FKD. 
D)  0ESB.

Question 15

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 produce in the short run if the price is at least as much as the price indicated by the distance:

Accepted Answer

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

Question 16

A firm's total revenue curve in perfect competition is an upward-sloping straight line.

Accepted Answer

A) True 
 B)False

Question 17

A decrease in production costs for firms in a perfectly competitive market will cause a(n):

Accepted Answer

A)  permanent increase in price. 
B)  economic loss for firms. 
C)  decrease in demand. 
D)  rightward shift in the market supply curve in the long run. 
A)  permanent increase in price. 
B)  economic loss for firms. 
C)  decrease in demand. 
D)  rightward shift in the market supply curve in the long run.

Question 18

For a firm producing at any level of output greater than the most profitable one, a reduction in output decreases total:

Accepted Answer

A)  cost more than total revenue. 
B)  revenue more than total cost. 
C)  revenue by the same amount as total cost. 
D)  revenue but not total cost. 
A)  cost more than total revenue. 
B)  revenue more than total cost. 
C)  revenue by the same amount as total cost. 
D)  revenue but not total cost.

Question 19

Which of the following is true regarding a long-run industry supply curve that is upward sloping?

Accepted Answer

A)  Average costs of production are unchanged when industry output increases. 
B)  Average costs of production increase when industry output is increased. 
C)  Average cost of production decrease when industry output is increased. 
D)  All of the above could be true depending on the market situation. 
A)  Average costs of production are unchanged when industry output increases. 
B)  Average costs of production increase when industry output is increased. 
C)  Average cost of production decrease when industry output is increased. 
D)  All of the above could be true depending on the market situation.

Question 20

Use the following to answer question(s): 
Exhibit: The Market for Carrots
  
-(Exhibit: The Market for Carrots) If this is a perfectly competitive market, when the demand is D1 and the supply is S, any firm could enter and sell carrots for:

Accepted Answer

A)  20 cents a pound. 
B)  25 cents a pound. 
C)  30 cents a pound. 
D)  any price above 20 cents a pound. 
A)  20 cents a pound. 
B)  25 cents a pound. 
C)  30 cents a pound. 
D)  any price above 20 cents a pound.

If price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

Economic profit in long-run equilibrium in perfect competition is zero.

A perfectly competitive firm will continue producing in the short run as long as it can cover its:

If firms are experiencing economic losses in the short run, firms will leave the industry and industry output will _ and economic losses will _ in the long run.

A perfectly competitive firm will shut down production in the short run if the price is below average total cost.

A perfectly competitive firm's marginal cost curve above the average variable cost curve is its:

In perfect competition, a change in fixed cost:

Which of the following is true?

Perfect competition is a model of the market that assumes a large number of buyers and sellers engaged in the purchase and sale of identical goods.

Use the following to answer question(s): Exhibit: Marginal Decision Rule -(Exhibit: Marginal Decision Rule) To maximize economic profit, this firm should produce quantity ____ where _ = _____ .

The Case in Point on the Iridium satellite phone indicated that the improved profitability was the result of:

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

Profit for the firm is maximized when the firm produces the level of output where MR = MC.

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's total cost of producing its most profitable level of output is:

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 produce in the short run if the price is at least as much as the price indicated by the distance:

A firm's total revenue curve in perfect competition is an upward-sloping straight line.

A decrease in production costs for firms in a perfectly competitive market will cause a(n):

For a firm producing at any level of output greater than the most profitable one, a reduction in output decreases total:

Which of the following is true regarding a long-run industry supply curve that is upward sloping?

Use the following to answer question(s): Exhibit: The Market for Carrots -(Exhibit: The Market for Carrots) If this is a perfectly competitive market, when the demand is D₁ and the supply is S, any firm could enter and sell carrots for:

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

If price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

Economic profit in long-run equilibrium in perfect competition is zero.

A perfectly competitive firm will continue producing in the short run as long as it can cover its:

If firms are experiencing economic losses in the short run, firms will leave the industry and industry output will _______ and economic losses will _______ in the long run.

A perfectly competitive firm will shut down production in the short run if the price is below average total cost.

A perfectly competitive firm's marginal cost curve above the average variable cost curve is its:

In perfect competition, a change in fixed cost:

Which of the following is true?

Perfect competition is a model of the market that assumes a large number of buyers and sellers engaged in the purchase and sale of identical goods.

Use the following to answer question(s): Exhibit: Marginal Decision Rule -(Exhibit: Marginal Decision Rule) To maximize economic profit, this firm should produce quantity ________ where _______ = _______ .

The Case in Point on the Iridium satellite phone indicated that the improved profitability was the result of:

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

Profit for the firm is maximized when the firm produces the level of output where MR = MC.

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's total cost of producing its most profitable level of output is:

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 produce in the short run if the price is at least as much as the price indicated by the distance:

A firm's total revenue curve in perfect competition is an upward-sloping straight line.

A decrease in production costs for firms in a perfectly competitive market will cause a(n):

For a firm producing at any level of output greater than the most profitable one, a reduction in output decreases total:

Which of the following is true regarding a long-run industry supply curve that is upward sloping?

Use the following to answer question(s): Exhibit: The Market for Carrots -(Exhibit: The Market for Carrots) If this is a perfectly competitive market, when the demand is D1 and the supply is S, any firm could enter and sell carrots for:

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

If firms are experiencing economic losses in the short run, firms will leave the industry and industry output will _ and economic losses will _ in the long run.

Use the following to answer question(s): Exhibit: Marginal Decision Rule -(Exhibit: Marginal Decision Rule) To maximize economic profit, this firm should produce quantity ____ where _ = _____ .

Use the following to answer question(s): Exhibit: The Market for Carrots -(Exhibit: The Market for Carrots) If this is a perfectly competitive market, when the demand is D₁ and the supply is S, any firm could enter and sell carrots for: