Question 1

Market supply is found by

Accepted Answer

A)  vertically summing the relevant part of each individual producer's marginal cost curve. 
B)  horizontally summing the relevant part of each individual producer's marginal cost curve. 
C)  vertically summing each individual producer's average total cost curve. 
D)  horizontally summing each individual producer's average total cost curve. 
A)  vertically summing the relevant part of each individual producer's marginal cost curve. 
B)  horizontally summing the relevant part of each individual producer's marginal cost curve. 
C)  vertically summing each individual producer's average total cost curve. 
D)  horizontally summing each individual producer's average total cost curve.

Question 2

-Refer to Figure 8-1. If the firm is producing 700 units,

Accepted Answer

A)  it is making a profit. 
B)  it is incurring a loss. 
C)  it should cut back its output to maximise profit. 
D)  it should increase its output to maximise profit. 
A)  it is making a profit. 
B)  it is incurring a loss. 
C)  it should cut back its output to maximise profit. 
D)  it should increase its output to maximise profit.

Question 3

-Refer to Figure 8-7. At price P2, the firm would produce

Accepted Answer

A)  Q2 units. 
B)  Q3 units. 
C)  Q4 units. 
D)  zero units. 
A)  Q2 units. 
B)  Q3 units. 
C)  Q4 units. 
D)  zero units.

Question 4

A perfectly competitive firm in long-run equilibrium produces output at the lowest possible average total cost.

Accepted Answer

A) True 
 B)False

Question 5

In the long run, a firm in a perfectly competitive industry will supply output only if its total revenue covers its

Accepted Answer

A)  explicit plus its implicit costs. 
B)  fixed costs. 
C)  implicit costs. 
D)  explicit costs. 
A)  explicit plus its implicit costs. 
B)  fixed costs. 
C)  implicit costs. 
D)  explicit costs.

Question 6

To maximise profit, a perfectly competitive firm

Accepted Answer

A)  should sell the quantity of output determined by the interaction between industry demand and supply. 
B)  should sell the quantity of output that results in a value for total revenue that is equal to total cost. 
C)  should produce the quantity of output that results in the greatest difference between total revenue and total cost. 
D)  should produce the quantity of output that results in the greatest difference between marginal revenue and marginal cost. 
A)  should sell the quantity of output determined by the interaction between industry demand and supply. 
B)  should sell the quantity of output that results in a value for total revenue that is equal to total cost. 
C)  should produce the quantity of output that results in the greatest difference between total revenue and total cost. 
D)  should produce the quantity of output that results in the greatest difference between marginal revenue and marginal cost.

Question 7

Suppose Veronica sells teapots in the perfectly competitive teapot market. Her output per day and her costs are as follows:
   Suppose the current equilibrium price in the teapot market is $10. To maximise profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss) will she make? Draw a graph to illustrate your answer. Your graph should include Veronica's demand, ATC, AVC, MC, and MR curves, the price she is charging, the quantity she is producing, and the area representing her profit (or loss).

Accepted Answer

Veronica will produce 2 teapot

Question 8

What characteristic of a competitive market has made the 'long run pretty short' in the market for iPhone applications?

Accepted Answer

A)  few firms in the market 
B)  identical products 
C)  ease of entry 
D)  blocked entry 
A)  few firms in the market 
B)  identical products 
C)  ease of entry 
D)  blocked entry

Question 9

For a perfectly competitive firm, at the profit-maximising output, average revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 10

-Refer to Figure 8-5. If the market price is $20, what is the amount of the firm's profit?

Accepted Answer

A)  $5400 
B)  $6750 
C)  $8100 
D)  $16 200 
A)  $5400 
B)  $6750 
C)  $8100 
D)  $16 200

Question 11

Both individual buyers and sellers in perfect competition

Accepted Answer

A)  can influence the market price by their own individual actions. 
B)  can influence the market price by joining with a few of their competitors. 
C)  have to take the market price as a given. 
D)  have the market price dictated to them by government. 
A)  can influence the market price by their own individual actions. 
B)  can influence the market price by joining with a few of their competitors. 
C)  have to take the market price as a given. 
D)  have the market price dictated to them by government.

Question 12

A firm would decide to shut down if its production resulted in

Accepted Answer

A) MR AVC. C) AFC > AVC. D) MR < AVC. A) MR AVC. C) AFC > AVC. D) MR < AVC.

Question 13

Firms in perfectly competitive industries are unable to control the prices of the products they sell and earn a profit in the long run. Which of the following is one reason for this?

Accepted Answer

A)  Owners of perfectly competitive firms realise that their short-run profits are temporary. Therefore, they either sell their businesses or develop other products that will earn short-run profits. 
B)  Firms in perfectly competitive industries can use advertising in the short run to persuade consumers that their products are better than those of other firms. But eventually consumers realise that all of the firms sell virtually identical products. 
C)  Firms from other countries are able to produce similar products at lower costs. 
D)  Firms in these industries sell identical products. 
A)  Owners of perfectly competitive firms realise that their short-run profits are temporary. Therefore, they either sell their businesses or develop other products that will earn short-run profits. 
B)  Firms in perfectly competitive industries can use advertising in the short run to persuade consumers that their products are better than those of other firms. But eventually consumers realise that all of the firms sell virtually identical products. 
C)  Firms from other countries are able to produce similar products at lower costs. 
D)  Firms in these industries sell identical products.

