Question 1

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

Accepted Answer

@#IMG-DLM& The profit-maximizi

Question 2

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit,then

Accepted Answer

A) marginal revenue is less than price. 
B) average total cost is at a minimum. 
C) total revenue equals total cost. 
D) price exceeds average total cost. 
A) marginal revenue is less than price. 
B) average total cost is at a minimum. 
C) total revenue equals total cost. 
D) price exceeds average total cost.

Question 3

Figure 12-2   Figure 12-2 shows the demand,marginal cost (MC)and average total cost (ATC)curves for Jason's House of Apples.
-Refer to Figure 12-2.Jason is currently producing 20 thousand pounds of apples.To maximize his profit Jason should

Accepted Answer

A) keep production at 20 thousand pounds. 
B) increase production to the output rate indicated by point d. 
C) increase production to the output rate indicated by point e. 
D) decrease production to the output rate indicated by point a. 
A) keep production at 20 thousand pounds. 
B) increase production to the output rate indicated by point d. 
C) increase production to the output rate indicated by point e. 
D) decrease production to the output rate indicated by point a.

Question 4

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 5

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

Accepted Answer

A) MR AVC. C) MR > AVC. D) AFC < AVC. A) MR AVC. C) MR > AVC. D) AFC < AVC.

Question 6

Figure 12-6  
-Refer to Figure 12-6.Which panel best represents the perfectly competitive organic produce market in which firms are breaking even,economically,organic produce is considered a normal good,and the average income level of consumers is rising?

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 7

Figure 12-3   Figure 12-3 illustrates the cost curves of a perfectly competitive firm.
-Refer to Figure 12-3.If the market price is P3 the firm

Accepted Answer

A) will break even. 
B) will make a profit. 
C) will earn enough revenue to cover its variable costs but not its fixed costs. 
D) will produce a quantity of Q1. 
A) will break even. 
B) will make a profit. 
C) will earn enough revenue to cover its variable costs but not its fixed costs. 
D) will produce a quantity of Q1.

Question 8

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

Accepted Answer

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

Question 9

Figure 12-8  
-Refer to Figure 12-8.The figure above shows the cost curves of a perfectly competitive firm in the coffee market.Use the graph in Figure 12-8 to answer the following questions.Assume the market price is $3 per pound.
a.What is the lowest price at which the coffee grower will supply output in the short run?
b.In the diagram draw the firm's demand curve (label this "MR" for marginal revenue).
c.What is the firm's profit-maximizing output?
d.Is the firm earning a profit or a loss? Identify the area in the graph that represents the firm's profit or loss.
e.Explain how entry or exit will occur in the market to ensure that firms will break even in the long run.

Accepted Answer

a.$1.50 per pound.This represents the lo

Question 10

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 11

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 12

Perfectly competitive industries tend to produce low-priced,low-technology products.

Accepted Answer

A) True 
 B)False

Question 13

In the short run,a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

Accepted Answer

A) True 
 B)False

Question 14

The price a perfectly competitive firm receives for its output

Accepted Answer

A) is determined by the interaction of the firm and all of the consumers who buy from the firm. 
B) is determined by the interaction of all sellers and all buyers in the firm's market. 
C) will not change in response to changes in market demand and supply because the firm is a price taker. 
D) will be lowered by the firm in order to sell more output. 
A) is determined by the interaction of the firm and all of the consumers who buy from the firm. 
B) is determined by the interaction of all sellers and all buyers in the firm's market. 
C) will not change in response to changes in market demand and supply because the firm is a price taker. 
D) will be lowered by the firm in order to sell more output.

Question 15

Figure 12-5  
-Refer to Figure 12-5.Total revenue at the profit-maximizing level of output is

Accepted Answer

A) $1,200. 
B) $2,500. 
C) $4,800. 
D) $6,000. 
A) $1,200. 
B) $2,500. 
C) $4,800. 
D) $6,000.

Question 16

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 17

Letters are used to represent the terms used to answer this question: price (P),quantity of output (Q),total cost (TC)and average total cost (ATC).Which of the following equations is equal to a firm's average profit?

Accepted Answer

A) P - ATC 
B) (P - AT
C) × Q 
C) (P × Q)- TC 
D) P - TC 
A) P - ATC 
B) (P - AT
C) × Q 
C) (P × Q)- TC 
D) P - TC

Question 18

The short-run supply curve for a perfectly competitive firm is that part of the firm's marginal cost curve that lies above the minimum point of its average variable cost curve.

