Question 1

Which of the following is not a characteristic of a perfect competition?

Accepted Answer

A)  Heavy advertising by individual sellers 
B)  Homogeneous products 
C)  Sellers are price takers 
D)  A horizontal demand curve for individual sellers 
A)  Heavy advertising by individual sellers 
B)  Homogeneous products 
C)  Sellers are price takers 
D)  A horizontal demand curve for individual sellers

Question 2

The minimum point on the average variable cost curve is called the loss-minimising point.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements is true?

Accepted Answer

A)  A long-run competitive equilibrium can only be achieved in constant-cost industries. 
B)  When an industry achieves a long-run competitive equilibrium, industry output will not change in the future. 
C)  A long-run competitive equilibrium outcome is not economically efficient. 
D)  When an industry reaches a long-run competitive equilibrium, the typical firm in the industry breaks even. 
A)  A long-run competitive equilibrium can only be achieved in constant-cost industries. 
B)  When an industry achieves a long-run competitive equilibrium, industry output will not change in the future. 
C)  A long-run competitive equilibrium outcome is not economically efficient. 
D)  When an industry reaches a long-run competitive equilibrium, the typical firm in the industry breaks even.

Question 4

In long-run perfectly competitive equilibrium,which of the following is false?

Accepted Answer

A)  There is efficient, low-cost production at the minimum efficient scale. 
B)  Economic surplus is maximised. 
C)  Firms earn economic profit. 
D)  Economies of scale are exhausted. 
A)  There is efficient, low-cost production at the minimum efficient scale. 
B)  Economic surplus is maximised. 
C)  Firms earn economic profit. 
D)  Economies of scale are exhausted.

Question 5

The supply curve of a perfectly competitive firm in the short run is

Accepted Answer

A)  the firm's average variable cost curve. 
B)  the portion of the firm's marginal cost curve below the minimum point of the average variable cost curve. 
C)  the portion of the firm's marginal cost curve above the minimum point of the average variable cost curve. 
D)  the portion of the firm's marginal cost curve above the minimum point of the average total cost curve. 
A)  the firm's average variable cost curve. 
B)  the portion of the firm's marginal cost curve below the minimum point of the average variable cost curve. 
C)  the portion of the firm's marginal cost curve above the minimum point of the average variable cost curve. 
D)  the portion of the firm's marginal cost curve above the minimum point of the average total cost curve.

Question 6

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable 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 7

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

Question 8

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 and the firm maximises profit,what is the amount of the firm's profit or loss?

Accepted Answer

A)  $0 (it breaks even) 
B)  Loss of $1000 
C)  Profit of $440 
D)  Loss of $440 
A)  $0 (it breaks even) 
B)  Loss of $1000 
C)  Profit of $440 
D)  Loss of $440

Question 9

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Accepted Answer

A) True 
 B)False

Question 10

Figure 7.4   Figure 7.4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market.
-Refer to Figure 7.4.If the market price is $30,what is the firm's profit-maximising output level?

Accepted Answer

A)  0 
B)  130 
C)  180 
D)  240 
A)  0 
B)  130 
C)  180 
D)  240

Question 11

Which of the following is a characteristic of a firm in a perfectly competitive market?

Accepted Answer

A)  The firm cannot make a profit in the short run because it is too small a part of the total market. 
B)  The firm can make a profit in the long run but not in the short run. 
C)  The firm can sell as much as it wants without having to lower its price. 
D)  The firm must lower its price in order to increase quantity demanded. 
A)  The firm cannot make a profit in the short run because it is too small a part of the total market. 
B)  The firm can make a profit in the long run but not in the short run. 
C)  The firm can sell as much as it wants without having to lower its price. 
D)  The firm must lower its price in order to increase quantity demanded.

Question 12

The market demand curve in a perfectly competitive market is downward sloping.

Accepted Answer

A) True 
 B)False

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.The figure shows the cost structure of a firm in a perfectly competitive market.If the firm's fixed cost increases by $1000 due to a new environmental regulation,what happens to its profit-maximising output level?

Accepted Answer

A)  It increases. 
B)  It decreases. 
C)  It remains the same. 
D)  It could increase, decrease, or remain constant, depending on whether the firm is able to cut costs somewhere else. 
A)  It increases. 
B)  It decreases. 
C)  It remains the same. 
D)  It could increase, decrease, or remain constant, depending on whether the firm is able to cut costs somewhere else.