Question 14

-Refer to Figure 8-4. If the market price is $30 and if the firm is producing output, what is the amount of its total variable cost?

Accepted Answer

A)  $7200 
B)  $6480 
C)  $5400 
D)  $3960 
A)  $7200 
B)  $6480 
C)  $5400 
D)  $3960

Question 15

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

Accepted Answer

A) True 
 B)False

Question 16

A perfectly competitive firm's marginal revenue curve is downward sloping.

Accepted Answer

A) True 
 B)False

Question 17

In the long run, perfectly competitive firms earn zero economic profit. Why do firms enter an industry when they know that in the long run they will not earn any profit?

Accepted Answer

Even though in the long run firms earn z

Question 18

-Refer to Figure 8-10. Consider a typical firm in a perfectly competitive industry that makes short-run profits. Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D

Question 19

-Refer to Figure 8-2. The firm breaks even at an output level of

Accepted Answer

A)  Q1 units. 
B)  Q2 units. 
C)  Q3 units. 
D)  Q4 units. 
A)  Q1 units. 
B)  Q2 units. 
C)  Q3 units. 
D)  Q4 units.

Question 20

-Refer to Figure 8-5. If the firm's fixed cost increases by $1000 due to a new environmental regulation, what happens in the diagram above?

Accepted Answer

A)  All the cost curves shift upward. 
B)  Only the average variable cost and average total cost curves shift upward; marginal cost is not affected. 
C)  Only the average total cost curve shifts upward; the marginal cost and average variable cost curves are not affected. 
D)  None of the curves shifts; only the fixed cost curve, which is not shown here, is affected. 
A)  All the cost curves shift upward. 
B)  Only the average variable cost and average total cost curves shift upward; marginal cost is not affected. 
C)  Only the average total cost curve shifts upward; the marginal cost and average variable cost curves are not affected. 
D)  None of the curves shifts; only the fixed cost curve, which is not shown here, is affected.

Market supply is found by

-Refer to Figure 8-1. If the firm is producing 700 units,

-Refer to Figure 8-7. At price P₂, the firm would produce

A perfectly competitive firm in long-run equilibrium produces output at the lowest possible average total cost.

In the long run, a firm in a perfectly competitive industry will supply output only if its total revenue covers its

To maximise profit, a perfectly competitive firm

What characteristic of a competitive market has made the 'long run pretty short' in the market for iPhone applications?

For a perfectly competitive firm, at the profit-maximising output, average revenue equals marginal cost.

-Refer to Figure 8-5. If the market price is $20, what is the amount of the firm's profit?

Both individual buyers and sellers in perfect competition

A firm would decide to shut down if its production resulted in

Firms in perfectly competitive industries are unable to control the prices of the products they sell and earn a profit in the long run. Which of the following is one reason for this?

-Refer to Figure 8-4. If the market price is $30 and if the firm is producing output, what is the amount of its total variable cost?

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

A perfectly competitive firm's marginal revenue curve is downward sloping.

In the long run, perfectly competitive firms earn zero economic profit. Why do firms enter an industry when they know that in the long run they will not earn any profit?

-Refer to Figure 8-10. Consider a typical firm in a perfectly competitive industry that makes short-run profits. Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

-Refer to Figure 8-2. The firm breaks even at an output level of

-Refer to Figure 8-5. If the firm's fixed cost increases by $1000 due to a new environmental regulation, what happens in the diagram above?

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

Market supply is found by

-Refer to Figure 8-1. If the firm is producing 700 units,

-Refer to Figure 8-7. At price P2, the firm would produce

A perfectly competitive firm in long-run equilibrium produces output at the lowest possible average total cost.

In the long run, a firm in a perfectly competitive industry will supply output only if its total revenue covers its

To maximise profit, a perfectly competitive firm

What characteristic of a competitive market has made the 'long run pretty short' in the market for iPhone applications?

For a perfectly competitive firm, at the profit-maximising output, average revenue equals marginal cost.

-Refer to Figure 8-5. If the market price is $20, what is the amount of the firm's profit?

Both individual buyers and sellers in perfect competition

A firm would decide to shut down if its production resulted in

Firms in perfectly competitive industries are unable to control the prices of the products they sell and earn a profit in the long run. Which of the following is one reason for this?

-Refer to Figure 8-4. If the market price is $30 and if the firm is producing output, what is the amount of its total variable cost?

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

A perfectly competitive firm's marginal revenue curve is downward sloping.

In the long run, perfectly competitive firms earn zero economic profit. Why do firms enter an industry when they know that in the long run they will not earn any profit?

-Refer to Figure 8-10. Consider a typical firm in a perfectly competitive industry that makes short-run profits. Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

-Refer to Figure 8-2. The firm breaks even at an output level of

-Refer to Figure 8-5. If the firm's fixed cost increases by $1000 due to a new environmental regulation, what happens in the diagram above?

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

-Refer to Figure 8-7. At price P₂, the firm would produce