Question 1

All of the following statements except one are true regarding the effect of a price increase on a perfectly competitive firm.Which is the exception?

Accepted Answer

A) Production will increase. 
B) The range of profitable outputs will increase. 
C) Total costs will decrease. 
D) The profitability of the firm will increase. 
A) Production will increase. 
B) The range of profitable outputs will increase. 
C) Total costs will decrease. 
D) The profitability of the firm will increase.

Question 2

An increase in the demand for a product will cause many firms to leave the industry.

Accepted Answer

A) True 
 B)False

Question 3

Suppose that the total fixed cost for a guitar manufacturer is $90.The marginal cost of the first guitar produced is $80 and decreases by $10 for the next three guitars produced.Thereafter,the marginal cost increases by $10 for each successive guitar.
-Refer to the information above to answer this question.If the manufacturer can sell her guitars for $70,how many should she produce in order to maximize her profits?

Accepted Answer

A) 0. 
B) 5. 
C) 6. 
D) 7. 
E) 8. 
A) 0. 
B) 5. 
C) 6. 
D) 7. 
E) 8.

Question 4

Assume that the following data is for a profit-maximizing manufacturer:
  
-Refer to the above information to answer this question.If the price is $55 per unit,what are the profit maximizing output and the level of profit or loss?

Accepted Answer

A) 4 and a profit of $20. 
B) 4 and a loss of $20. 
C) 5 and a profit of $25. 
D) 5 and a loss of $25. 
E) The firm would shut down. 
A) 4 and a profit of $20. 
B) 4 and a loss of $20. 
C) 5 and a profit of $25. 
D) 5 and a loss of $25. 
E) The firm would shut down.

Question 5

Graph A shows the market demand and supply in a perfectly competitive market.Graph B shows the cost curves of a representative profit-maximizing firm in that industry.
  
-Refer to the above graph to answer this question.Suppose that the industry demand were to increase by 3,000 units.At the new equilibrium,what will be the firm's total profit or loss?

Accepted Answer

A) Profit of $50. 
B) Profit of $6,400. 
C) Profit of $10.000. 
D) Profit of $12,000. 
E) The firm will break even. 
A) Profit of $50. 
B) Profit of $6,400. 
C) Profit of $10.000. 
D) Profit of $12,000. 
E) The firm will break even.

Question 6

Successful competition requires good conduct,rules and officials.Which of the market system requirements do these characteristics reflect?

Accepted Answer

A) Extensive specialization and trade. 
B) Perfect competition. 
C) Private ownership of productive resources. 
D) A legal and social foundation 
E) A balanced government budget 
A) Extensive specialization and trade. 
B) Perfect competition. 
C) Private ownership of productive resources. 
D) A legal and social foundation 
E) A balanced government budget

Question 7

Figure 8.13 refers to a perfectly competitive firm.
  
-Refer to Figure 8.13 to answer this question.What is the value of the break-even price?

Accepted Answer

A) $10. 
B) $20. 
C) $40. 
D) $50. 
E) Cannot be determined from the information. 
A) $10. 
B) $20. 
C) $40. 
D) $50. 
E) Cannot be determined from the information.

Question 8

Firm ABC is currently producing 80 units of output at a total cost of $12,000.Customer B is willing to offer Firm ABC $2,200 to produce 8 more units.Firm ABC's average cost of producing 88 units is $160.Should Firm ABC accept the offer?

Accepted Answer

Yes,the total cost of producing 88 units

Question 9

Firm XYZ is currently producing 50 units of output at an average cost of $18.Customer A is willing to offer Firm XYZ $220 to produce 5 more additional units.Firm XYZ's average variable cost and average fixed cost of producing 55 units is $20 and $2.Should Firm XYZ accept the offer?

Accepted Answer

No,the total cost of producing 55 units

Question 10

The total fixed costs of a perfectly-competitive manufacturer are $500,and its marginal costs are as follows:
  
-Refer to the above information to answer this question.If the price of the product is $70,how many will the manufacturer produce and what will be its profit or loss?

