Question 1

Firms that are price takers

Accepted Answer

A) must lower their prices to increase sales. 
B) are able to sell a fixed quantity of output at the market price. 
C) can raise their prices as a result of a successful advertising campaign. 
D) are able to sell all their output at the market price. 
A) must lower their prices to increase sales. 
B) are able to sell a fixed quantity of output at the market price. 
C) can raise their prices as a result of a successful advertising campaign. 
D) are able to sell all their output at the market price.

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

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

Accepted Answer

A) implicit costs. 
B) capital costs. 
C) nonmonetary opportunity costs. 
D) sunk costs. 
A) implicit costs. 
B) capital costs. 
C) nonmonetary opportunity costs. 
D) sunk costs.

Question 4

In the mid-1990s,cattle ranchers in the United States kept raising cattle even though prices were at a ten-year low and below average total cost.What is the likely explanation for this?

Accepted Answer

A) Continuing to operate resulted in smaller losses than would have been incurred by shutting down. 
B) The ranchers were hoping to receive government subsidies. 
C) The exit costs were too high. 
D) Cattle is an important source of protein and its production is essential for the United States. 
A) Continuing to operate resulted in smaller losses than would have been incurred by shutting down. 
B) The ranchers were hoping to receive government subsidies. 
C) The exit costs were too high. 
D) Cattle is an important source of protein and its production is essential for the United States.

Question 5

Firms in perfectly competitive industries are unable to control the prices of the products they sell and earn a profit in the long run.Which of the following is one reason for this?

Accepted Answer

A) Owners of perfectly competitive firms realize that their short-run profits are temporary.Therefore,they either sell their businesses or develop other products that will earn short-run profits. 
B) Firms in perfectly competitive industries can use advertising in the short run to persuade consumers that their products are better than those of other firms.But eventually consumers realize that all of the firms sell virtually identical products. 
C) Firms from other countries are able to produce similar products at lower costs. 
D) Firms in these industries sell identical products. 
A) Owners of perfectly competitive firms realize that their short-run profits are temporary.Therefore,they either sell their businesses or develop other products that will earn short-run profits. 
B) Firms in perfectly competitive industries can use advertising in the short run to persuade consumers that their products are better than those of other firms.But eventually consumers realize that all of the firms sell virtually identical products. 
C) Firms from other countries are able to produce similar products at lower costs. 
D) Firms in these industries sell identical products.

Question 6

A perfectly competitive firm faces a demand curve that is

Accepted Answer

A) horizontal. 
B) vertical. 
C) perpendicular to the quantity axis. 
D) perfectly inelastic. 
A) horizontal. 
B) vertical. 
C) perpendicular to the quantity axis. 
D) perfectly inelastic.

Question 7

If,for the last bushel of apples produced and sold by an apple farm marginal revenue exceeds marginal cost,then in producing that bushel the farm

Accepted Answer

A) added more to total cost than it added to total revenue. 
B) added an equal amount to both total revenue and total cost. 
C) added more to total revenue than it added to total cost. 
D) maximized its profits or minimized its losses. 
A) added more to total cost than it added to total revenue. 
B) added an equal amount to both total revenue and total cost. 
C) added more to total revenue than it added to total cost. 
D) maximized its profits or minimized its losses.

Question 8

Competition has driven the economic profits in the video rental business to zero.Surya Bacha,who owns a video rental business,would be better off leaving the industry for another alternative.

Accepted Answer

A) True 
 B)False

Question 9

For a given quantity,the total profit of a perfectly competitive firm is equal to the vertical distance between the firm's total revenue curve and its total cost curve.

Accepted Answer

A) True 
 B)False

Question 10

What is the difference between "shutting down temporarily" and "exiting the industry"?

Accepted Answer

The difference between the two has to do

Question 11

When firms exit a perfectly competitive industry,the market supply curve shifts to the left.

Accepted Answer

A) True 
 B)False

Question 12

Table 12-1
   Table 12-1 lists the various pounds (lbs.)of apples that Margie Stattler can sell.Assume that Margie operates in a perfectly competitive market.
-Refer to Table 12-1.How many pounds of apples should Margie sell to maximize her profit?

Accepted Answer

A) 300 pounds 
B) 400 pounds 
C) This cannot be determined without knowing Margie's total or marginal production costs. 
D) This can be determined only when all of the values for market price,total revenue,average revenue and marginal revenue are given. 
A) 300 pounds 
B) 400 pounds 
C) This cannot be determined without knowing Margie's total or marginal production costs. 
D) This can be determined only when all of the values for market price,total revenue,average revenue and marginal revenue are given.

Question 13

Assume that a perfectly competitive market is in long-run equilibrium.Suppose as a result of a health hazard associated with the industry's product,demand decreases drastically.What is the immediate result of this event?

Accepted Answer

A) The market price falls and the typical firm suffers an economic loss. 
B) The market supply increases to offset the fall in demand. 
C) The typical firm's average total cost curve shifts downward. 
D) The typical firm's marginal cost curve shifts to the left. 
A) The market price falls and the typical firm suffers an economic loss. 
B) The market supply increases to offset the fall in demand. 
C) The typical firm's average total cost curve shifts downward. 
D) The typical firm's marginal cost curve shifts to the left.

Question 14

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 15

Being a price-taker,a perfectly competitive firm cannot receive a producer surplus in the short run.