Accepted Answer

A) True 
 B)False

Question 19

What is the relationship among the following variables in for a perfectly competitive firm: the market price,average revenue and marginal revenue?

Accepted Answer

A) Average revenue is equal to the market price; average revenue is greater than marginal revenue. 
B) The market price is equal to both average revenue and marginal revenue. 
C) Average revenue is equal to marginal revenue; average revenue is greater than the market price. 
D) As a firm lowers the market price to sell more output,marginal revenue and average revenue will be less than the market price. 
A) Average revenue is equal to the market price; average revenue is greater than marginal revenue. 
B) The market price is equal to both average revenue and marginal revenue. 
C) Average revenue is equal to marginal revenue; average revenue is greater than the market price. 
D) As a firm lowers the market price to sell more output,marginal revenue and average revenue will be less than the market price.

Question 20

How are sunk costs and fixed costs related?

Accepted Answer

A) They are not related in any way. 
B) Sunk costs cannot be recovered and fixed costs can be avoided by shutting down. 
C) In the short run they are equal to each other. 
D) In the long run they are equal to each other. 
A) They are not related in any way. 
B) Sunk costs cannot be recovered and fixed costs can be avoided by shutting down. 
C) In the short run they are equal to each other. 
D) In the long run they are equal to each other.

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

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit,then

Figure 12-2 Figure 12-2 shows the demand,marginal cost (MC)and average total cost (ATC)curves for Jason's House of Apples. -Refer to Figure 12-2.Jason is currently producing 20 thousand pounds of apples.To maximize his profit Jason should

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

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

Figure 12-6 -Refer to Figure 12-6.Which panel best represents the perfectly competitive organic produce market in which firms are breaking even,economically,organic produce is considered a normal good,and the average income level of consumers is rising?

Figure 12-3 Figure 12-3 illustrates the cost curves of a perfectly competitive firm. -Refer to Figure 12-3.If the market price is P₃ the firm

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

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

The marginal revenue curve for a perfectly competitive firm

Perfectly competitive industries tend to produce low-priced,low-technology products.

In the short run,a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

The price a perfectly competitive firm receives for its output

Figure 12-5 -Refer to Figure 12-5.Total revenue at the profit-maximizing level of output is

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

Letters are used to represent the terms used to answer this question: price (P),quantity of output (Q),total cost (TC)and average total cost (ATC).Which of the following equations is equal to a firm's average profit?

The short-run supply curve for a perfectly competitive firm is that part of the firm's marginal cost curve that lies above the minimum point of its average variable cost curve.

What is the relationship among the following variables in for a perfectly competitive firm: the market price,average revenue and marginal revenue?

How are sunk costs and fixed costs related?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Filters

Exam 12: Firms in Perfectly Competitive Markets

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

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit,then

Figure 12-2 Figure 12-2 shows the demand,marginal cost (MC)and average total cost (ATC)curves for Jason's House of Apples. -Refer to Figure 12-2.Jason is currently producing 20 thousand pounds of apples.To maximize his profit Jason should

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

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

Figure 12-6 -Refer to Figure 12-6.Which panel best represents the perfectly competitive organic produce market in which firms are breaking even,economically,organic produce is considered a normal good,and the average income level of consumers is rising?

Figure 12-3 Figure 12-3 illustrates the cost curves of a perfectly competitive firm. -Refer to Figure 12-3.If the market price is P3 the firm

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

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

The marginal revenue curve for a perfectly competitive firm

Perfectly competitive industries tend to produce low-priced,low-technology products.

In the short run,a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

The price a perfectly competitive firm receives for its output

Figure 12-5 -Refer to Figure 12-5.Total revenue at the profit-maximizing level of output is

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

Letters are used to represent the terms used to answer this question: price (P),quantity of output (Q),total cost (TC)and average total cost (ATC).Which of the following equations is equal to a firm's average profit?

The short-run supply curve for a perfectly competitive firm is that part of the firm's marginal cost curve that lies above the minimum point of its average variable cost curve.

What is the relationship among the following variables in for a perfectly competitive firm: the market price,average revenue and marginal revenue?

How are sunk costs and fixed costs related?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Filters

Figure 12-3 Figure 12-3 illustrates the cost curves of a perfectly competitive firm. -Refer to Figure 12-3.If the market price is P₃ the firm