Question 1

Which of the following is an assumption in the model of perfect competition?

Accepted Answer

A) The firms in a competitive industry produce a homogeneous product. 
B) The firms in a competitive industry actively compete with each other by advertising. 
C) There are no natural impediments to entry in a competitive industry,but there may be artificial impediments such as licensing. 
D) The firms in a competitive industry have a decreasing short-run marginal cost curve. 
A) The firms in a competitive industry produce a homogeneous product. 
B) The firms in a competitive industry actively compete with each other by advertising. 
C) There are no natural impediments to entry in a competitive industry,but there may be artificial impediments such as licensing. 
D) The firms in a competitive industry have a decreasing short-run marginal cost curve.

Question 2

For a perfectly competitive firm,the demand curve:

Accepted Answer

A) coincides with the marginal revenue curve. 
B) is parallel to the vertical axis. 
C) is upward sloping. 
D) is convex to the origin. 
A) coincides with the marginal revenue curve. 
B) is parallel to the vertical axis. 
C) is upward sloping. 
D) is convex to the origin.

Question 3

Use the following figure to answer the question : Figure 9-1 : shows the total cost and total revenue for a firm when it prices its products at $8 and $10. 
 
-In Figure 9-1,if the market price fell to $8 the firm would:

Accepted Answer

A) decrease production to OJ and would be operating at a loss. 
B) decrease production to OJ and would be earning a normal return. 
C) decrease production to OF where it would break even. 
D) incur losses and shut down. 
A) decrease production to OJ and would be operating at a loss. 
B) decrease production to OJ and would be earning a normal return. 
C) decrease production to OF where it would break even. 
D) incur losses and shut down.

Question 4

The long-run cost function faced by each producer in a perfectly competitive industry is given by: MC(Q)= 20 - 6Q + Q2.The corresponding long-run average cost function is AC(Q)= 20 - 3Q + Q2/3.The market demand curve for the product is D(P)= 1100 - 50P.
a)What is the long-run equilibrium price in this industry? At this price,how much would an individual firm produce?

Accepted Answer

In the long-run all firms earn zero econ

Question 5

In the short-run,if the price falls,the firm will respond by:

Accepted Answer

A) liquidating its assets and shutting down. 
B) producing at the output level where average variable cost is equal to marginal revenue. 
C) reducing output along its marginal cost curve as long as marginal revenue exceeds average variable cost. 
D) increasing its output in order to sell higher quantities. 
A) liquidating its assets and shutting down. 
B) producing at the output level where average variable cost is equal to marginal revenue. 
C) reducing output along its marginal cost curve as long as marginal revenue exceeds average variable cost. 
D) increasing its output in order to sell higher quantities.

Question 6

Use the following figure to answer the question : Figure 9-3 : shows the marginal cost curve,average total cost curve,average variable cost curve,and marginal revenue curve for a firm for different levels of output.  
-Refer to Figure 9-3.If the market price is $10,average revenue _____.

Accepted Answer

A) is greater than $10 
B) is less than $10 
C) equals $10 
D) is equal to $10 - GZ 
A) is greater than $10 
B) is less than $10 
C) equals $10 
D) is equal to $10 - GZ

Question 7

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

Accepted Answer

A) the marginal cost curve. 
B) the marginal cost curve above the minimum of average variable cost. 
C) the marginal cost curve above the minimum of average cost. 
D) the negatively sloped portion of the marginal cost curve. 
A) the marginal cost curve. 
B) the marginal cost curve above the minimum of average variable cost. 
C) the marginal cost curve above the minimum of average cost. 
D) the negatively sloped portion of the marginal cost curve.

Question 8

Consider a perfectly competitive firm facing the following conditions: TR = 150Q and
TC = 500 + 3Q + Q2.What is the firm's profit maximizing output?

Accepted Answer

A) 50 
B) 73.5 
C) 87.5 
D) 102 
A) 50 
B) 73.5 
C) 87.5 
D) 102

Question 9

Which one of the following is not an assumption of the competitive model?

Accepted Answer

A) Homogenous products 
B) Unrestricted mobility of resources 
C) Economies of scale 
D) Perfect information 
A) Homogenous products 
B) Unrestricted mobility of resources 
C) Economies of scale 
D) Perfect information

Question 10

Use the following figure to answer the question : Figure 9-3 : shows the marginal cost curve,average total cost curve,average variable cost curve,and marginal revenue curve for a firm for different levels of output.  
-Refer to Figure 9-3.At the profit-maximizing level of output:

Accepted Answer

A) the firm is earning economic profit. 
B) profits per unit are the highest. 
C) profit equals ZC. 
D) costs exceed revenue. 
A) the firm is earning economic profit. 
B) profits per unit are the highest. 
C) profit equals ZC. 
D) costs exceed revenue.