Accepted Answer

A) True 
 B)False

Question 16

If a firm's total variable cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Accepted Answer

A) True 
 B)False

Question 17

Figure 12-4  
-Refer to Figure 12-4.Suppose the firm produces 4,000 units.What does the shaded area labeled A represent?

Accepted Answer

A) total variable cost 
B) profit 
C) total fixed cost 
D) total revenue 
A) total variable cost 
B) profit 
C) total fixed cost 
D) total revenue

Question 18

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.The prevailing market price is $48.Assuming that this firm continues to produce in the long run,what happens to output level in the long run?

Accepted Answer

A) The firm's output falls. 
B) The firm's output increases. 
C) The firm produces the same output level. 
D) There is insufficient information to answer the question. 
A) The firm's output falls. 
B) The firm's output increases. 
C) The firm produces the same output level. 
D) There is insufficient information to answer the question.

Question 19

In the long run,a firm in a perfectly competitive industry will supply output only if its total revenue covers its

Accepted Answer

A) explicit plus its implicit costs. 
B) fixed costs. 
C) implicit costs. 
D) explicit costs. 
A) explicit plus its implicit costs. 
B) fixed costs. 
C) implicit costs. 
D) explicit costs.

Question 20

In long-run competitive equilibrium,the perfectly competitive firm produces where price equals minimum average total cost.
a.What is this efficiency criterion called?
b.How does it benefit consumers?

Accepted Answer

a.Productive efficiency b.Productive eff

Firms that are price takers

Profit is the difference between

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

In the mid-1990s,cattle ranchers in the United States kept raising cattle even though prices were at a ten-year low and below average total cost.What is the likely explanation for this?

Firms in perfectly competitive industries are unable to control the prices of the products they sell and earn a profit in the long run.Which of the following is one reason for this?

A perfectly competitive firm faces a demand curve that is

If,for the last bushel of apples produced and sold by an apple farm marginal revenue exceeds marginal cost,then in producing that bushel the farm

Competition has driven the economic profits in the video rental business to zero.Surya Bacha,who owns a video rental business,would be better off leaving the industry for another alternative.

For a given quantity,the total profit of a perfectly competitive firm is equal to the vertical distance between the firm's total revenue curve and its total cost curve.

What is the difference between "shutting down temporarily" and "exiting the industry"?

When firms exit a perfectly competitive industry,the market supply curve shifts to the left.

Table 12-1 Table 12-1 lists the various pounds (lbs.)of apples that Margie Stattler can sell.Assume that Margie operates in a perfectly competitive market. -Refer to Table 12-1.How many pounds of apples should Margie sell to maximize her profit?

Assume that a perfectly competitive market is in long-run equilibrium.Suppose as a result of a health hazard associated with the industry's product,demand decreases drastically.What is the immediate result of this event?

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

Being a price-taker,a perfectly competitive firm cannot receive a producer surplus in the short run.

If a firm's total variable cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Figure 12-4 -Refer to Figure 12-4.Suppose the firm produces 4,000 units.What does the shaded area labeled A represent?

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.The prevailing market price is $48.Assuming that this firm continues to produce in the long run,what happens to output level in the long run?

In the long run,a firm in a perfectly competitive industry will supply output only if its total revenue covers its

In long-run competitive equilibrium,the perfectly competitive firm produces where price equals minimum average total cost. a.What is this efficiency criterion called? b.How does it benefit consumers?

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

Firms that are price takers

Profit is the difference between

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

In the mid-1990s,cattle ranchers in the United States kept raising cattle even though prices were at a ten-year low and below average total cost.What is the likely explanation for this?

Firms in perfectly competitive industries are unable to control the prices of the products they sell and earn a profit in the long run.Which of the following is one reason for this?

A perfectly competitive firm faces a demand curve that is

If,for the last bushel of apples produced and sold by an apple farm marginal revenue exceeds marginal cost,then in producing that bushel the farm

Competition has driven the economic profits in the video rental business to zero.Surya Bacha,who owns a video rental business,would be better off leaving the industry for another alternative.

For a given quantity,the total profit of a perfectly competitive firm is equal to the vertical distance between the firm's total revenue curve and its total cost curve.

What is the difference between "shutting down temporarily" and "exiting the industry"?

When firms exit a perfectly competitive industry,the market supply curve shifts to the left.

Table 12-1 Table 12-1 lists the various pounds (lbs.)of apples that Margie Stattler can sell.Assume that Margie operates in a perfectly competitive market. -Refer to Table 12-1.How many pounds of apples should Margie sell to maximize her profit?

Assume that a perfectly competitive market is in long-run equilibrium.Suppose as a result of a health hazard associated with the industry's product,demand decreases drastically.What is the immediate result of this event?

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

Being a price-taker,a perfectly competitive firm cannot receive a producer surplus in the short run.

If a firm's total variable cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Figure 12-4 -Refer to Figure 12-4.Suppose the firm produces 4,000 units.What does the shaded area labeled A represent?

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.The prevailing market price is $48.Assuming that this firm continues to produce in the long run,what happens to output level in the long run?

In the long run,a firm in a perfectly competitive industry will supply output only if its total revenue covers its

In long-run competitive equilibrium,the perfectly competitive firm produces where price equals minimum average total cost. a.What is this efficiency criterion called? b.How does it benefit consumers?

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