Question 1

If total variable cost exceeds total revenue at all output levels, a perfectly competitive firm

Accepted Answer

A)  should produce in the short run. 
B)  is making short-run profits. 
C)  should shut down in the short run. 
D)  has covered its fixed cost. 
A)  should produce in the short run. 
B)  is making short-run profits. 
C)  should shut down in the short run. 
D)  has covered its fixed cost. C

Question 2

Which of the following is a characteristic of an oligopolistic market structure?

Accepted Answer

A)  There are few dominant sellers. 
B)  Each firm sells a unique product. 
C)  It is easy for new firms to enter the industry. 
D)  Each firm need not react to the actions of rivals. 
A)  There are few dominant sellers. 
B)  Each firm sells a unique product. 
C)  It is easy for new firms to enter the industry. 
D)  Each firm need not react to the actions of rivals. A

Question 3

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

Accepted Answer

A)  the firm's average variable cost curve. 
B)  the portion of the firm's marginal cost curve below the minimum point of the average variable cost curve. 
C)  the portion of the firm's marginal cost curve above the minimum point of the average variable cost curve. 
D)  the portion of the firm's marginal cost curve above the minimum point of the average total cost curve. 
A)  the firm's average variable cost curve. 
B)  the portion of the firm's marginal cost curve below the minimum point of the average variable cost curve. 
C)  the portion of the firm's marginal cost curve above the minimum point of the average variable cost curve. 
D)  the portion of the firm's marginal cost curve above the minimum point of the average total cost curve. C

Question 4

-Refer to Table 8-1. Suppose the fixed cost of production rises by $500 and the price per unit is still $8. What happens to the firm's profit-maximising output level?

Accepted Answer

A)  It must fall. 
B)  It must rise to offset the increased cost. 
C)  It will remain the same. 
D)  The firm will shut down. 
A)  It must fall. 
B)  It must rise to offset the increased cost. 
C)  It will remain the same. 
D)  The firm will shut down.

Question 5

Assume that price is greater than average variable cost. If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102, then the firm is probably producing more than its profit-maximising quantity.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is not an assumption of perfectly competitive markets?

Accepted Answer

A)  There are many sellers and many buyers, all of which are small relative to the market. 
B)  Each firm produces a similar but not identical product. 
C)  There are no barriers to new firms entering the market. 
D)  The products sold by all firms in the market are identical. 
A)  There are many sellers and many buyers, all of which are small relative to the market. 
B)  Each firm produces a similar but not identical product. 
C)  There are no barriers to new firms entering the market. 
D)  The products sold by all firms in the market are identical.

Question 7

-Refer to Table 8-1. The firm will not produce in the short run if the output price falls below

Accepted Answer

A)  $8. 
B)  $4. 
C)  $3.20. 
D)  $2.80. 
A)  $8. 
B)  $4. 
C)  $3.20. 
D)  $2.80.

Question 8

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Accepted Answer

A)  each seller is too small to affect market price. 
B)  the price is set by the government. 
C)  all the sellers get together and set the price. 
D)  all the demanders get together and set the price. 
A)  each seller is too small to affect market price. 
B)  the price is set by the government. 
C)  all the sellers get together and set the price. 
D)  all the demanders get together and set the price.

Question 9

Assume that firms in a perfectly competitive market are earning economic profits. Which of the following statements describes the change in market price and output as a result of the entry of new firms into this market?

Accepted Answer

A)  The market demand curve shifts to the right, causing price to rise and market output to increase. 
B)  The market demand curve shifts to the left, causing price to fall and market output to decrease. 
C)  The short-run market supply curve shifts to the right, causing price to fall and total market output to increase. 
D)  The short-run market supply curve shifts to the left, causing price to rise and total market output to decrease. 
A)  The market demand curve shifts to the right, causing price to rise and market output to increase. 
B)  The market demand curve shifts to the left, causing price to fall and market output to decrease. 
C)  The short-run market supply curve shifts to the right, causing price to fall and total market output to increase. 
D)  The short-run market supply curve shifts to the left, causing price to rise and total market output to decrease.

Question 10

The perfectly competitive market structure benefits consumers because

Accepted Answer

A)  firms do not produce goods at the lowest possible price in the long run. 
B)  firms are forced by competitive pressure to be as efficient as possible. 
C)  firms add a much smaller markup over average cost than firms in any other type of market structure. 
D)  firms produce high quality goods at low prices. 
A)  firms do not produce goods at the lowest possible price in the long run. 
B)  firms are forced by competitive pressure to be as efficient as possible. 
C)  firms add a much smaller markup over average cost than firms in any other type of market structure. 
D)  firms produce high quality goods at low prices.

Question 11

A firm will break even when

Accepted Answer

A) P = ATC. B) P > ATC. C) P < AVC. D) P = AVC. A) P = ATC. B) P > ATC. C) P < AVC. D) P = AVC.

Question 12

If, as a perfectly competitive industry expands, it can supply larger quantities at the same long-run market price, it is

Accepted Answer

A)  a constant-cost industry. 
B)  an increasing-cost industry. 
C)  a decreasing-cost industry. 
D)  a fixed-cost industry. 
A)  a constant-cost industry. 
B)  an increasing-cost industry. 
C)  a decreasing-cost industry. 
D)  a fixed-cost industry.

Question 13

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm

Accepted Answer

A)  is earning a profit. 
B)  should shut down. 
C)  is incurring a loss. 
D)  is breaking even. 
A)  is earning a profit. 
B)  should shut down. 
C)  is incurring a loss. 
D)  is breaking even.

