Question 1

At the profit-maximizing level of output for a perfectly competitive firm,price equals marginal cost.Which of the following is also true?

Accepted Answer

A) The difference between total revenue and total cost is the greatest. 
B) Total revenue equals total cost. 
C) Average revenue equals average total cost. 
D) Marginal profit equals marginal cost. 
A) The difference between total revenue and total cost is the greatest. 
B) Total revenue equals total cost. 
C) Average revenue equals average total cost. 
D) Marginal profit equals marginal cost.

Question 2

The long-run supply curve for a perfectly competitive,constant-cost industry

Accepted Answer

A) is upward-sloping. 
B) is horizontal. 
C) is downward-sloping. 
D) is found by adding up the marginal cost curves for all firms in the industry. 
A) is upward-sloping. 
B) is horizontal. 
C) is downward-sloping. 
D) is found by adding up the marginal cost curves for all firms in the industry.

Question 3

A firm will break even when

Accepted Answer

A) P = ATC. B) P > ATC. C) P < AVC. D) P = AVC. A) P = ATC. B) P > ATC. C) P < AVC. D) P = AVC.

Question 4

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

Accepted Answer

Allocative efficiency refers to a state

Question 5

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

Accepted Answer

A) Each firm produces up to the point where the price of the good equals the marginal cost of producing the last unit. 
B) Each firm produces up to the point where all scale economies are exhausted. 
C) Production occurs at the lowest average total cost. 
D) Firms use an input combination that minimizes cost and maximizes output. 
A) Each firm produces up to the point where the price of the good equals the marginal cost of producing the last unit. 
B) Each firm produces up to the point where all scale economies are exhausted. 
C) Production occurs at the lowest average total cost. 
D) Firms use an input combination that minimizes cost and maximizes output.

Question 6

A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000.The price of each bushel is $50.Calculate the firm's short-run profit or loss.

Accepted Answer

A) loss of $14,000 
B) profit of $14,000 
C) profit of $50,000 
D) There is insufficient information to answer the question. 
A) loss of $14,000 
B) profit of $14,000 
C) profit of $50,000 
D) There is insufficient information to answer the question.

Question 7

If a firm shuts down it

Accepted Answer

A) will suffer a loss equal to its fixed costs. 
B) will produce nothing but must pay its variable costs. 
C) will produce nothing but must pay its fixed and variable costs. 
D) will earn enough revenue to cover its variable costs but not all of its fixed costs. 
A) will suffer a loss equal to its fixed costs. 
B) will produce nothing but must pay its variable costs. 
C) will produce nothing but must pay its fixed and variable costs. 
D) will earn enough revenue to cover its variable costs but not all of its fixed costs.

Question 8

Assume that firms in a perfectly competitive market are earning economic profits.Which of the following statements describes the change in market price and output as a result of the entry of new firms into this market?

Accepted Answer

A) The market demand curve shifts to the right,causing price to rise and market output to increase. 
B) The market demand curve shifts to the left,causing price to fall and market output to decrease. 
C) The short-run market supply curve shifts to the right,causing price to fall and total market output to increase. 
D) The short-run market supply curve shifts to the left,causing price to rise and total market output to decrease. 
A) The market demand curve shifts to the right,causing price to rise and market output to increase. 
B) The market demand curve shifts to the left,causing price to fall and market output to decrease. 
C) The short-run market supply curve shifts to the right,causing price to fall and total market output to increase. 
D) The short-run market supply curve shifts to the left,causing price to rise and total market output to decrease.

Question 9

At the profit-maximizing level of output for a perfectly competitive firm,

Accepted Answer

A) price equals marginal cost. 
B) average revenue equals average variable cost and price equals marginal cost. 
C) marginal revenue equals marginal cost and average total cost equals average fixed cost. 
D) price equals average revenue and marginal cost equals average variable cost. 
A) price equals marginal cost. 
B) average revenue equals average variable cost and price equals marginal cost. 
C) marginal revenue equals marginal cost and average total cost equals average fixed cost. 
D) price equals average revenue and marginal cost equals average variable cost.

