Question 1

Maximising average profit is equivalent to maximising total profit.

Accepted Answer

A) True 
 B)False

Question 2

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 3

Some markets have many buyers and sellers but fall into the category of monopolistic competition rather than perfect competition.The most common reason for this is

Accepted Answer

A)  there are high barriers to entering these markets. 
B)  firms in these markets sell identical products. 
C)  firms in these markets make high profits. 
D)  firms in these markets do not sell identical products. 
A)  there are high barriers to entering these markets. 
B)  firms in these markets sell identical products. 
C)  firms in these markets make high profits. 
D)  firms in these markets do not sell identical products.

Question 4

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 5

When plasma television sets were first introduced,prices were high and few firms were in the market.Later,economic profits attracted new firms,and the price of plasma televisions fell.This example illustrates

Accepted Answer

A)  a decreasing-cost industry. 
B)  that consumers receive this new technology 'free of charge' in the sense that they only have to pay a price for plasma televisions equal to the lowest production cost. 
C)  an industry with a low minimum efficient scale. 
D)  how fickle consumer demands are. 
A)  a decreasing-cost industry. 
B)  that consumers receive this new technology 'free of charge' in the sense that they only have to pay a price for plasma televisions equal to the lowest production cost. 
C)  an industry with a low minimum efficient scale. 
D)  how fickle consumer demands are.

Question 6

Figure 7.1  
-Refer to Figure 7.1.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 7

A perfectly competitive firm's supply curve is its

Accepted Answer

A)  marginal cost curve. 
B)  marginal cost curve above its minimum average total cost. 
C)  marginal cost curve above its minimum average variable cost. 
D)  marginal cost curve above its minimum average fixed cost. 
A)  marginal cost curve. 
B)  marginal cost curve above its minimum average total cost. 
C)  marginal cost curve above its minimum average variable cost. 
D)  marginal cost curve above its minimum average fixed cost.

Question 8

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 9

Explain two different ways to determine the profit-maximising level of output for a firm in a perfectly competitive market.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

One way is using total revenue and total

Maximising average profit is equivalent to maximising total profit.

Profit is the difference between

Some markets have many buyers and sellers but fall into the category of monopolistic competition rather than perfect competition.The most common reason for this is

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?

When plasma television sets were first introduced,prices were high and few firms were in the market.Later,economic profits attracted new firms,and the price of plasma televisions fell.This example illustrates

Figure 7.1 -Refer to Figure 7.1.If the firm is producing 700 units,

A perfectly competitive firm's supply curve is its

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

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

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Exam 7: Firms in Perfectly Competitive Markets

Maximising average profit is equivalent to maximising total profit.

Profit is the difference between

Some markets have many buyers and sellers but fall into the category of monopolistic competition rather than perfect competition.The most common reason for this is

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?

When plasma television sets were first introduced,prices were high and few firms were in the market.Later,economic profits attracted new firms,and the price of plasma televisions fell.This example illustrates

Figure 7.1 -Refer to Figure 7.1.If the firm is producing 700 units,

A perfectly competitive firm's supply curve is its

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

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