Question 14

Assume that the LCD and plasma television sets industry is perfectly competitive.Suppose a producer develops a successful innovation that enables it to lower its cost of production.What happens in the short run and in the long run?

Accepted Answer

A)  Initially, the firm will be able to increase its profit significantly, but in the long run its profits will still be greater than zero but lower than its short run profits because other firms would also innovate. 
B)  The firm will probably incur losses temporarily because of the high cost of the innovation, but in the long run it will start earning positive profits. 
C)  This firm will be able to earn above normal profits indefinitely if it obtains a patent for its innovation. 
D)  The firm will be able to increase its profits temporarily, but in the long run its profits will be eliminated as other firms copy the innovation. 
A)  Initially, the firm will be able to increase its profit significantly, but in the long run its profits will still be greater than zero but lower than its short run profits because other firms would also innovate. 
B)  The firm will probably incur losses temporarily because of the high cost of the innovation, but in the long run it will start earning positive profits. 
C)  This firm will be able to earn above normal profits indefinitely if it obtains a patent for its innovation. 
D)  The firm will be able to increase its profits temporarily, but in the long run its profits will be eliminated as other firms copy the innovation.

Question 15

What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

Productive efficiency refers to a the si

Question 16

The marginal revenue curve for a perfectly competitive firm

Accepted Answer

A)  is downward sloping. 
B)  is the same as its demand curve. 
C)  is perfectly inelastic. 
D)  is the same as its marginal cost curve. 
A)  is downward sloping. 
B)  is the same as its demand curve. 
C)  is perfectly inelastic. 
D)  is the same as its marginal cost curve.

Question 17

If price is equal to average variable cost,a perfectly competitive firm breaks even.

Accepted Answer

A) True 
 B)False

Question 18

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

\[\begin{array} { | c | c | r | r | r |

Question 19

Which of the following can not be used to compute average profit?

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 20

What is always true at the quantity where a firm's average total cost equals average revenue?

Accepted Answer

A)  The firm's revenue is maximised. 
B)  The firm's profit is maximised. 
C)  The firm breaks even. 
D)  Marginal cost equals marginal revenue. 
A)  The firm's revenue is maximised. 
B)  The firm's profit is maximised. 
C)  The firm breaks even. 
D)  Marginal cost equals marginal revenue.

Which of the following is not a characteristic of a perfect competition?

The minimum point on the average variable cost curve is called the loss-minimising point.

Which of the following statements is true?

In long-run perfectly competitive equilibrium,which of the following is false?

The supply curve of a perfectly competitive firm in the short run is

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost,the firm

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?

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Figure 7.4 Figure 7.4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market. -Refer to Figure 7.4.If the market price is $30,what is the firm's profit-maximising output level?

Which of the following is a characteristic of a firm in a perfectly competitive market?

The market demand curve in a perfectly competitive market is downward sloping.

Assume that the LCD and plasma television sets industry is perfectly competitive.Suppose a producer develops a successful innovation that enables it to lower its cost of production.What happens in the short run and in the long run?

What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency? __________________________________________________________________________________________________________________________________________________________________________________________

The marginal revenue curve for a perfectly competitive firm

If price is equal to average variable cost,a perfectly competitive firm breaks even.

Which of the following can not be used to compute average profit?

What is always true at the quantity where a firm's average total cost equals average revenue?

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

Which of the following is not a characteristic of a perfect competition?

The minimum point on the average variable cost curve is called the loss-minimising point.

Which of the following statements is true?

In long-run perfectly competitive equilibrium,which of the following is false?

The supply curve of a perfectly competitive firm in the short run is

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost,the firm

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?

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Figure 7.4 Figure 7.4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market. -Refer to Figure 7.4.If the market price is $30,what is the firm's profit-maximising output level?

Which of the following is a characteristic of a firm in a perfectly competitive market?

The market demand curve in a perfectly competitive market is downward sloping.

Assume that the LCD and plasma television sets industry is perfectly competitive.Suppose a producer develops a successful innovation that enables it to lower its cost of production.What happens in the short run and in the long run?

What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency? __________________________________________________________________________________________________________________________________________________________________________________________

The marginal revenue curve for a perfectly competitive firm

If price is equal to average variable cost,a perfectly competitive firm breaks even.

Which of the following can not be used to compute average profit?

What is always true at the quantity where a firm's average total cost equals average revenue?

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