Question 1

If the market price is $40,what is the average revenue of selling five units?

Accepted Answer

A)  $8 
B)  $20 
C)  $40 
D)  $200 
A)  $8 
B)  $20 
C)  $40 
D)  $200

Question 2

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 3

Figure 7.3  
-Refer to Figure 7.3.Suppose the prevailing price is P1 and the firm is currently producing its loss-minimising quantity.Identify the area that represents the loss.

Accepted Answer

A)  P2 deP1 
B)  P3cbP1 
C)  P3caP0 
D)  0P1 bQ1 
A)  P2 deP1 
B)  P3cbP1 
C)  P3caP0 
D)  0P1 bQ1

Question 4

Figure 7.6  
-Refer to Figure 7.6.Suppose the firm produces 4000 units.The shaded area labelled B represents

Accepted Answer

A)  the firm's economic loss. 
B)  total variable cost. 
C)  average variable cost. 
D)  total fixed cost. 
A)  the firm's economic loss. 
B)  total variable cost. 
C)  average variable cost. 
D)  total fixed cost.

Question 5

What is the difference between 'shutting down temporarily' and 'exiting the industry'?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The difference between the two has to do

Question 6

Figure 7.5   Figure 7.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 7.5.The amount of the firm's fixed cost of production is -.

Accepted Answer

A)  $5400 
B)  $6750 
C)  $8100 
D)  It cannot be determined. 
A)  $5400 
B)  $6750 
C)  $8100 
D)  It cannot be determined.

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

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 9

Assume the market for organically grown produce is perfectly competitive.All else equal,as farmers find it less profitable to produce and sell organic produce in this market,

Accepted Answer

A)  the demand curve will shift to the left and the equilibrium price will decrease. 
B)  the supply curve will shift to the left and the equilibrium price will increase. 
C)  the supply curve will shift to the right, the demand curve will shift to the left, and the equilibrium price will decrease. 
D)  the supply curve will shift to the left, the demand curve will shift to the left, and the equilibrium price will increase. 
A)  the demand curve will shift to the left and the equilibrium price will decrease. 
B)  the supply curve will shift to the left and the equilibrium price will increase. 
C)  the supply curve will shift to the right, the demand curve will shift to the left, and the equilibrium price will decrease. 
D)  the supply curve will shift to the left, the demand curve will shift to the left, and the equilibrium price will increase.

Question 10

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 11

Figure 7.14  
-Refer to Figure 7.14.Which panel best represents the perfectly competitive organic produce market in which some firms are earning short-run economic profits,and the Surgeon General announces that switching from nonorganic produce to organic produce will add 5 years to the average life span of consumers?

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 12

Figure 7.7   Figure 7.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm.
-Refer to Figure 7.7.At price P3,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 13

Figure 7.5   Figure 7.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 7.5.If the market price is $20,the firm's profit-maximising output is -

Accepted Answer

A)  750 units 
B)  1100 units 
C)  1350 units 
D)  1800 units 
A)  750 units 
B)  1100 units 
C)  1350 units 
D)  1800 units

Question 14

If the market price is $40 in a perfectly competitive market,what is the marginal revenue from selling the fifth unit?

Accepted Answer

A)  $8 
B)  $20 
C)  $40 
D)  $200 
A)  $8 
B)  $20 
C)  $40 
D)  $200

Question 15

When firms exit a perfectly competitive industry,the market supply curve shifts to the left.

Accepted Answer

A) True 
 B)False

Question 16

Table 7.1
 $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Total Cost } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Variable Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & \$ 1000 & \$ 0 \
\hline 100 & 1360 & 360 \
\hline 200 & 1560 & 560 \
\hline 300 & 1960 & 960 \
\hline 400 & 2760 & 1760 \
\hline 500 & 4000 & 3000 \
\hline 600 & 5800 & 4800 \
\hline
\end{array}$$ Table 7.1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
-Refer to Table 7.1.If the market price of each camera case is $8,the profit-maximising quantity is

Accepted Answer

A)  300 units. 
B)  400 units. 
C)  500 units. 
D)  600 units. 
A)  300 units. 
B)  400 units. 
C)  500 units. 
D)  600 units.

