Question 1

If the market price is $25, the average revenue of selling five units is

Accepted Answer

A)  $5. 
B)  $12.50. 
C)  $25. 
D)  $125. 
A)  $5. 
B)  $12.50. 
C)  $25. 
D)  $125.

Question 2

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?

Accepted Answer

A)  productive efficiency 
B)  allocative efficiency 
C)  marginal efficiency 
D)  profit maximisation 
A)  productive efficiency 
B)  allocative efficiency 
C)  marginal efficiency 
D)  profit maximisation

Question 3

Profit is the difference between

Accepted Answer

A)  marginal revenue and marginal cost. 
B)  total revenue and variable cost. 
C)  total revenue and total explicit cost. 
D)  total revenue and total cost. 
A)  marginal revenue and marginal cost. 
B)  total revenue and variable cost. 
C)  total revenue and total explicit cost. 
D)  total revenue and total cost.

Question 4

Of the following industries, which are perfectly competitive? For those that are not perfectly competitive, explain why.
a. Restaurants
b. Corn
c. University education
d. Local radio and television

Accepted Answer

a differentiated product. Universities d

Question 5

An increase in a firm's fixed cost will not change the firm's profit-maximising output in the short run.

Accepted Answer

A) True 
 B)False

Question 6

When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell

Accepted Answer

A)  the output where marginal revenue equals marginal cost. 
B)  any positive output the entrepreneur decides upon because all of it can be sold. 
C)  nothing at all; the firm shuts down. 
D)  the output where average total cost equals price. 
A)  the output where marginal revenue equals marginal cost. 
B)  any positive output the entrepreneur decides upon because all of it can be sold. 
C)  nothing at all; the firm shuts down. 
D)  the output where average total cost equals price.

Question 7

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

Accepted Answer

A)  Restaurants do not sell identical products. 
B)  Restaurants compete in small market areas - neighbourhoods and cities - rather than in regional or national markets. Therefore, restaurants are not small relative to their market size. 
C)  Restaurants usually have entry barriers in the form of zoning restrictions and health regulations. 
D)  Restaurants have significant liability costs that perfectly competitive firms do not have; for example, customers may sue if they suffer from food poisoning. 
A)  Restaurants do not sell identical products. 
B)  Restaurants compete in small market areas - neighbourhoods and cities - rather than in regional or national markets. Therefore, restaurants are not small relative to their market size. 
C)  Restaurants usually have entry barriers in the form of zoning restrictions and health regulations. 
D)  Restaurants have significant liability costs that perfectly competitive firms do not have; for example, customers may sue if they suffer from food poisoning.

Question 8

If total revenue exceeds fixed cost, a firm

Accepted Answer

A)  should produce in the short run. 
B)  has covered its variable cost. 
C)  is making short-run profits. 
D)  may or may not produce in the short run, depending on whether total revenue covers variable cost. 
A)  should produce in the short run. 
B)  has covered its variable cost. 
C)  is making short-run profits. 
D)  may or may not produce in the short run, depending on whether total revenue covers variable cost.

Question 9

A perfectly competitive firm's short-run supply curve is

Accepted Answer

A)  upward sloping and is the portion of the marginal cost curve that lies above the average total cost curve. 
B)  upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve. 
C)  perfectly elastic at the market price. 
D)  horizontal at the minimum average total cost. 
A)  upward sloping and is the portion of the marginal cost curve that lies above the average total cost curve. 
B)  upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve. 
C)  perfectly elastic at the market price. 
D)  horizontal at the minimum average total cost.

Question 10

If a typical firm in a perfectly competitive industry is incurring losses, then

Accepted Answer

A)  all firms will continue to lose money. 
B)  some firms will exit in the long run, causing market supply to decrease and market price to rise, increasing profits for the remaining firms. 
C)  some firms will exit in the long run, causing market supply to decrease and market price to fall, increasing losses for the remaining firms. 
D)  some firms will enter in the long run, causing market supply to increase and market price to rise, increasing profit for all firms. 
A)  all firms will continue to lose money. 
B)  some firms will exit in the long run, causing market supply to decrease and market price to rise, increasing profits for the remaining firms. 
C)  some firms will exit in the long run, causing market supply to decrease and market price to fall, increasing losses for the remaining firms. 
D)  some firms will enter in the long run, causing market supply to increase and market price to rise, increasing profit for all firms.

Question 11

The price a perfectly competitive firm receives for its output

Accepted Answer

A)  is determined by the interaction of the firm and all of the consumers who buy from the firm. 
B)  is determined by the interaction of all sellers and all buyers in the firm's market. 
C)  will not change in response to changes in market demand and supply because the firm is a price taker. 
D)  will be lowered by the firm in order to sell more output. 
A)  is determined by the interaction of the firm and all of the consumers who buy from the firm. 
B)  is determined by the interaction of all sellers and all buyers in the firm's market. 
C)  will not change in response to changes in market demand and supply because the firm is a price taker. 
D)  will be lowered by the firm in order to sell more output.