Question 14

The market demand curve in a perfectly competitive market is downward sloping.

Accepted Answer

A) True 
 B)False

Question 15

For a perfectly competitive firm, average revenue is equal to

Accepted Answer

A)  marginal cost. 
B)  the market price. 
C)  total revenue. 
D)  average fixed cost. 
A)  marginal cost. 
B)  the market price. 
C)  total revenue. 
D)  average fixed cost.

Question 16

If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing it, the firm

Accepted Answer

A)  added more to total costs than it added to total revenue. 
B)  added more to total revenue than it added to total cost. 
C)  is maximising marginal profit. 
D)  has minimised its losses. 
A)  added more to total costs than it added to total revenue. 
B)  added more to total revenue than it added to total cost. 
C)  is maximising marginal profit. 
D)  has minimised its losses.

Question 17

For a firm in a perfectly competitive market, price is

Accepted Answer

A)  equal to both average revenue and marginal revenue. 
B)  equal to average revenue but greater than marginal revenue. 
C)  greater than marginal revenue but less than average revenue. 
D)  less than both average revenue and marginal revenue. 
A)  equal to both average revenue and marginal revenue. 
B)  equal to average revenue but greater than marginal revenue. 
C)  greater than marginal revenue but less than average revenue. 
D)  less than both average revenue and marginal revenue.

Question 18

For a given quantity, the total profit of a perfectly competitive firm is equal to the vertical distance between the firm's total revenue curve and its total cost curve.

Accepted Answer

A) True 
 B)False

Question 19

-Refer to Figure 8-9. Suppose the prevailing price is $20 and the firm is currently producing 1350 units. In the long-run equilibrium

Accepted Answer

A)  there will be fewer firms in the industry and total industry output decreases. 
B)  there will be more firms in the industry and total industry output increases. 
C)  there will be fewer firms in the industry but total industry output increases. 
D)  there will be more firms in the industry and total industry output remains constant. 
A)  there will be fewer firms in the industry and total industry output decreases. 
B)  there will be more firms in the industry and total industry output increases. 
C)  there will be fewer firms in the industry but total industry output increases. 
D)  there will be more firms in the industry and total industry output remains constant.

Question 20

-Refer to Figure 8-4. If the market price is $30, should the firm represented in the diagram continue to stay in business?

Accepted Answer

A)  No, it should shut down because it is incurring a loss. 
B)  No, it should shut down because it cannot cover its variable cost. 
C)  Yes, because it is covering part of its fixed cost. 
D)  Yes, because it is making a profit. 
A)  No, it should shut down because it is incurring a loss. 
B)  No, it should shut down because it cannot cover its variable cost. 
C)  Yes, because it is covering part of its fixed cost. 
D)  Yes, because it is making a profit.

If total variable cost exceeds total revenue at all output levels, a perfectly competitive firm

Which of the following is a characteristic of an oligopolistic market structure?

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

-Refer to Table 8-1. Suppose the fixed cost of production rises by $500 and the price per unit is still $8. What happens to the firm's profit-maximising output level?

Assume that price is greater than average variable cost. If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102, then the firm is probably producing more than its profit-maximising quantity.

Which of the following is not an assumption of perfectly competitive markets?

-Refer to Table 8-1. The firm will not produce in the short run if the output price falls below

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Assume that firms in a perfectly competitive market are earning economic profits. Which of the following statements describes the change in market price and output as a result of the entry of new firms into this market?

The perfectly competitive market structure benefits consumers because

A firm will break even when

If, as a perfectly competitive industry expands, it can supply larger quantities at the same long-run market price, it is

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm

The market demand curve in a perfectly competitive market is downward sloping.

For a perfectly competitive firm, average revenue is equal to

If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing it, the firm

For a firm in a perfectly competitive market, price is

For a given quantity, the total profit of a perfectly competitive firm is equal to the vertical distance between the firm's total revenue curve and its total cost curve.

-Refer to Figure 8-9. Suppose the prevailing price is $20 and the firm is currently producing 1350 units. In the long-run equilibrium

-Refer to Figure 8-4. If the market price is $30, should the firm represented in the diagram continue to stay in business?

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 8: Firms in Perfectly Compitive Markets

If total variable cost exceeds total revenue at all output levels, a perfectly competitive firm

Which of the following is a characteristic of an oligopolistic market structure?

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

-Refer to Table 8-1. Suppose the fixed cost of production rises by $500 and the price per unit is still $8. What happens to the firm's profit-maximising output level?

Assume that price is greater than average variable cost. If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102, then the firm is probably producing more than its profit-maximising quantity.

Which of the following is not an assumption of perfectly competitive markets?

-Refer to Table 8-1. The firm will not produce in the short run if the output price falls below

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Assume that firms in a perfectly competitive market are earning economic profits. Which of the following statements describes the change in market price and output as a result of the entry of new firms into this market?

The perfectly competitive market structure benefits consumers because

A firm will break even when

If, as a perfectly competitive industry expands, it can supply larger quantities at the same long-run market price, it is

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm

The market demand curve in a perfectly competitive market is downward sloping.

For a perfectly competitive firm, average revenue is equal to

If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing it, the firm

For a firm in a perfectly competitive market, price is

For a given quantity, the total profit of a perfectly competitive firm is equal to the vertical distance between the firm's total revenue curve and its total cost curve.

-Refer to Figure 8-9. Suppose the prevailing price is $20 and the firm is currently producing 1350 units. In the long-run equilibrium

-Refer to Figure 8-4. If the market price is $30, should the firm represented in the diagram continue to stay in business?

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Monopoly Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters