Question 1

The supply curve of a competitive firm in the short-run is:

Accepted Answer

A) the marginal cost curve. 
B) the marginal cost curve above the minimum of average variable cost. 
C) the marginal cost curve above the minimum of average cost. 
D) the negatively sloped portion of the marginal cost curve. 
A) the marginal cost curve. 
B) the marginal cost curve above the minimum of average variable cost. 
C) the marginal cost curve above the minimum of average cost. 
D) the negatively sloped portion of the marginal cost curve.

Question 2

The following figure shows the marginal cost curve,average total cost curve,average variable cost curve,and marginal revenue curve for a firm for different levels of output.
Figure 9-3  
-Refer to Figure 9-3.At the profit-maximizing level of output:

Accepted Answer

A) the firm is earning economic profit. 
B) profits per unit are the highest. 
C) profit equals ZC. 
D) costs exceed revenue. 
A) the firm is earning economic profit. 
B) profits per unit are the highest. 
C) profit equals ZC. 
D) costs exceed revenue.

Question 3

A perfectly competitive firm is a price taker.This implies that:

Accepted Answer

A) price does not change in a perfectly competitive market. 
B) price is not determined by supply and demand in a competitive market. 
C) price only changes when market conditions change. 
D) output of a firm is the only factor that can change prices. 
A) price does not change in a perfectly competitive market. 
B) price is not determined by supply and demand in a competitive market. 
C) price only changes when market conditions change. 
D) output of a firm is the only factor that can change prices.

Question 4

The model of perfect competition assumes that:

Accepted Answer

A) there is information asymmetry in the market. 
B) individual suppliers face a downward sloping demand curve. 
C) all goods in that market are homogeneous. 
D) there are a small number of sellers in the market. 
A) there is information asymmetry in the market. 
B) individual suppliers face a downward sloping demand curve. 
C) all goods in that market are homogeneous. 
D) there are a small number of sellers in the market.

Question 5

The short-run supply curve for the firm operating in a perfectly competitive industry is:

Accepted Answer

A) its marginal cost curve. 
B) its marginal cost curve above the minimum of average variable cost. 
C) its marginal cost curve above the minimum of average total cost. 
D) the average variable cost curve above average revenue curve. 
A) its marginal cost curve. 
B) its marginal cost curve above the minimum of average variable cost. 
C) its marginal cost curve above the minimum of average total cost. 
D) the average variable cost curve above average revenue curve.

Question 6

On the graphs below,demonstrate the circumstances that would prevail in a perfectly competitive market where the representative firm is experiencing economic losses.Draw the relevant cost curves (marginal,average total,and average variable costs;use U-shaped curves),the marginal revenue curve,and the market supply and demand curves.Shade in the area of total revenue and the area of economic loss.As you've drawn it,will the firm shut down in the short-run or choose to continue production? Explain your answer.   ref SHAPE \* MERGEFORMAT

Accepted Answer

ref SHAPE \* MERGEFORMAT @#IMG-DLM& The loss and r

Question 7

The competitive firm is known as a price taker because:

Accepted Answer

A) it sets the highest price it can charge. 
B) it can vary its price based on variations in its cost. 
C) it produces output at a level that minimizes its marginal cost. 
D) it accepts the market price as a given. 
A) it sets the highest price it can charge. 
B) it can vary its price based on variations in its cost. 
C) it produces output at a level that minimizes its marginal cost. 
D) it accepts the market price as a given.

Question 8

Suppose the total revenue (TR)and total cost (TC)curves of a perfectly competitive firm are given by the following set of equations: TR = 100Q and TC = Q2 + 4Q + 5,where Q is the output.Derive the firm's profit maximizing output and calculate the total and average profit earned by the firm at this level of output.

Accepted Answer

Since TR = 100Q,marginal revenue [MR] an

Question 9

Which of the following is true of a constant cost industry?

Accepted Answer

A) Along the industry's long-run supply curve,firms in the industry earn a positive economic profit. 
B) The long-run supply curve for a constant cost industry is horizontal. 
C) The industry's long-run supply curve is derived by horizontally summing the long-run supply curves of the individual firms. 
D) In the long run,the industry experiences an increase in the price of inputs. 
A) Along the industry's long-run supply curve,firms in the industry earn a positive economic profit. 
B) The long-run supply curve for a constant cost industry is horizontal. 
C) The industry's long-run supply curve is derived by horizontally summing the long-run supply curves of the individual firms. 
D) In the long run,the industry experiences an increase in the price of inputs.