Question 11

Zero economic profit occurs when:

Accepted Answer

A) price equals minimum average variable cost. 
B) a firm has existed for long enough to make normal profit. 
C) price equals long-run average cost. 
D) a firm operates at the minimum of its long-run marginal cost curve. 
A) price equals minimum average variable cost. 
B) a firm has existed for long enough to make normal profit. 
C) price equals long-run average cost. 
D) a firm operates at the minimum of its long-run marginal cost curve.

Question 12

Use the following figure to answer the question : Figure 9-4 : shows the marginal cost curve,the average cost curve,the average variable cost curve,and the demand curve for a firm over different levels of output.The market price is $P.  
-Refer to Figure 9-4.If the firm chooses to shut down when the market price is $P,what is the loss it would incur?

Accepted Answer

A) KTVP 
B) GTVS 
C) GKPS 
D) TBOV 
A) KTVP 
B) GTVS 
C) GKPS 
D) TBOV

Question 13

Abe's Taxi Company operates in a perfectly competitive market.Gasoline is a variable input in the taxi services industry.As the price of gasoline decreases,the short-run marginal cost curve for Abe's Taxi Company:

Accepted Answer

A) shifts up and to the left. 
B) shifts down and to the right. 
C) remains unchanged. 
D) becomes flatter. 
A) shifts up and to the left. 
B) shifts down and to the right. 
C) remains unchanged. 
D) becomes flatter.

Question 14

Consider a perfectly competitive firm facing the following conditions: TR = 150Q and
TC = 500 + 3Q + Q2.What is the firm's marginal cost when Q = 50?

Accepted Answer

A) 50 
B) 78 
C) 103 
D) 150 
A) 50 
B) 78 
C) 103 
D) 150

Question 15

The short-run supply curve for a perfectly competitive industry:

Accepted Answer

A) is less elastic than the long-run industry supply curve. 
B) is derived by vertically summing the individual firms' marginal cost curves. 
C) reflects zero economic profits at all points on the curve. 
D) is typically upward sloping. 
A) is less elastic than the long-run industry supply curve. 
B) is derived by vertically summing the individual firms' marginal cost curves. 
C) reflects zero economic profits at all points on the curve. 
D) is typically upward sloping.

Question 16

A significant decrease in the price of a variable input causes the:

Accepted Answer

A) marginal,average,and total cost curves to shift downward. 
B) average total cost curve to shift downward,causing a fall in output. 
C) average variable cost curve to shift downward while leaving the output level unchanged. 
D) marginal cost curve to shift downward. 
A) marginal,average,and total cost curves to shift downward. 
B) average total cost curve to shift downward,causing a fall in output. 
C) average variable cost curve to shift downward while leaving the output level unchanged. 
D) marginal cost curve to shift downward.

Question 17

Use the following figure to answer the question : Figure 9-4 : shows the marginal cost curve,the average cost curve,the average variable cost curve,and the demand curve for a firm over different levels of output.The market price is $P.  
-Refer to Figure 9-4.At a price of $P,the firm will produce the output level _____.

Accepted Answer

A) OA where marginal cost just covers AVC 
B) OB where marginal cost equals the price 
C) OC where marginal cost equals ATC 
D) OD where the price just covers AVC 
A) OA where marginal cost just covers AVC 
B) OB where marginal cost equals the price 
C) OC where marginal cost equals ATC 
D) OD where the price just covers AVC

Question 18

Assume that coffee shops operate in a perfectly competitive industry.A single coffee shop,Brick & Mortar,decides to charge an entrance fee in addition to charges for its coffee and pastry.Which of the following is most likely to happen?

Accepted Answer

A) Brick & Mortar can continue to charge the entrance fee in the long-run since there is free entry into the coffee shop industry. 
B) As long as the coffee shop industry is perfectly competitive,customers will be willing to pay the extra charges. 
C) Brick & Mortar will not be able to sustain the extra charges as customers will move to coffee shops that are cheaper. 
D) Brick & Mortar can charge their customers extra because there are a large number of buyers and sellers in the coffee shop industry. 
A) Brick & Mortar can continue to charge the entrance fee in the long-run since there is free entry into the coffee shop industry. 
B) As long as the coffee shop industry is perfectly competitive,customers will be willing to pay the extra charges. 
C) Brick & Mortar will not be able to sustain the extra charges as customers will move to coffee shops that are cheaper. 
D) Brick & Mortar can charge their customers extra because there are a large number of buyers and sellers in the coffee shop industry.