Question 17

The statement that does not hold true for a perfectly competitive firm in long-run equilibrium is:

Accepted Answer

A)  Its economic profit will be zero. 
B)  It will minimise average total cost. 
C)  It will charge a price equal to marginal cost. 
D)  Marginal cost will be minimised. 
A)  Its economic profit will be zero. 
B)  It will minimise average total cost. 
C)  It will charge a price equal to marginal cost. 
D)  Marginal cost will be minimised.

Question 18

Figure 7.2  
-Refer to Figure 7.2.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 19

If,for a perfectly competitive firm,price exceeds the marginal cost of production,the firm should

Accepted Answer

A)  increase its output. 
B)  reduce its output. 
C)  keep output constant and enjoy the above normal profit. 
D)  lower the price. 
A)  increase its output. 
B)  reduce its output. 
C)  keep output constant and enjoy the above normal profit. 
D)  lower the price.

Question 20

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.

If the market price is $40,what is the average revenue of selling five units?

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

Figure 7.3 -Refer to Figure 7.3.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimising quantity.Identify the area that represents the loss.

Figure 7.6 -Refer to Figure 7.6.Suppose the firm produces 4000 units.The shaded area labelled B represents

What is the difference between 'shutting down temporarily' and 'exiting the industry'? __________________________________________________________________________________________________________________________________________________________________________________________

Figure 7.5 Figure 7.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 7.5.The amount of the firm's fixed cost of production is -.

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

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

Assume the market for organically grown produce is perfectly competitive.All else equal,as farmers find it less profitable to produce and sell organic produce in this market,

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

Figure 7.7 Figure 7.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 7.7.At price P₃,the firm would

Figure 7.5 Figure 7.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 7.5.If the market price is $20,the firm's profit-maximising output is -

If the market price is $40 in a perfectly competitive market,what is the marginal revenue from selling the fifth unit?

When firms exit a perfectly competitive industry,the market supply curve shifts to the left.

The statement that does not hold true for a perfectly competitive firm in long-run equilibrium is:

Figure 7.2 -Refer to Figure 7.2.Suppose the firm is currently producing Q₂units.What happens if it expands output to Q₃units?

If,for a perfectly competitive firm,price exceeds the marginal cost of production,the firm should

Market supply is found by

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Exam 7: Firms in Perfectly Competitive Markets

If the market price is $40,what is the average revenue of selling five units?

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

Figure 7.3 -Refer to Figure 7.3.Suppose the prevailing price is P1 and the firm is currently producing its loss-minimising quantity.Identify the area that represents the loss.

Figure 7.6 -Refer to Figure 7.6.Suppose the firm produces 4000 units.The shaded area labelled B represents

What is the difference between 'shutting down temporarily' and 'exiting the industry'? __________________________________________________________________________________________________________________________________________________________________________________________

Figure 7.5 Figure 7.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 7.5.The amount of the firm's fixed cost of production is -.

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

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

Assume the market for organically grown produce is perfectly competitive.All else equal,as farmers find it less profitable to produce and sell organic produce in this market,

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

Figure 7.7 Figure 7.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 7.7.At price P3,the firm would

Figure 7.5 Figure 7.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 7.5.If the market price is $20,the firm's profit-maximising output is -

If the market price is $40 in a perfectly competitive market,what is the marginal revenue from selling the fifth unit?

When firms exit a perfectly competitive industry,the market supply curve shifts to the left.

The statement that does not hold true for a perfectly competitive firm in long-run equilibrium is:

Figure 7.2 -Refer to Figure 7.2.Suppose the firm is currently producing Q2 units.What happens if it expands output to Q3 units?

If,for a perfectly competitive firm,price exceeds the marginal cost of production,the firm should

Market supply is found by

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Monopoly Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Figure 7.3 -Refer to Figure 7.3.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimising quantity.Identify the area that represents the loss.

Figure 7.7 Figure 7.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 7.7.At price P₃,the firm would

Figure 7.2 -Refer to Figure 7.2.Suppose the firm is currently producing Q₂units.What happens if it expands output to Q₃units?