Question 10

A perfectly competitive firm faces a horizontal demand curve,which implies that:

Accepted Answer

A) the price in the market never changes. 
B) the firm cannot affect price by any action it takes. 
C) the quantity of output produced by the firm is indeterminate. 
D) the firm makes zero accounting profits. 
A) the price in the market never changes. 
B) the firm cannot affect price by any action it takes. 
C) the quantity of output produced by the firm is indeterminate. 
D) the firm makes zero accounting profits.

Question 11

The short-run supply curve for a competitive industry is derived by summing the _____ for each firm in the industry.

Accepted Answer

A) portion of the marginal cost curves above average variable cost 
B) upward sloping portion of the average variable cost curve 
C) downward sloping portions of the marginal cost curve 
D) upward sloping portion of the average total cost curve 
A) portion of the marginal cost curves above average variable cost 
B) upward sloping portion of the average variable cost curve 
C) downward sloping portions of the marginal cost curve 
D) upward sloping portion of the average total cost curve

Question 12

Which of the following will occur in response to an unexpected increase in demand in a constant-cost,competitive industry?

Accepted Answer

A) Resources will move out of the industry. 
B) The output of the industry will remain constant. 
C) The output will increase with input prices remaining unchanged 
D) The existing firms will not be able to expand output sufficiently without incurring huge costs. 
A) Resources will move out of the industry. 
B) The output of the industry will remain constant. 
C) The output will increase with input prices remaining unchanged 
D) The existing firms will not be able to expand output sufficiently without incurring huge costs.

Question 13

In a perfectly competitive market,if the product price remains unchanged,a fall in the price of an input used by a firm will:

Accepted Answer

A) cause the firm to substitute away from this input. 
B) reduce the quantity of output it produces. 
C) shift the marginal cost curve downward. 
D) reduce the price of the product. 
A) cause the firm to substitute away from this input. 
B) reduce the quantity of output it produces. 
C) shift the marginal cost curve downward. 
D) reduce the price of the product.

Question 14

The following figure shows the marginal cost curve,the average cost curve,the average variable cost curve,and the demand curve for a firm over different levels of output.The market price is $P.
Figure 9-4  
-Refer to Figure 9-4.If the firm chooses to shut down when the market price is $P,what is the loss it would incur?

Accepted Answer

A) KTVP 
B) GTVS 
C) GKPS 
D) TBOV 
A) KTVP 
B) GTVS 
C) GKPS 
D) TBOV

Question 15

The following figure shows the marginal cost curve,average total cost curve,average variable cost curve,and marginal revenue curve for a firm for different levels of output.
Figure 9-3  
-Refer to Figure 9-3.Assuming that price at 0R is $10,the profit maximizing level of output for the firm is _____.

Accepted Answer

A) OA where marginal cost just covers AVC 
B) OB where average profit per unit is the greatest 
C) OC where marginal cost equals the $10 price 
D) OK where average cost equals marginal revenue and the firm earns a normal rate of return 
A) OA where marginal cost just covers AVC 
B) OB where average profit per unit is the greatest 
C) OC where marginal cost equals the $10 price 
D) OK where average cost equals marginal revenue and the firm earns a normal rate of return

Question 16

If a competitive industry is characterized by increasing cost,which of the following will occur in response to an unexpected increase in demand?

Accepted Answer

A) New firms will enter the industry. 
B) Economic profit will remain zero. 
C) Input prices will remain constant. 
D) The price of the product will remain unchanged. 
A) New firms will enter the industry. 
B) Economic profit will remain zero. 
C) Input prices will remain constant. 
D) The price of the product will remain unchanged.

Question 17

The following figure shows the marginal cost curve,the average cost curve,the average variable cost curve,and the demand curve for a firm over different levels of output.The market price is $P.
Figure 9-4  
-Refer to Figure 9-4.The total variable cost for the firm at output level OB is _____.

Accepted Answer

A) BT 
B) BKPO 
C) BK 
D) BTVO 
A) BT 
B) BKPO 
C) BK 
D) BTVO

Question 18

Suppose a constant-cost competitive industry produces widgets using labor and capital in fixed proportions.A firm in the industry faces:

Accepted Answer

A) a vertical supply curve for labor and capital. 
B) a downward sloping supply curve for labor and capital. 
C) a horizontal supply curve for labor and capital. 
D) an upward sloping supply curve for labor and capital. 
A) a vertical supply curve for labor and capital. 
B) a downward sloping supply curve for labor and capital. 
C) a horizontal supply curve for labor and capital. 
D) an upward sloping supply curve for labor and capital.

