Question 1

In what situation should a firm shut down in the short run?

Accepted Answer

A) When its total revenue is less than its total fixed costs at all output levels. 
B) When its total revenue exceeds its total variable costs at all output levels. 
C) When the price is below its lowest average variable cost at all output levels. 
D) When the price is below its lowest average total cost at all output levels. 
A) When its total revenue is less than its total fixed costs at all output levels. 
B) When its total revenue exceeds its total variable costs at all output levels. 
C) When the price is below its lowest average variable cost at all output levels. 
D) When the price is below its lowest average total cost at all output levels.

Question 2

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.If the market is in equilibrium,what quantity will the firm produce?

Accepted Answer

A) 30. 
B) 50. 
C) 70. 
D) 90. 
E) 100. 
A) 30. 
B) 50. 
C) 70. 
D) 90. 
E) 100.

Question 3

You are running a business in a perfectly competitive market.Your product sells for $5 and your marginal costs rise as output rises.
(a)If the cost of producing another unit of output is $4,what should you do? What will happen to your profit?
(b)If the cost incurred from your last unit of output produced is $6,what has happened to your profit? What should you do about this?
(c)What general rule do the above examples suggest about how a firm should determine the level of output to produce so as to maximize profit?

Accepted Answer

(a)You should produce another unit.Doing

Question 4

What type of product is sold by the representative firm in a perfectly competitive market?

Accepted Answer

A) The same as is sold by the other firms. 
B) A unique product. 
C) A product similar to that sold by the other firms. 
D) It could be any of the above three types. 
A) The same as is sold by the other firms. 
B) A unique product. 
C) A product similar to that sold by the other firms. 
D) It could be any of the above three types.

Question 5

The following questions are based on the key below.Assume that you are given cost and price data for a number of competitive firms at their present output levels.In all cases the marginal cost is increasing.With this information,indicate whether each firm should,in the short run:
1.produce more
2.produce less.
3.shut down
4.cannot be determined from the information.
-Refer to the information above to answer this question.If the price exceeds the firm's marginal cost and is above its average variable costs,what should the firm do?

Accepted Answer

A) 1. 
B) 2. 
C) 3. 
D) 4. 
A) 1. 
B) 2. 
C) 3. 
D) 4.

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 break-even 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

The data are for a firm operating in perfect competition.
  
-Use Table 8.7 to answer this question.What is the firm's break-even price?

Accepted Answer

A) $60. 
B) $70. 
C) $86. 
D) $200. 
A) $60. 
B) $70. 
C) $86. 
D) $200.

Question 8

The Competitive Industry and Firm
-Refer to the graph above to answer this question.What is the total loss at the shut-down price?

Accepted Answer

A) $30. 
B) $100. 
C) $150. 
D) $210. 
E) $250. 
A) $30. 
B) $100. 
C) $150. 
D) $210. 
E) $250.

Question 9

What is average revenue?

Accepted Answer

A) The price multiplied by the quantity sold. 
B) The total revenue divided by the price. 
C) The extra revenue derived from the sale of one more unit. 
D) It is equal to the price in perfectly competitive markets. 
A) The price multiplied by the quantity sold. 
B) The total revenue divided by the price. 
C) The extra revenue derived from the sale of one more unit. 
D) It is equal to the price in perfectly competitive markets.

Question 10

Consider the following table of numbers,which represents demand and cost conditions for a competitive firm.The price of the product this firm produces is $50.
   (a)Fill in the missing values.
(b)What level of output should the firm produce? Why?
(c)What do you predict will happen to the number of firms in the industry? Why?
(d)What do you predict will happen to supply and the market price?

Accepted Answer

a)
 @#IMG-DLM& 
b)4 units.The firm produces at thi

Question 11

If the price of a product increases,which of the following statements regarding the perfectly competitive firm is correct?

Accepted Answer

A) Its average revenue curve will be steeper. 
B) Its average revenue curve will be flatter. 
C) Its marginal revenue curve will be flatter. 
D) Its total revenue curve will be steeper. 
A) Its average revenue curve will be steeper. 
B) Its average revenue curve will be flatter. 
C) Its marginal revenue curve will be flatter. 
D) Its total revenue curve will be steeper.

Question 12

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 $35,what will be the total profit?

Accepted Answer

A) 0. 
B) $90. 
C) $900. 
D) $3,150. 
E) Cannot be determined. 
A) 0. 
B) $90. 
C) $900. 
D) $3,150. 
E) Cannot be determined.

In what situation should a firm shut down in the short run?

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.If the market is in equilibrium,what quantity will the firm produce?

What type of product is sold by the representative firm in a perfectly competitive market?

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 break-even price?

The data are for a firm operating in perfect competition. -Use Table 8.7 to answer this question.What is the firm's break-even price?

The Competitive Industry and Firm -Refer to the graph above to answer this question.What is the total loss at the shut-down price?

What is average revenue?

If the price of a product increases,which of the following statements regarding the perfectly competitive firm is correct?

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 $35,what will be the total profit?

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 what situation should a firm shut down in the short run?

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.If the market is in equilibrium,what quantity will the firm produce?

What type of product is sold by the representative firm in a perfectly competitive market?

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 break-even price?

The data are for a firm operating in perfect competition. -Use Table 8.7 to answer this question.What is the firm's break-even price?

The Competitive Industry and Firm -Refer to the graph above to answer this question.What is the total loss at the shut-down price?

What is average revenue?

If the price of a product increases,which of the following statements regarding the perfectly competitive firm is correct?

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 $35,what will be the total profit?

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