Accepted Answer

A) 0 and a loss of $500. 
B) 3 and a loss of $30. 
C) 3 and a loss of $530. 
D) 5 and a profit of $200. 
E) 8 and a profit of $140. 
A) 0 and a loss of $500. 
B) 3 and a loss of $30. 
C) 3 and a loss of $530. 
D) 5 and a profit of $200. 
E) 8 and a profit of $140.

Question 11

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 below P1,what is the profit-maximizing (or loss-minimizing)output?

Accepted Answer

A) 0. 
B) Q1. 
C) Q2. 
D) Q3. 
E) Q4. 
A) 0. 
B) Q1. 
C) Q2. 
D) Q3. 
E) Q4.

Question 12

What is a competitive firm's supply curve equivalent to?

Accepted Answer

A) Its average revenue curve. 
B) Its average variable cost curve. 
C) Its marginal cost curve. 
D) The rising portion of its marginal cost curve above its average variable cost curve. 
A) Its average revenue curve. 
B) Its average variable cost curve. 
C) Its marginal cost curve. 
D) The rising portion of its marginal cost curve above its average variable cost curve.

Question 13

Using the following diagram,demonstrate graphically and explain verbally why Q0 is not a profit maximizing output level.

Accepted Answer

@#IMG-DLM& At Q0 notice that MR > MC.This tells us

Question 14

Suppose that the total fixed cost for a guitar manufacturer is $90.The marginal cost of the first guitar produced is $80 and decreases by $10 for the next three guitars produced.Thereafter,the marginal cost increases by $10 for each successive guitar.
-Refer to the information above to answer this question.If the manufacturer can sell her guitars for $70,what will be her profit or loss at the optimal output?

Accepted Answer

A) She will break even. 
B) A loss of $50. 
C) A profit of $50. 
D) A loss of $60. 
E) A loss of $90. 
A) She will break even. 
B) A loss of $50. 
C) A profit of $50. 
D) A loss of $60. 
E) A loss of $90.

Question 15

Assume that the following data is for a profit-maximizing manufacturer:
  
-Refer to the above information to answer this question.If the price is $75 per unit,what are the profit maximizing output and the level of profit or loss?

Accepted Answer

A) 4 and $40. 
B) 5 and $75. 
C) 5 and $80. 
D) 6 and $80. 
E) 8 and $50. 
A) 4 and $40. 
B) 5 and $75. 
C) 5 and $80. 
D) 6 and $80. 
E) 8 and $50.

Question 16

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.Suppose that the market demand were to increase by 2,000 units.At the new equilibrium price in this market,what will be the representative firm's total profit or loss?

Accepted Answer

A) 0. 
B) A profit of $10. 
C) A profit of $400. 
D) A profit of $200. 
E) A profit of $5,250. 
A) 0. 
B) A profit of $10. 
C) A profit of $400. 
D) A profit of $200. 
E) A profit of $5,250.

Question 17

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.Suppose that the market demand were to increase by 2,000 units.What would be the new equilibrium price and quantity in the market?

Accepted Answer

A) $50 and 5,000. 
B) $60 and 4,500. 
C) $60 and 6,000. 
D) $70 and 4,000. 
E) $80 and 6,000. 
A) $50 and 5,000. 
B) $60 and 4,500. 
C) $60 and 6,000. 
D) $70 and 4,000. 
E) $80 and 6,000.

Question 18

What is the term for the level of price at which the firm is just covering all of its variable costs?

Accepted Answer

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

Question 19

Assume that the following data is for a profit-maximizing manufacturer:
  
-Refer to the above information to answer this question.What is the value of the shut-down price?

Accepted Answer

A) $20. 
B) $30. 
C) $40. 
D) $50. 
E) $60. 
A) $20. 
B) $30. 
C) $40. 
D) $50. 
E) $60.

Question 20

A firm will not shut down in the short run so long as it is covering its variable costs.