Question 10

Werner & Sons is a manufacturer of three-ring binders operating in a perfectly competitive industry.Table 12-4 shows the firm's cost schedule.
Table 12-4   
-Use the table to answer the following questions.
A.Complete Table 12-4 by filling in the blank cells.
B.Werner is selling in a perfectly competitive market at a price of $40.What is the profit maximizing or loss-minimizing output?
C.Calculate the firm's profit or loss.
D.Should the firm continue to produce in the short run? Explain.
E.If the firm's fixed costs were $30 higher what would be the profit-maximizing output level in the short run? Indicate whether the output level will increase,decrease or remain unchanged compared to your answer in b.
F.Suppose fixed cost remains at $76.If the price of three-ring binders falls to $20 what is the profit-maximizing or loss-minimizing output?
G.Calculate the profit or loss.Should the firm continue to produce in the short run? Explain your answer.
H.Suppose the fixed cost remains at $76.What price corresponds to the shut-down point?
I.Suppose the fixed cost remains at $76.What price corresponds to the break-even point?

Accepted Answer

a. @#IMG-DLM& 
b.Quantity = 8 units. 
c.Profit = $

Question 11

If a perfectly competitive firm raises the price it charges to consumers,which of the following is the most likely outcome?

Accepted Answer

A) The firm's revenue will not change because some consumers will refuse to pay the higher price. 
B) The firm will not sell any output. 
C) The firm's total revenue will increase only if the demand for its product is inelastic. 
D) The firm's total revenue will increase only if the demand for its product is elastic. 
A) The firm's revenue will not change because some consumers will refuse to pay the higher price. 
B) The firm will not sell any output. 
C) The firm's total revenue will increase only if the demand for its product is inelastic. 
D) The firm's total revenue will increase only if the demand for its product is elastic.

Question 12

If a perfectly competitive firm achieves productive efficiency then

Accepted Answer

A) it will raise its price in order to earn an economic profit. 
B) the price of the good it sells is equal to the benefit consumers receive from consuming the last unit of the good sold. 
C) it is producing at minimum efficient scale. 
D) it is producing the good it sells at the lowest possible cost. 
A) it will raise its price in order to earn an economic profit. 
B) the price of the good it sells is equal to the benefit consumers receive from consuming the last unit of the good sold. 
C) it is producing at minimum efficient scale. 
D) it is producing the good it sells at the lowest possible cost.

Question 13

A constant-cost industry is an industry in which

Accepted Answer

A) average costs fall as the industry expands output. 
B) average costs rise as the industry expands output. 
C) average costs remain constant as the industry expands output. 
D) input prices rise at a constant rate as firms in the industry use more inputs. 
A) average costs fall as the industry expands output. 
B) average costs rise as the industry expands output. 
C) average costs remain constant as the industry expands output. 
D) input prices rise at a constant rate as firms in the industry use more inputs.

Question 14

Ted's Pancake Kitchen suffers a short-run loss.When should Ted decide to shut down rather than continue to produce?

Accepted Answer

A) if his Kitchen's revenue is less than its variable costs 
B) if his Kitchen's revenue is less than its fixed costs 
C) if his Kitchen's revenue is less than its explicit costs 
D) if his Kitchen's revenue is less than its total costs 
A) if his Kitchen's revenue is less than its variable costs 
B) if his Kitchen's revenue is less than its fixed costs 
C) if his Kitchen's revenue is less than its explicit costs 
D) if his Kitchen's revenue is less than its total costs

Question 15

New York Times writer Michael Lewis wrote that "The sad truth,for investors,seems to be that most of the benefits....are passed through to consumers free of charge." To which of the following did Lewis refer?

Accepted Answer

A) apple farming in New York state 
B) the Enron accounting scandal 
C) the medical screening industry 
D) new technologies developed in the 1990s 
A) apple farming in New York state 
B) the Enron accounting scandal 
C) the medical screening industry 
D) new technologies developed in the 1990s

Question 16

Ethan Nicholas,who developed the iShoot application for the iPhone 3G,found that to maintain sales in a profitable competitive market,the price of a product

Accepted Answer

A) will usually rise. 
B) will usually fall. 
C) will usually remain stable. 
D) will eventually fall to zero. 
A) will usually rise. 
B) will usually fall. 
C) will usually remain stable. 
D) will eventually fall to zero.

