Question 1

A perfectly competitive firm has to charge the same price as every other firm in the market. Therefore, the firm

Accepted Answer

A)  faces a perfectly inelastic demand curve. 
B)  is not able to make a profit in the short run. 
C)  is a price taker. 
D)  faces a perfectly elastic supply curve. 
A)  faces a perfectly inelastic demand curve. 
B)  is not able to make a profit in the short run. 
C)  is a price taker. 
D)  faces a perfectly elastic supply curve.

Question 2

-Refer to Table 8-4. If the market price is $45 the firm will produce

Accepted Answer

A)  60 units. 
B)  80 units. 
C)  100 units 
D)  120 units 
A)  60 units. 
B)  80 units. 
C)  100 units 
D)  120 units

Question 3

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

Accepted Answer

A)  lose an amount equal to its fixed cost. 
B)  lose an amount more than fixed cost. 
C)  lose an amount less than fixed cost. 
D)  break even. 
A)  lose an amount equal to its fixed cost. 
B)  lose an amount more than fixed cost. 
C)  lose an amount less than fixed cost. 
D)  break even.

Question 4

In the short run, a firm that is operating at a loss has two options. These options are

Accepted Answer

A)  to reduce output or reduce its variable costs. 
B)  to go out of business or declare bankruptcy. 
C)  to shut down temporarily or continue to produce. 
D)  to adopt new technology or change the size of its physical plant. 
A)  to reduce output or reduce its variable costs. 
B)  to go out of business or declare bankruptcy. 
C)  to shut down temporarily or continue to produce. 
D)  to adopt new technology or change the size of its physical plant.

Question 5

The long-run supply curve for a perfectly competitive, constant-cost industry

Accepted Answer

A)  is upward sloping. 
B)  is horizontal. 
C)  is downward sloping. 
D)  is found by adding up the marginal cost curves for all firms in the industry. 
A)  is upward sloping. 
B)  is horizontal. 
C)  is downward sloping. 
D)  is found by adding up the marginal cost curves for all firms in the industry.

Question 6

-Refer to Figure 8-7. Identify the short-run shut down point for the firm.

Accepted Answer

A)  a 
B)  b 
C)  c 
D)  d 
A)  a 
B)  b 
C)  c 
D)  d

Question 7

-Refer to Figure 8-2. Suppose the firm is currently producing Q2 units. What happens if it expands output to Q3 units?

Accepted Answer

A)  Its profit increases by the size of the vertical distance df. 
B)  It makes less profit. 
C)  It incurs a loss. 
D)  It will be moving toward its profit-maximising output. 
A)  Its profit increases by the size of the vertical distance df. 
B)  It makes less profit. 
C)  It incurs a loss. 
D)  It will be moving toward its profit-maximising output.

Question 8

-Refer to Figure 8-7. At price P4, the firm would produce

Accepted Answer

A)  Q3 units. 
B)  Q4 units. 
C)  Q5 units. 
D)  Q6 units. 
A)  Q3 units. 
B)  Q4 units. 
C)  Q5 units. 
D)  Q6 units.

Question 9

-Refer to Figure 8-2. What is the amount of profit if the firm produces Q2 units?

Accepted Answer

A)  It is equal to the vertical distance c to g. 
B)  It is equal to the vertical distance c to Q2. 
C)  It is equal to the vertical distance g to Q2. 
D)  It is equal to the vertical distance c to g multiplied by Q2 units. 
A)  It is equal to the vertical distance c to g. 
B)  It is equal to the vertical distance c to Q2. 
C)  It is equal to the vertical distance g to Q2. 
D)  It is equal to the vertical distance c to g multiplied by Q2 units.

Question 10

A constant cost, perfectly competitive market is in long-run equilibrium. At present, there are 1000 firms each producing 400 units of output. The price of the good is $60. Now suppose there is a sudden increase in demand for the industry's product which causes the price of the good to rise to $64. In the new long-run equilibrium, how will the average total cost of producing the good compare to what it was before the price of the good rose?

Accepted Answer

A)  The average total cost will be higher than it was before the price increase since the increase in demand will drive up input prices. 
B)  The average total cost will be lower than it was before the price increase because of economies of scale. 
C)  The average total cost will be higher than it was before the price increase because of diseconomies of scale arising from the increased demand. 
D)  The average total cost will be the same as it was before the price increase. 
A)  The average total cost will be higher than it was before the price increase since the increase in demand will drive up input prices. 
B)  The average total cost will be lower than it was before the price increase because of economies of scale. 
C)  The average total cost will be higher than it was before the price increase because of diseconomies of scale arising from the increased demand. 
D)  The average total cost will be the same as it was before the price increase.

Question 11

Ben's Peanut Shoppe suffers a short-run loss. Ben will not choose to shut down if

Accepted Answer

A)  his Shoppe's total revenue exceeds his fixed cost. 
B)  his Shoppe's total revenue exceeds his variable cost. 
C)  his Shoppe's total revenue exceeds his implicit costs. 
D)  his Shoppe's total revenue exceeds his capital costs. 
A)  his Shoppe's total revenue exceeds his fixed cost. 
B)  his Shoppe's total revenue exceeds his variable cost. 
C)  his Shoppe's total revenue exceeds his implicit costs. 
D)  his Shoppe's total revenue exceeds his capital costs.