Question 12

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen?

Accepted Answer

A)  The firm's profits will increase. 
B)  The firm's revenue will increase. 
C)  The firm will not sell any output. 
D)  The firm will sell more output than its competitors. 
A)  The firm's profits will increase. 
B)  The firm's revenue will increase. 
C)  The firm will not sell any output. 
D)  The firm will sell more output than its competitors.

Question 13

-Refer to Figure 8-8. The total cost at the profit-maximising output level equals

Accepted Answer

A)  $4800. 
B)  $3300. 
C)  $2500. 
D)  $1800. 
A)  $4800. 
B)  $3300. 
C)  $2500. 
D)  $1800.

Question 14

What is meant by the term 'long-run competitive equilibrium'?

Accepted Answer

Long-run competitive equilibri

Question 15

In the short run, a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

Accepted Answer

A) True 
 B)False

Question 16

-Refer to Figure 8-9. If this is a constant-cost industry, what is the market price in the long-run equilibrium?

Accepted Answer

A)  $5 
B)  $14 
C)  $15 
D)  $20 
A)  $5 
B)  $14 
C)  $15 
D)  $20

Question 17

The demand curve for an individual seller's product in perfect competition is

Accepted Answer

A)  the same as market demand. 
B)  downward sloping. 
C)  vertical. 
D)  horizontal. 
A)  the same as market demand. 
B)  downward sloping. 
C)  vertical. 
D)  horizontal.

Question 18

-Refer to Figure 8-8. The firm's short-run supply curve is its

Accepted Answer

A)  marginal cost curve. 
B)  marginal cost curve from b and above. 
C)  marginal cost curve from c and above. 
D)  marginal cost curve from d and above. 
A)  marginal cost curve. 
B)  marginal cost curve from b and above. 
C)  marginal cost curve from c and above. 
D)  marginal cost curve from d and above.

Question 19

What is a long-run supply curve? What does a long-run supply curve look like on a perfectly competitive market graph?

Accepted Answer

A long run supply curve shows the relati

Question 20

Assume that the tuna fishing industry is perfectly competitive. Which of the following best characterises the industry if, as demand for tuna increases, fishing boats have to go farther into the ocean to harvest tuna?

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

If the market price is $25, the average revenue of selling five units is

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?

Profit is the difference between

Of the following industries, which are perfectly competitive? For those that are not perfectly competitive, explain why. a. Restaurants b. Corn c. University education d. Local radio and television

An increase in a firm's fixed cost will not change the firm's profit-maximising output in the short run.

When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

If total revenue exceeds fixed cost, a firm

A perfectly competitive firm's short-run supply curve is

If a typical firm in a perfectly competitive industry is incurring losses, then

The price a perfectly competitive firm receives for its output

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen?

-Refer to Figure 8-8. The total cost at the profit-maximising output level equals

What is meant by the term 'long-run competitive equilibrium'?

In the short run, a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

-Refer to Figure 8-9. If this is a constant-cost industry, what is the market price in the long-run equilibrium?

The demand curve for an individual seller's product in perfect competition is

-Refer to Figure 8-8. The firm's short-run supply curve is its

What is a long-run supply curve? What does a long-run supply curve look like on a perfectly competitive market graph?

Assume that the tuna fishing industry is perfectly competitive. Which of the following best characterises the industry if, as demand for tuna increases, fishing boats have to go farther into the ocean to harvest tuna?

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 the market price is $25, the average revenue of selling five units is

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?

Profit is the difference between

Of the following industries, which are perfectly competitive? For those that are not perfectly competitive, explain why. a. Restaurants b. Corn c. University education d. Local radio and television

An increase in a firm's fixed cost will not change the firm's profit-maximising output in the short run.

When a perfectly competitive firm finds that its market price is below its minimum average variable cost, it will sell

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

If total revenue exceeds fixed cost, a firm

A perfectly competitive firm's short-run supply curve is

If a typical firm in a perfectly competitive industry is incurring losses, then

The price a perfectly competitive firm receives for its output

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen?

-Refer to Figure 8-8. The total cost at the profit-maximising output level equals

What is meant by the term 'long-run competitive equilibrium'?

In the short run, a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

-Refer to Figure 8-9. If this is a constant-cost industry, what is the market price in the long-run equilibrium?

The demand curve for an individual seller's product in perfect competition is

-Refer to Figure 8-8. The firm's short-run supply curve is its

What is a long-run supply curve? What does a long-run supply curve look like on a perfectly competitive market graph?

Assume that the tuna fishing industry is perfectly competitive. Which of the following best characterises the industry if, as demand for tuna increases, fishing boats have to go farther into the ocean to harvest tuna?

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