Question 17

A teenaged babysitter is similar to a firm in a perfectly competitive industry in that,for both,

Accepted Answer

A) fixed costs are lower than variable costs. 
B) there are many other suppliers of similar goods or services. 
C) the implicit costs of production exceed the explicit costs of production. 
D) average costs of production do not change when their industry expands. 
A) fixed costs are lower than variable costs. 
B) there are many other suppliers of similar goods or services. 
C) the implicit costs of production exceed the explicit costs of production. 
D) average costs of production do not change when their industry expands.

Question 18

Of the following industries,which are perfectly competitive? For those that are not perfectly competitive,explain why.
a.Restaurants
b.Corn
c.College education
d.Local radio and television

Accepted Answer

a.Restaurants are not perfectly competit

Question 19

Which of the following is the best example of a perfectly competitive firm?

Accepted Answer

A) a corn farmer in Illinois 
B) a Taco Bell restaurant 
C) the Ford Motor Company 
D) the United Parcel Service (UPS) 
A) a corn farmer in Illinois 
B) a Taco Bell restaurant 
C) the Ford Motor Company 
D) the United Parcel Service (UPS)

Question 20

Marginal revenue is

Accepted Answer

A) total revenue divided by the total quantity of output. 
B) the change in profit divided by the change in the quantity of output. 
C) the change in total revenue divided by the change in total cost. 
D) the change in total revenue divided by the change in the quantity of output. 
A) total revenue divided by the total quantity of output. 
B) the change in profit divided by the change in the quantity of output. 
C) the change in total revenue divided by the change in total cost. 
D) the change in total revenue divided by the change in the quantity of output.

At the profit-maximizing level of output for a perfectly competitive firm,price equals marginal cost.Which of the following is also true?

The long-run supply curve for a perfectly competitive,constant-cost industry

A firm will break even when

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

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000.The price of each bushel is $50.Calculate the firm's short-run profit or loss.

If a firm shuts down it

Assume that firms in a perfectly competitive market are earning economic profits.Which of the following statements describes the change in market price and output as a result of the entry of new firms into this market?

At the profit-maximizing level of output for a perfectly competitive firm,

If a perfectly competitive firm raises the price it charges to consumers,which of the following is the most likely outcome?

If a perfectly competitive firm achieves productive efficiency then

A constant-cost industry is an industry in which

Ted's Pancake Kitchen suffers a short-run loss.When should Ted decide to shut down rather than continue to produce?

New York Times writer Michael Lewis wrote that "The sad truth,for investors,seems to be that most of the benefits....are passed through to consumers free of charge." To which of the following did Lewis refer?

Ethan Nicholas,who developed the iShoot application for the iPhone 3G,found that to maintain sales in a profitable competitive market,the price of a product

A teenaged babysitter is similar to a firm in a perfectly competitive industry in that,for both,

Of the following industries,which are perfectly competitive? For those that are not perfectly competitive,explain why. a.Restaurants b.Corn c.College education d.Local radio and television

Which of the following is the best example of a perfectly competitive firm?

Marginal revenue is

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

At the profit-maximizing level of output for a perfectly competitive firm,price equals marginal cost.Which of the following is also true?

The long-run supply curve for a perfectly competitive,constant-cost industry

A firm will break even when

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

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000.The price of each bushel is $50.Calculate the firm's short-run profit or loss.

If a firm shuts down it

Assume that firms in a perfectly competitive market are earning economic profits.Which of the following statements describes the change in market price and output as a result of the entry of new firms into this market?

At the profit-maximizing level of output for a perfectly competitive firm,

If a perfectly competitive firm raises the price it charges to consumers,which of the following is the most likely outcome?

If a perfectly competitive firm achieves productive efficiency then

A constant-cost industry is an industry in which

Ted's Pancake Kitchen suffers a short-run loss.When should Ted decide to shut down rather than continue to produce?

New York Times writer Michael Lewis wrote that "The sad truth,for investors,seems to be that most of the benefits....are passed through to consumers free of charge." To which of the following did Lewis refer?

Ethan Nicholas,who developed the iShoot application for the iPhone 3G,found that to maintain sales in a profitable competitive market,the price of a product

A teenaged babysitter is similar to a firm in a perfectly competitive industry in that,for both,

Of the following industries,which are perfectly competitive? For those that are not perfectly competitive,explain why. a.Restaurants b.Corn c.College education d.Local radio and television

Which of the following is the best example of a perfectly competitive firm?

Marginal revenue is

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