Question 12

What is productive efficiency?

Accepted Answer

A)  a situation in which resources are allocated to their highest profit use 
B)  a situation in which resources are allocated such that goods can be produced at their lowest possible average cost 
C)  a situation in which resources are allocated such the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it 
D)  a situation in which firms produce as much as possible 
A)  a situation in which resources are allocated to their highest profit use 
B)  a situation in which resources are allocated such that goods can be produced at their lowest possible average cost 
C)  a situation in which resources are allocated such the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it 
D)  a situation in which firms produce as much as possible

Question 13

Fill in the columns in the following table and use the values in the table to determine the profit-maximising level of output.

Accepted Answer

@#IMG-DLM& The profit-maximisi

Question 14

If a perfectly competitive firm's price is above its average total 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 15

All of the following can be used to compute average profit except

Accepted Answer

A)  marginal profit minus marginal cost. 
B)  total profit divided by quantity. 
C)  average revenue minus average total cost 
D)  price minus average total cost. 
A)  marginal profit minus marginal cost. 
B)  total profit divided by quantity. 
C)  average revenue minus average total cost 
D)  price minus average total cost.

Question 16

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 $15. 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 5 teapot

Question 17

If, as a perfectly competitive industry expands, it can supply larger quantities only at a higher long-run equilibrium 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 18

-Refer to Figure 8-14. Which panel best represents the perfectly competitive organic produce market in which some firms are experiencing short-run losses, and consumers are displaying an increased preference for organic produce?

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

A very large number of small sellers who sell identical products imply

Accepted Answer

A)  a multitude of vastly different selling prices. 
B)  a downward-sloping demand for each seller's product. 
C)  the inability of one seller to influence price. 
D)  chaos in the market. 
A)  a multitude of vastly different selling prices. 
B)  a downward-sloping demand for each seller's product. 
C)  the inability of one seller to influence price. 
D)  chaos in the market.

Question 20

Which of the following describes a situation in which a good or service is produced at the lowest possible cost?

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

A perfectly competitive firm has to charge the same price as every other firm in the market. Therefore, the firm

-Refer to Table 8-4. If the market price is $45 the firm will produce

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

In the short run, a firm that is operating at a loss has two options. These options are

The long-run supply curve for a perfectly competitive, constant-cost industry

-Refer to Figure 8-7. Identify the short-run shut down point for the firm.

-Refer to Figure 8-2. Suppose the firm is currently producing Q₂units. What happens if it expands output to Q₃units?

-Refer to Figure 8-7. At price P₄, the firm would produce

-Refer to Figure 8-2. What is the amount of profit if the firm produces Q₂units?

Ben's Peanut Shoppe suffers a short-run loss. Ben will not choose to shut down if

What is productive efficiency?

Fill in the columns in the following table and use the values in the table to determine the profit-maximising level of output.

If a perfectly competitive firm's price is above its average total cost, the firm

All of the following can be used to compute average profit except

If, as a perfectly competitive industry expands, it can supply larger quantities only at a higher long-run equilibrium price, it is

-Refer to Figure 8-14. Which panel best represents the perfectly competitive organic produce market in which some firms are experiencing short-run losses, and consumers are displaying an increased preference for organic produce?

A very large number of small sellers who sell identical products imply

Which of the following describes a situation in which a good or service is produced at the lowest possible cost?

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

A perfectly competitive firm has to charge the same price as every other firm in the market. Therefore, the firm

-Refer to Table 8-4. If the market price is $45 the firm will produce

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

In the short run, a firm that is operating at a loss has two options. These options are

The long-run supply curve for a perfectly competitive, constant-cost industry

-Refer to Figure 8-7. Identify the short-run shut down point for the firm.

-Refer to Figure 8-2. Suppose the firm is currently producing Q2 units. What happens if it expands output to Q3 units?

-Refer to Figure 8-7. At price P4, the firm would produce

-Refer to Figure 8-2. What is the amount of profit if the firm produces Q2 units?

Ben's Peanut Shoppe suffers a short-run loss. Ben will not choose to shut down if

What is productive efficiency?

Fill in the columns in the following table and use the values in the table to determine the profit-maximising level of output.

If a perfectly competitive firm's price is above its average total cost, the firm

All of the following can be used to compute average profit except

If, as a perfectly competitive industry expands, it can supply larger quantities only at a higher long-run equilibrium price, it is

-Refer to Figure 8-14. Which panel best represents the perfectly competitive organic produce market in which some firms are experiencing short-run losses, and consumers are displaying an increased preference for organic produce?

A very large number of small sellers who sell identical products imply

Which of the following describes a situation in which a good or service is produced at the lowest possible cost?

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

-Refer to Figure 8-2. Suppose the firm is currently producing Q₂units. What happens if it expands output to Q₃units?

-Refer to Figure 8-7. At price P₄, the firm would produce

-Refer to Figure 8-2. What is the amount of profit if the firm produces Q₂units?