Question 1

The minimum point on the average variable cost curve is called

Accepted Answer

A) the shutdown point. 
B) the break-even point. 
C) the loss minimizing point. 
D) the point of diminishing returns. 
A) the shutdown point. 
B) the break-even point. 
C) the loss minimizing point. 
D) the point of diminishing returns.

Question 2

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 3

Ben's Peanut Shoppe suffers a short-run loss.Ben will not choose to shut down if

Accepted Answer

A) his Shoppe's total revenue exceeds his fixed cost. 
B) his Shoppe's total revenue exceeds his variable cost. 
C) his Shoppe's total revenue exceeds his implicit costs. 
D) his Shoppe's total revenue exceeds his capital costs. 
A) his Shoppe's total revenue exceeds his fixed cost. 
B) his Shoppe's total revenue exceeds his variable cost. 
C) his Shoppe's total revenue exceeds his implicit costs. 
D) his Shoppe's total revenue exceeds his capital costs.

Question 4

For a perfectly competitive firm,average revenue is equal to

Accepted Answer

A) marginal cost. 
B) the market price. 
C) total revenue. 
D) average fixed cost. 
A) marginal cost. 
B) the market price. 
C) total revenue. 
D) average fixed cost.

Question 5

Firms in perfect competition are price takers because

Accepted Answer

A) one firm determines the price that all other firms in the industry will charge. 
B) consumers have enough market power to set prices. 
C) firms accept the price determined by the government. 
D) each firm is too small relative to the market to be able to influence price. 
A) one firm determines the price that all other firms in the industry will charge. 
B) consumers have enough market power to set prices. 
C) firms accept the price determined by the government. 
D) each firm is too small relative to the market to be able to influence price.

Question 6

Figure 12-5  
-Refer to Figure 12-5.At the profit-maximizing output level,the firm earns

Accepted Answer

A) zero economic profit. 
B) a profit of $600. 
C) a profit of $1,200. 
D) a profit of $2,700. 
A) zero economic profit. 
B) a profit of $600. 
C) a profit of $1,200. 
D) a profit of $2,700.

Question 7

For a perfectly competitive firm,at profit maximization

Accepted Answer

A) market price exceeds marginal cost. 
B) total revenue is maximized. 
C) marginal revenue equals marginal cost. 
D) production must occur where average cost is minimized. 
A) market price exceeds marginal cost. 
B) total revenue is maximized. 
C) marginal revenue equals marginal cost. 
D) production must occur where average cost is minimized.

Question 8

If the market price is $40 in a perfectly competitive market,the marginal revenue from selling the fifth unit is

Accepted Answer

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

Question 9

Marty's Bird House suffers a short-run loss.Marty can reduce his loss below the amount of his total fixed costs by continuing to produce if his revenue

Accepted Answer

A) exceeds his implicit costs. 
B) exceeds his nonmonetary opportunity costs. 
C) exceeds his variable costs. 
D) exceeds his marginal costs. 
A) exceeds his implicit costs. 
B) exceeds his nonmonetary opportunity costs. 
C) exceeds his variable costs. 
D) exceeds his marginal costs.

Question 10

A perfectly competitive firm in a constant-cost industry produces 3,000 units of a good at a total cost of $36,000.The prevailing market price is $15.What will happen to the number of firms in the industry and to the industry's output in the long run?

Accepted Answer

A) The number of firms and the industry's output increase. 
B) The number of firms and the industry's output decrease. 
C) The number of firms remains constant and the industry's output increases. 
D) The number of firms remains constant and the industry's output decreases. 
A) The number of firms and the industry's output increase. 
B) The number of firms and the industry's output decrease. 
C) The number of firms remains constant and the industry's output increases. 
D) The number of firms remains constant and the industry's output decreases.

Question 11

A firm will make a profit when

Accepted Answer

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

Question 12

Figure 12-6  
-Refer to Figure 12-6.Which panel best represents the perfectly competitive organic produce market in which some firms are experiencing short-run losses,and consumers are displaying an increased preference for organic produce?

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 13

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

Accepted Answer

A) True 
 B)False

Question 14

A constant cost,perfectly competitive market is in long-run equilibrium.At present,there are 1,000 firms each producing 400 units of output.The price of the good is $60.Now suppose there is a sudden increase in demand for the industry's product which causes the price of the good to rise to $64.In the new long-run equilibrium,how will the average total cost of producing the good compare to what it was before the price of the good rose?

Accepted Answer

A) The average total cost will be higher than it was before the price increase since the increase in demand will drive up input prices. 
B) The average total cost will be lower than it was before the price increase because of economies of scale. 
C) The average total cost will be higher than it was before the price increase because of diseconomies of scale arising from the increased demand. 
D) The average total cost will be the same as it was before the price increase. 
A) The average total cost will be higher than it was before the price increase since the increase in demand will drive up input prices. 
B) The average total cost will be lower than it was before the price increase because of economies of scale. 
C) The average total cost will be higher than it was before the price increase because of diseconomies of scale arising from the increased demand. 
D) The average total cost will be the same as it was before the price increase.