Accepted Answer

A) True 
 B)False

All of the following statements except one are true regarding the effect of a price increase on a perfectly competitive firm.Which is the exception?

An increase in the demand for a product will cause many firms to leave the industry.

Assume that the following data is for a profit-maximizing manufacturer: -Refer to the above information to answer this question.If the price is $55 per unit,what are the profit maximizing output and the level of profit or loss?

Successful competition requires good conduct,rules and officials.Which of the market system requirements do these characteristics reflect?

Figure 8.13 refers to a perfectly competitive firm. -Refer to Figure 8.13 to answer this question.What is the value of the break-even price?

Firm ABC is currently producing 80 units of output at a total cost of $12,000.Customer B is willing to offer Firm ABC $2,200 to produce 8 more units.Firm ABC's average cost of producing 88 units is $160.Should Firm ABC accept the offer?

Firm XYZ is currently producing 50 units of output at an average cost of $18.Customer A is willing to offer Firm XYZ $220 to produce 5 more additional units.Firm XYZ's average variable cost and average fixed cost of producing 55 units is $20 and $2.Should Firm XYZ accept the offer?

The total fixed costs of a perfectly-competitive manufacturer are $500,and its marginal costs are as follows: -Refer to the above information to answer this question.If the price of the product is $70,how many will the manufacturer produce and what will be its profit or loss?

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 below P1,what is the profit-maximizing (or loss-minimizing)output?

What is a competitive firm's supply curve equivalent to?

Using the following diagram,demonstrate graphically and explain verbally why Q0 is not a profit maximizing output level.

Assume that the following data is for a profit-maximizing manufacturer: -Refer to the above information to answer this question.If the price is $75 per unit,what are the profit maximizing output and the level of profit or loss?

What is the term for the level of price at which the firm is just covering all of its variable costs?

Assume that the following data is for a profit-maximizing manufacturer: -Refer to the above information to answer this question.What is the value of the shut-down price?

A firm will not shut down in the short run so long as it is covering its variable costs.

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

All of the following statements except one are true regarding the effect of a price increase on a perfectly competitive firm.Which is the exception?

An increase in the demand for a product will cause many firms to leave the industry.

Assume that the following data is for a profit-maximizing manufacturer: -Refer to the above information to answer this question.If the price is $55 per unit,what are the profit maximizing output and the level of profit or loss?

Successful competition requires good conduct,rules and officials.Which of the market system requirements do these characteristics reflect?

Figure 8.13 refers to a perfectly competitive firm. -Refer to Figure 8.13 to answer this question.What is the value of the break-even price?

Firm ABC is currently producing 80 units of output at a total cost of $12,000.Customer B is willing to offer Firm ABC $2,200 to produce 8 more units.Firm ABC's average cost of producing 88 units is $160.Should Firm ABC accept the offer?

Firm XYZ is currently producing 50 units of output at an average cost of $18.Customer A is willing to offer Firm XYZ $220 to produce 5 more additional units.Firm XYZ's average variable cost and average fixed cost of producing 55 units is $20 and $2.Should Firm XYZ accept the offer?

The total fixed costs of a perfectly-competitive manufacturer are $500,and its marginal costs are as follows: -Refer to the above information to answer this question.If the price of the product is $70,how many will the manufacturer produce and what will be its profit or loss?

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 below P1,what is the profit-maximizing (or loss-minimizing)output?

What is a competitive firm's supply curve equivalent to?

Using the following diagram,demonstrate graphically and explain verbally why Q0 is not a profit maximizing output level.

Assume that the following data is for a profit-maximizing manufacturer: -Refer to the above information to answer this question.If the price is $75 per unit,what are the profit maximizing output and the level of profit or loss?

What is the term for the level of price at which the firm is just covering all of its variable costs?

Assume that the following data is for a profit-maximizing manufacturer: -Refer to the above information to answer this question.What is the value of the shut-down price?

A firm will not shut down in the short run so long as it is covering its variable costs.

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