Question 1

In a perfectly competitive market,all buyers and sellers are price takers.

Accepted Answer

A) True 
 B)False

Question 2

The following graph (A)represents the cost curves for a representative firm in a perfectly competitive market.The market demand is shown in graph (B):
  
-Refer to the above graph to answer this question.At the equilibrium price in this market,what will be the representative firm's total profit or loss?

Accepted Answer

A) 0. 
B) A profit of $15. 
C) A loss of $15. 
D) A loss of $20. 
E) A loss of $360. 
A) 0. 
B) A profit of $15. 
C) A loss of $15. 
D) A loss of $20. 
E) A loss of $360.

Question 3

What long-run effect will a decrease in market demand have on a constant-cost industry?

Accepted Answer

A) The price will stay the same,and the number of firms in the industry will increase. 
B) The price will stay the same,and the number of firms in the industry will decrease. 
C) The price will decrease,and the number of firms in the industry will increase. 
D) The price will decrease,and the number of firms in the industry will decrease. 
A) The price will stay the same,and the number of firms in the industry will increase. 
B) The price will stay the same,and the number of firms in the industry will decrease. 
C) The price will decrease,and the number of firms in the industry will increase. 
D) The price will decrease,and the number of firms in the industry will decrease.

Question 4

A firm will maximize its profits at the output at which the difference between its average revenue and average cost is greatest.

Accepted Answer

A) True 
 B)False

Question 5

"If MC = ATC when Q = 25,and MR = ATC when Q = 35,a perfectly competitive firm will breakeven when 35 units are produced and the profit maximizing level of output must be greater than 35." Evaluate this statement.

Accepted Answer

The first part of the statement is corre

Question 6

The following graph shows the costs for a perfectly competitive producer:
  
-Refer to the above graph to answer this question.What is the value of the shut-down price?

Accepted Answer

A) P1. 
B) P2. 
C) P3. 
D) P4. 
E) P5. 
A) P1. 
B) P2. 
C) P3. 
D) P4. 
E) P5.

Question 7

Which of the following markets provide the best example of a perfect competition?

Accepted Answer

A) Automobile manufacturing. 
B) Restaurants. 
C) Oil refining. 
D) Wheat farming. 
A) Automobile manufacturing. 
B) Restaurants. 
C) Oil refining. 
D) Wheat farming.

Question 8

What is the shape of the demand curve facing the perfectly competitive firm?

Accepted Answer

A) Downward-sloping. 
B) Horizontal. 
C) Vertical. 
D) Upward-sloping. 
A) Downward-sloping. 
B) Horizontal. 
C) Vertical. 
D) Upward-sloping.

Question 9

What does break-even output mean?

Accepted Answer

A) The output at which the price is equal to the average revenue. 
B) The output at which the price is equal to the marginal revenue. 
C) The output at which the price is equal to the average cost. 
D) The output at which the price is equal to marginal cost. 
A) The output at which the price is equal to the average revenue. 
B) The output at which the price is equal to the marginal revenue. 
C) The output at which the price is equal to the average cost. 
D) The output at which the price is equal to marginal cost.

Question 10

What is the term for the price at which the firm makes only normal profits?

Accepted Answer

A) Shutdown price. 
B) Break-even price. 
C) Average price. 
D) Economic price. 
A) Shutdown price. 
B) Break-even price. 
C) Average price. 
D) Economic price.

Question 11

What is perfect competition?

Accepted Answer

A) A market in which firms try to undercut each others' prices on a consistent basis. 
B) A market where producers try to emphasize the differences in their products. 
C) A market in which all buyers and sellers are price-takers. 
D) A market in which the sellers are all price-makers. 
A) A market in which firms try to undercut each others' prices on a consistent basis. 
B) A market where producers try to emphasize the differences in their products. 
C) A market in which all buyers and sellers are price-takers. 
D) A market in which the sellers are all price-makers.

Question 12

What is the term for the amount of revenue received per unit sold?

Accepted Answer

A) Average revenue. 
B) Total revenue. 
C) Marginal revenue. 
D) Net revenue. 
A) Average revenue. 
B) Total revenue. 
C) Marginal revenue. 
D) Net revenue.

Question 13

Which of the following statements is correct regarding a perfectly competitive firm's total revenue?

Accepted Answer

A) The higher the price,the lower will be the total revenue. 
B) The higher the price,the higher will be the total revenue. 
C) When graphed,the total revenue curve is a horizontal line. 
D) There is an inverse relationship between the price and the total revenue. 
A) The higher the price,the lower will be the total revenue. 
B) The higher the price,the higher will be the total revenue. 
C) When graphed,the total revenue curve is a horizontal line. 
D) There is an inverse relationship between the price and the total revenue.

Question 14

Figure 8.13 refers to a perfectly competitive firm.
  
-Refer to Figure 8.13 to answer this question.If the price of the product is $70,what is the profit-maximizing output,and what is the amount of economic profits?

Accepted Answer

A) 7 and zero. 
B) 7 and $10. 
C) 7 and $70. 
D) 9 and $180. 
E) 11 and zero. 
A) 7 and zero. 
B) 7 and $10. 
C) 7 and $70. 
D) 9 and $180. 
E) 11 and zero.

Question 15

The following graph shows the costs for a perfectly competitive producer:
  
-Refer to the above graph to answer this question.If the price of the product is $40,what will be the average profit?

Accepted Answer

A) 0. 
B) $10. 
C) $18. 
D) $1,000. 
E) Cannot be determined. 
A) 0. 
B) $10. 
C) $18. 
D) $1,000. 
E) Cannot be determined.

Question 16

The following table shows a profit-maximizing producer's marginal costs.The firm is operating in a perfectly competitive market and has fixed costs of $500.
  
-Refer to the above information to answer this question.If the price is $500,what is the optimal output and what is the profit or loss?

Accepted Answer

A) 5 and a profit of $1,150. 
B) 6 and a profit of $1,200. 
C) 7 and a profit of $560. 
D) 7 and a profit of $1,430. 
E) 8 and a profit of $1,330. 
A) 5 and a profit of $1,150. 
B) 6 and a profit of $1,200. 
C) 7 and a profit of $560. 
D) 7 and a profit of $1,430. 
E) 8 and a profit of $1,330.

Question 17

The following table shows the costs for a manufacturer:
  
-Refer to the above information to answer this question.If the price of the product is $50,how much will the manufacturer produce and what will be its total profit or loss?

Accepted Answer

A) 0 and a loss of $120. 
B) 6 and a profit of $48. 
C) 7 and a profit of $42. 
D) 7 and a profit of zero. 
E) 8 and a profit of $16. 
A) 0 and a loss of $120. 
B) 6 and a profit of $48. 
C) 7 and a profit of $42. 
D) 7 and a profit of zero. 
E) 8 and a profit of $16.

Question 18

What action should a perfectly competitive firm take if,at its present output,MC is both increasing and is greater than the price and the price is greater than the average variable cost?

Accepted Answer

A) It should shut down. 
B) It should increase its output. 
C) It should decrease its output. 
D) It should increase the price. 
A) It should shut down. 
B) It should increase its output. 
C) It should decrease its output. 
D) It should increase the price.

Question 19

Table 8.8 refers to a perfectly competitive firm.
  
-Refer to Table 8.8 to answer this question.What is the value of the break-even price?

Accepted Answer

A) $3.25. 
B) $5. 
C) $5.60. 
D) $18. 
E) $28. 
A) $3.25. 
B) $5. 
C) $5.60. 
D) $18. 
E) $28.

Question 20

Define a)shutdown price b)breakeven price

Accepted Answer

a)shutdown price:the price tha

In a perfectly competitive market,all buyers and sellers are price takers.

What long-run effect will a decrease in market demand have on a constant-cost industry?

A firm will maximize its profits at the output at which the difference between its average revenue and average cost is greatest.

"If MC = ATC when Q = 25,and MR = ATC when Q = 35,a perfectly competitive firm will breakeven when 35 units are produced and the profit maximizing level of output must be greater than 35." Evaluate this statement.

The following graph shows the costs for a perfectly competitive producer: -Refer to the above graph to answer this question.What is the value of the shut-down price?

Which of the following markets provide the best example of a perfect competition?

What is the shape of the demand curve facing the perfectly competitive firm?

What does break-even output mean?

What is the term for the price at which the firm makes only normal profits?

What is perfect competition?

What is the term for the amount of revenue received per unit sold?

Which of the following statements is correct regarding a perfectly competitive firm's total revenue?

Figure 8.13 refers to a perfectly competitive firm. -Refer to Figure 8.13 to answer this question.If the price of the product is $70,what is the profit-maximizing output,and what is the amount of economic profits?

The following graph shows the costs for a perfectly competitive producer: -Refer to the above graph to answer this question.If the price of the product is $40,what will be the average profit?

The following table shows a profit-maximizing producer's marginal costs.The firm is operating in a perfectly competitive market and has fixed costs of $500. -Refer to the above information to answer this question.If the price is $500,what is the optimal output and what is the profit or loss?

The following table shows the costs for a manufacturer: -Refer to the above information to answer this question.If the price of the product is $50,how much will the manufacturer produce and what will be its total profit or loss?

What action should a perfectly competitive firm take if,at its present output,MC is both increasing and is greater than the price and the price is greater than the average variable cost?

Table 8.8 refers to a perfectly competitive firm. -Refer to Table 8.8 to answer this question.What is the value of the break-even price?

Define a)shutdown price b)breakeven price

The Economic Problem

Demand and Supply: An Introduction

Demand and Supply: An Elaboration

Elasticity

Consumer Choice

A Firms Production Decisions and Costs in the Short Run

Costs in the Long Run

An Evaluation of Competitive Markets

Monopoly

Imperfect Competition

The Factors of Production

International Trade

Filters

Exam 8: Perfect Competition

In a perfectly competitive market,all buyers and sellers are price takers.

What long-run effect will a decrease in market demand have on a constant-cost industry?

A firm will maximize its profits at the output at which the difference between its average revenue and average cost is greatest.

"If MC = ATC when Q = 25,and MR = ATC when Q = 35,a perfectly competitive firm will breakeven when 35 units are produced and the profit maximizing level of output must be greater than 35." Evaluate this statement.

The following graph shows the costs for a perfectly competitive producer: -Refer to the above graph to answer this question.What is the value of the shut-down price?

Which of the following markets provide the best example of a perfect competition?

What is the shape of the demand curve facing the perfectly competitive firm?

What does break-even output mean?

What is the term for the price at which the firm makes only normal profits?

What is perfect competition?

What is the term for the amount of revenue received per unit sold?

Which of the following statements is correct regarding a perfectly competitive firm's total revenue?

Figure 8.13 refers to a perfectly competitive firm. -Refer to Figure 8.13 to answer this question.If the price of the product is $70,what is the profit-maximizing output,and what is the amount of economic profits?

The following graph shows the costs for a perfectly competitive producer: -Refer to the above graph to answer this question.If the price of the product is $40,what will be the average profit?

The following table shows a profit-maximizing producer's marginal costs.The firm is operating in a perfectly competitive market and has fixed costs of $500. -Refer to the above information to answer this question.If the price is $500,what is the optimal output and what is the profit or loss?

The following table shows the costs for a manufacturer: -Refer to the above information to answer this question.If the price of the product is $50,how much will the manufacturer produce and what will be its total profit or loss?

What action should a perfectly competitive firm take if,at its present output,MC is both increasing and is greater than the price and the price is greater than the average variable cost?

Table 8.8 refers to a perfectly competitive firm. -Refer to Table 8.8 to answer this question.What is the value of the break-even price?

Define a)shutdown price b)breakeven price

The Economic Problem

Demand and Supply: An Introduction

Demand and Supply: An Elaboration

Elasticity

Consumer Choice

A Firms Production Decisions and Costs in the Short Run

Costs in the Long Run

An Evaluation of Competitive Markets

Monopoly

Imperfect Competition

The Factors of Production

International Trade

Filters