Question 19

At the profit maximizing level of output in a competitive industry,the firm is:

Accepted Answer

A) making economic profit. 
B) losing money on each unit sold. 
C) making zero accounting profit. 
D) making abnormal profits 
A) making economic profit. 
B) losing money on each unit sold. 
C) making zero accounting profit. 
D) making abnormal profits

Question 20

As long as there is free entry into a market:

Accepted Answer

A) firms in that market can sustain prices above average total cost. 
B) firms in that market can maintain market power. 
C) economic profits are not sustainable. 
D) accounting profits will be zero. 
A) firms in that market can sustain prices above average total cost. 
B) firms in that market can maintain market power. 
C) economic profits are not sustainable. 
D) accounting profits will be zero.

Which of the following is an assumption in the model of perfect competition?

For a perfectly competitive firm,the demand curve:

Use the following figure to answer the question : Figure 9-1 : shows the total cost and total revenue for a firm when it prices its products at $8 and $10. -In Figure 9-1,if the market price fell to $8 the firm would:

In the short-run,if the price falls,the firm will respond by:

Use the following figure to answer the question : Figure 9-3 : shows the marginal cost curve,average total cost curve,average variable cost curve,and marginal revenue curve for a firm for different levels of output. -Refer to Figure 9-3.If the market price is $10,average revenue _____.

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

Consider a perfectly competitive firm facing the following conditions: TR = 150Q and TC = 500 + 3Q + Q².What is the firm's profit maximizing output?

Which one of the following is not an assumption of the competitive model?

Use the following figure to answer the question : Figure 9-3 : shows the marginal cost curve,average total cost curve,average variable cost curve,and marginal revenue curve for a firm for different levels of output. -Refer to Figure 9-3.At the profit-maximizing level of output:

Zero economic profit occurs when:

Abe's Taxi Company operates in a perfectly competitive market.Gasoline is a variable input in the taxi services industry.As the price of gasoline decreases,the short-run marginal cost curve for Abe's Taxi Company:

Consider a perfectly competitive firm facing the following conditions: TR = 150Q and TC = 500 + 3Q + Q².What is the firm's marginal cost when Q = 50?

The short-run supply curve for a perfectly competitive industry:

A significant decrease in the price of a variable input causes the:

Assume that coffee shops operate in a perfectly competitive industry.A single coffee shop,Brick & Mortar,decides to charge an entrance fee in addition to charges for its coffee and pastry.Which of the following is most likely to happen?

At the profit maximizing level of output in a competitive industry,the firm is:

As long as there is free entry into a market:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 9: Profit Maximization in Perfectly Competitive Markets

Which of the following is an assumption in the model of perfect competition?

For a perfectly competitive firm,the demand curve:

Use the following figure to answer the question : Figure 9-1 : shows the total cost and total revenue for a firm when it prices its products at $8 and $10. -In Figure 9-1,if the market price fell to $8 the firm would:

In the short-run,if the price falls,the firm will respond by:

Use the following figure to answer the question : Figure 9-3 : shows the marginal cost curve,average total cost curve,average variable cost curve,and marginal revenue curve for a firm for different levels of output. -Refer to Figure 9-3.If the market price is $10,average revenue _____.

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

Consider a perfectly competitive firm facing the following conditions: TR = 150Q and TC = 500 + 3Q + Q2.What is the firm's profit maximizing output?

Which one of the following is not an assumption of the competitive model?

Use the following figure to answer the question : Figure 9-3 : shows the marginal cost curve,average total cost curve,average variable cost curve,and marginal revenue curve for a firm for different levels of output. -Refer to Figure 9-3.At the profit-maximizing level of output:

Zero economic profit occurs when:

Abe's Taxi Company operates in a perfectly competitive market.Gasoline is a variable input in the taxi services industry.As the price of gasoline decreases,the short-run marginal cost curve for Abe's Taxi Company:

Consider a perfectly competitive firm facing the following conditions: TR = 150Q and TC = 500 + 3Q + Q2.What is the firm's marginal cost when Q = 50?

The short-run supply curve for a perfectly competitive industry:

A significant decrease in the price of a variable input causes the:

Assume that coffee shops operate in a perfectly competitive industry.A single coffee shop,Brick & Mortar,decides to charge an entrance fee in addition to charges for its coffee and pastry.Which of the following is most likely to happen?

At the profit maximizing level of output in a competitive industry,the firm is:

As long as there is free entry into a market:

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Using the Competitive Model

Monopoly

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Consider a perfectly competitive firm facing the following conditions: TR = 150Q and TC = 500 + 3Q + Q².What is the firm's profit maximizing output?

Consider a perfectly competitive firm facing the following conditions: TR = 150Q and TC = 500 + 3Q + Q².What is the firm's marginal cost when Q = 50?