Question 15

For a perfectly competitive firm,at the profit-maximizing output average revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 16

Figure 12-5  
-Refer to Figure 12-5.The total cost at the profit-maximizing output level equals

Accepted Answer

A) $4,800. 
B) $3,300. 
C) $2,500. 
D) $1,800. 
A) $4,800. 
B) $3,300. 
C) $2,500. 
D) $1,800.

Question 17

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 P2 the firm

Accepted Answer

A) will break even and produce a quantity of Q2. 
B) will make a profit and produce a quantity of Q2. 
C) will make a profit and produce a quantity of Q1. 
D) will make a profit and produce a quantity of Q3. 
A) will break even and produce a quantity of Q2. 
B) will make a profit and produce a quantity of Q2. 
C) will make a profit and produce a quantity of Q1. 
D) will make a profit and produce a quantity of Q3.

Question 18

In the short run,a profit-maximizing firm will shut down if its total revenue is greater than its variable costs.

Accepted Answer

A) True 
 B)False

Question 19

A perfectly competitive firm's marginal revenue

Accepted Answer

A) is greater than price. 
B) is less than price because a firm must lower its price to sell more. 
C) is equal to price. 
D) may be either greater or less than price,depending on the quantity sold. 
A) is greater than price. 
B) is less than price because a firm must lower its price to sell more. 
C) is equal to price. 
D) may be either greater or less than price,depending on the quantity sold.

Question 20

Figure 12-1  
-Refer to Figure 12-1.If the firm is charging a price of $12 per unit

Accepted Answer

A) it breaks even. 
B) it is making a profit. 
C) it is selling 700 units. 
D) it is not selling any output. 
A) it breaks even. 
B) it is making a profit. 
C) it is selling 700 units. 
D) it is not selling any output.

The minimum point on the average variable cost curve is called

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

Ben's Peanut Shoppe suffers a short-run loss.Ben will not choose to shut down if

For a perfectly competitive firm,average revenue is equal to

Firms in perfect competition are price takers because

Figure 12-5 -Refer to Figure 12-5.At the profit-maximizing output level,the firm earns

For a perfectly competitive firm,at profit maximization

If the market price is $40 in a perfectly competitive market,the marginal revenue from selling the fifth unit is

Marty's Bird House suffers a short-run loss.Marty can reduce his loss below the amount of his total fixed costs by continuing to produce if his revenue

A perfectly competitive firm in a constant-cost industry produces 3,000 units of a good at a total cost of $36,000.The prevailing market price is $15.What will happen to the number of firms in the industry and to the industry's output in the long run?

A firm will make a profit when

Figure 12-6 -Refer to Figure 12-6.Which panel best represents the perfectly competitive organic produce market in which some firms are experiencing short-run losses,and consumers are displaying an increased preference for organic produce?

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

For a perfectly competitive firm,at the profit-maximizing output average revenue equals marginal cost.

Figure 12-5 -Refer to Figure 12-5.The total cost at the profit-maximizing output level equals

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 P₂ the firm

In the short run,a profit-maximizing firm will shut down if its total revenue is greater than its variable costs.

A perfectly competitive firm's marginal revenue

Figure 12-1 -Refer to Figure 12-1.If the firm is charging a price of $12 per unit

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

The minimum point on the average variable cost curve is called

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

Ben's Peanut Shoppe suffers a short-run loss.Ben will not choose to shut down if

For a perfectly competitive firm,average revenue is equal to

Firms in perfect competition are price takers because

Figure 12-5 -Refer to Figure 12-5.At the profit-maximizing output level,the firm earns

For a perfectly competitive firm,at profit maximization

If the market price is $40 in a perfectly competitive market,the marginal revenue from selling the fifth unit is

Marty's Bird House suffers a short-run loss.Marty can reduce his loss below the amount of his total fixed costs by continuing to produce if his revenue

A perfectly competitive firm in a constant-cost industry produces 3,000 units of a good at a total cost of $36,000.The prevailing market price is $15.What will happen to the number of firms in the industry and to the industry's output in the long run?

A firm will make a profit when

Figure 12-6 -Refer to Figure 12-6.Which panel best represents the perfectly competitive organic produce market in which some firms are experiencing short-run losses,and consumers are displaying an increased preference for organic produce?

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

For a perfectly competitive firm,at the profit-maximizing output average revenue equals marginal cost.

Figure 12-5 -Refer to Figure 12-5.The total cost at the profit-maximizing output level equals

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 P2 the firm

In the short run,a profit-maximizing firm will shut down if its total revenue is greater than its variable costs.

A perfectly competitive firm's marginal revenue

Figure 12-1 -Refer to Figure 12-1.If the firm is charging a price of $12 per unit

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 P₂ the firm