Question 19

A competitive firm maximizes profit at the output level where:

Accepted Answer

A) the difference between price and average total cost is the largest. 
B) the slope of the total revenue curve equals the slope of the total cost curve. 
C) the average total cost equals marginal cost. 
D) the marginal revenue exceeds marginal cost by the greatest amount. 
A) the difference between price and average total cost is the largest. 
B) the slope of the total revenue curve equals the slope of the total cost curve. 
C) the average total cost equals marginal cost. 
D) the marginal revenue exceeds marginal cost by the greatest amount.

Question 20

In the long run,if the input procurement prices increase as the output supplied by firms in an industry rises:

Accepted Answer

A) the firms are operating in an increasing-cost industry. 
B) the firms' profit margins will increase. 
C) the firms are making positive economic profits. 
D) the firms' cost curves shift will downward. 
A) the firms are operating in an increasing-cost industry. 
B) the firms' profit margins will increase. 
C) the firms are making positive economic profits. 
D) the firms' cost curves shift will downward.

The supply curve of a competitive firm in the short-run is:

The following figure shows the marginal cost curve,average total cost curve,average variable cost curve,and marginal revenue curve for a firm for different levels of output. Figure 9-3 -Refer to Figure 9-3.At the profit-maximizing level of output:

A perfectly competitive firm is a price taker.This implies that:

The model of perfect competition assumes that:

The short-run supply curve for the firm operating in a perfectly competitive industry is:

The competitive firm is known as a price taker because:

Which of the following is true of a constant cost industry?

A perfectly competitive firm faces a horizontal demand curve,which implies that:

The short-run supply curve for a competitive industry is derived by summing the _____ for each firm in the industry.

Which of the following will occur in response to an unexpected increase in demand in a constant-cost,competitive industry?

In a perfectly competitive market,if the product price remains unchanged,a fall in the price of an input used by a firm will:

The following figure shows the marginal cost curve,average total cost curve,average variable cost curve,and marginal revenue curve for a firm for different levels of output. Figure 9-3 -Refer to Figure 9-3.Assuming that price at 0R is $10,the profit maximizing level of output for the firm is _____.

If a competitive industry is characterized by increasing cost,which of the following will occur in response to an unexpected increase in demand?

The following figure shows the marginal cost curve,the average cost curve,the average variable cost curve,and the demand curve for a firm over different levels of output.The market price is $P. Figure 9-4 -Refer to Figure 9-4.The total variable cost for the firm at output level OB is _____.

Suppose a constant-cost competitive industry produces widgets using labor and capital in fixed proportions.A firm in the industry faces:

A competitive firm maximizes profit at the output level where:

In the long run,if the input procurement prices increase as the output supplied by firms in an industry rises:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

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Exam 9: Profit Maximization in Perfectly Competitive Markets

The supply curve of a competitive firm in the short-run is:

The following figure shows the marginal cost curve,average total cost curve,average variable cost curve,and marginal revenue curve for a firm for different levels of output. Figure 9-3 -Refer to Figure 9-3.At the profit-maximizing level of output:

A perfectly competitive firm is a price taker.This implies that:

The model of perfect competition assumes that:

The short-run supply curve for the firm operating in a perfectly competitive industry is:

The competitive firm is known as a price taker because:

Which of the following is true of a constant cost industry?

A perfectly competitive firm faces a horizontal demand curve,which implies that:

The short-run supply curve for a competitive industry is derived by summing the _____ for each firm in the industry.

Which of the following will occur in response to an unexpected increase in demand in a constant-cost,competitive industry?

In a perfectly competitive market,if the product price remains unchanged,a fall in the price of an input used by a firm will:

The following figure shows the marginal cost curve,average total cost curve,average variable cost curve,and marginal revenue curve for a firm for different levels of output. Figure 9-3 -Refer to Figure 9-3.Assuming that price at 0R is $10,the profit maximizing level of output for the firm is _____.

If a competitive industry is characterized by increasing cost,which of the following will occur in response to an unexpected increase in demand?

The following figure shows the marginal cost curve,the average cost curve,the average variable cost curve,and the demand curve for a firm over different levels of output.The market price is $P. Figure 9-4 -Refer to Figure 9-4.The total variable cost for the firm at output level OB is _____.

Suppose a constant-cost competitive industry produces widgets using labor and capital in fixed proportions.A firm in the industry faces:

A competitive firm maximizes profit at the output level where:

In the long run,if the input procurement prices increase as the output supplied by firms in an industry rises:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters