Question 1

A perfectly competitive firm in the short run maximises its profit by producing the output where:

Accepted Answer

A)  average cost equals price. 
B)  marginal product equals marginal revenue. 
C)  total profit is at maximum. 
D)  total profit is at minimum. 
A)  average cost equals price. 
B)  marginal product equals marginal revenue. 
C)  total profit is at maximum. 
D)  total profit is at minimum.

Question 2

The firm in a perfectly competitive market will:

Accepted Answer

A)  set the price lower than the variable cost of producing the product or service to gain a market share. 
B)  set the price higher than the fixed cost of producing the product or service but lower than the variable cost to prevent competition. 
C)  set the price as low as possible to prevent competition. 
D)  set the price higher than the variable cost of producing the product or service. 
A)  set the price lower than the variable cost of producing the product or service to gain a market share. 
B)  set the price higher than the fixed cost of producing the product or service but lower than the variable cost to prevent competition. 
C)  set the price as low as possible to prevent competition. 
D)  set the price higher than the variable cost of producing the product or service.

Question 3

If a firm's MR currently equals MC and product price = $24, AVC = $22 and ATC = $26, then in the long run this firm:

Accepted Answer

A)  will continue to operate at a loss. 
B)  will earn a positive profit. 
C)  will go out of business. 
D)  should increase output. 
A)  will continue to operate at a loss. 
B)  will earn a positive profit. 
C)  will go out of business. 
D)  should increase output.

Question 4

Suppose the market demand for second-hand books has decreased to the level less than the average total cost. The firm will:

Accepted Answer

A)  reduce its losses to zero. 
B)  produce at the output level where ATC = MC. 
C)  produce at the level of output that keeps its losses to a minimum. 
D)  increase its output to make up for losses. 
A)  reduce its losses to zero. 
B)  produce at the output level where ATC = MC. 
C)  produce at the level of output that keeps its losses to a minimum. 
D)  increase its output to make up for losses.

Question 5

A perfectly competitive firm's short-run supply curve is the:

Accepted Answer

A)  average total cost curve. 
B)  demand curve above the marginal revenue curve. 
C)  same as the market supply curve. 
D)  marginal cost curve above the average variable cost curve. 
A)  average total cost curve. 
B)  demand curve above the marginal revenue curve. 
C)  same as the market supply curve. 
D)  marginal cost curve above the average variable cost curve.

Question 6

In a perfectly competitive industry - assuming the short-run average total cost increases as the output of the industry expands - the industry supply curve, in the long run, will:

Accepted Answer

A)  first have a positive slope and then a negative slope. 
B)  have a negative slope. 
C)  be perfectly horizontal. 
D)  have a positive slope. 
A)  first have a positive slope and then a negative slope. 
B)  have a negative slope. 
C)  be perfectly horizontal. 
D)  have a positive slope.

Question 7

The long-run equilibrium condition for perfect competition is:

Accepted Answer

A)  P = AVC = MR = MC. 
B)  P = ATC = MR = MC. 
C)  Q = AVC = MR = MC. 
D)  Q = ATC = MR = MC. 
A)  P = AVC = MR = MC. 
B)  P = ATC = MR = MC. 
C)  Q = AVC = MR = MC. 
D)  Q = ATC = MR = MC.

Question 8

If the long-run supply curve in a perfectly competitive industry is downward-sloping, then the market is characterised by:

Accepted Answer

A)  decreasing input costs. 
B)  increasing input costs. 
C)  increasing or decreasing input costs. 
D)  constant input costs. 
A)  decreasing input costs. 
B)  increasing input costs. 
C)  increasing or decreasing input costs. 
D)  constant input costs.

Question 9

Under perfect competition, which of the following determine the market equilibrium?

Accepted Answer

A)  Price and marginal cost. 
B)  Both demand and supply. 
C)  Marginal cost and average revenue. 
D)  Total cost and a number of suppliers. 
A)  Price and marginal cost. 
B)  Both demand and supply. 
C)  Marginal cost and average revenue. 
D)  Total cost and a number of suppliers.

Question 10

All three types of long-run supply curves can be observed in real life: increasing-cost supply curve, upward-sloping supply curve and constant supply curve.

Accepted Answer

A) True 
 B)False

Question 11

Narrbegin Exhibit 7.8   
-According to Exhibit 7.8, the results in the short run for this firm will be:

Accepted Answer

A)  positive economic profits. 
B)  a normal profit. 
C)  a loss, but the firm will be able to cover its fixed cost. 
D)  such a big loss they will shut down. 
A)  positive economic profits. 
B)  a normal profit. 
C)  a loss, but the firm will be able to cover its fixed cost. 
D)  such a big loss they will shut down.

Question 12

Above the shutdown point, a competitive firm's supply curve coincides with its:

Accepted Answer

A)  marginal revenue curve. 
B)  marginal cost curve. 
C)  average variable cost curve. 
D)  average total cost curve. 
A)  marginal revenue curve. 
B)  marginal cost curve. 
C)  average variable cost curve. 
D)  average total cost curve.

Question 13

Narrbegin Exhibit 7.8   
-According to Exhibit 7.8, in the short run the firm will be:

Accepted Answer

A)  earning an economic profit of $600. 
B)  earning zero economic profit. 
C)  earning a $220 loss. 
D)  earning a loss. 
A)  earning an economic profit of $600. 
B)  earning zero economic profit. 
C)  earning a $220 loss. 
D)  earning a loss.

Question 14

Under perfect competition, which of the following are the same (equal) at all levels of output?

Accepted Answer

A)  Market price and marginal cost. 
B)  Market price and marginal revenue. 
C)  Marginal cost and marginal revenue. 
D)  Total cost and total revenue. 
A)  Market price and marginal cost. 
B)  Market price and marginal revenue. 
C)  Marginal cost and marginal revenue. 
D)  Total cost and total revenue.

Question 15

The firm in a perfectly competitive market will:

Accepted Answer

A)  set the price as high as possible to make maximum profit. 
B)  use different rules for loss minimisation and for profit maximisation. 
C)  use non-price competition techniques like advertising to sell more. 
D)  try to keep the average total cost below the market price. 
A)  set the price as high as possible to make maximum profit. 
B)  use different rules for loss minimisation and for profit maximisation. 
C)  use non-price competition techniques like advertising to sell more. 
D)  try to keep the average total cost below the market price.

Question 16

In the short run, the supply curve for a perfectly competitive firm is its marginal cost curve for all levels of output.

Accepted Answer

A) True 
 B)False

Question 17

Suppose that in a perfectly competitive market, firms are making economic profits. In the long run, we can expect to see:

Accepted Answer

A)  some firms leave. 
B)  the market price rise. 
C)  market supply shift to the left. 
D)  economic profits become zero. 
A)  some firms leave. 
B)  the market price rise. 
C)  market supply shift to the left. 
D)  economic profits become zero.

Question 18

Narrbegin Exhibit 7.2 Cost per unit curves   
-As shown in Exhibit 7.2, the price at which the firm earns zero economic profit in the short run is:

Accepted Answer

A)  $1 per unit. 
B)  $1.50 per unit. 
C)  $4 per unit. 
D)  $2 per unit. 
A)  $1 per unit. 
B)  $1.50 per unit. 
C)  $4 per unit. 
D)  $2 per unit.

Question 19

If a competitive firm suffers loss, it should:

Accepted Answer

A)  always shut down. 
B)  shut down if its losses are greater than total fixed costs. 
C)  shut down if its total fixed costs are greater than losses. 
D)  raise its price. 
A)  always shut down. 
B)  shut down if its losses are greater than total fixed costs. 
C)  shut down if its total fixed costs are greater than losses. 
D)  raise its price.

Question 20

In a perfectly competitive market, firms:

Accepted Answer

A)  enter the industry in the long run. 
B)  exit the industry in the long run. 
C)  earn economic profit in a long run. 
D)  earn normal profit in a long run. 
A)  enter the industry in the long run. 
B)  exit the industry in the long run. 
C)  earn economic profit in a long run. 
D)  earn normal profit in a long run.

A perfectly competitive firm in the short run maximises its profit by producing the output where:

The firm in a perfectly competitive market will:

If a firm's MR currently equals MC and product price = $24, AVC = $22 and ATC = $26, then in the long run this firm:

Suppose the market demand for second-hand books has decreased to the level less than the average total cost. The firm will:

A perfectly competitive firm's short-run supply curve is the:

In a perfectly competitive industry - assuming the short-run average total cost increases as the output of the industry expands - the industry supply curve, in the long run, will:

The long-run equilibrium condition for perfect competition is:

If the long-run supply curve in a perfectly competitive industry is downward-sloping, then the market is characterised by:

Under perfect competition, which of the following determine the market equilibrium?

All three types of long-run supply curves can be observed in real life: increasing-cost supply curve, upward-sloping supply curve and constant supply curve.

Narrbegin Exhibit 7.8 -According to Exhibit 7.8, the results in the short run for this firm will be:

Above the shutdown point, a competitive firm's supply curve coincides with its:

Narrbegin Exhibit 7.8 -According to Exhibit 7.8, in the short run the firm will be:

Under perfect competition, which of the following are the same (equal) at all levels of output?

The firm in a perfectly competitive market will:

In the short run, the supply curve for a perfectly competitive firm is its marginal cost curve for all levels of output.

Suppose that in a perfectly competitive market, firms are making economic profits. In the long run, we can expect to see:

Narrbegin Exhibit 7.2 Cost per unit curves -As shown in Exhibit 7.2, the price at which the firm earns zero economic profit in the short run is:

If a competitive firm suffers loss, it should:

In a perfectly competitive market, firms:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

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Exam 8: Perfect Competition

A perfectly competitive firm in the short run maximises its profit by producing the output where:

The firm in a perfectly competitive market will:

If a firm's MR currently equals MC and product price = $24, AVC = $22 and ATC = $26, then in the long run this firm:

Suppose the market demand for second-hand books has decreased to the level less than the average total cost. The firm will:

A perfectly competitive firm's short-run supply curve is the:

In a perfectly competitive industry - assuming the short-run average total cost increases as the output of the industry expands - the industry supply curve, in the long run, will:

The long-run equilibrium condition for perfect competition is:

If the long-run supply curve in a perfectly competitive industry is downward-sloping, then the market is characterised by:

Under perfect competition, which of the following determine the market equilibrium?

All three types of long-run supply curves can be observed in real life: increasing-cost supply curve, upward-sloping supply curve and constant supply curve.

Narrbegin Exhibit 7.8 -According to Exhibit 7.8, the results in the short run for this firm will be:

Above the shutdown point, a competitive firm's supply curve coincides with its:

Narrbegin Exhibit 7.8 -According to Exhibit 7.8, in the short run the firm will be:

Under perfect competition, which of the following are the same (equal) at all levels of output?

The firm in a perfectly competitive market will:

In the short run, the supply curve for a perfectly competitive firm is its marginal cost curve for all levels of output.

Suppose that in a perfectly competitive market, firms are making economic profits. In the long run, we can expect to see:

Narrbegin Exhibit 7.2 Cost per unit curves -As shown in Exhibit 7.2, the price at which the firm earns zero economic profit in the short run is:

If a competitive firm suffers loss, it should:

In a perfectly competitive market, firms:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters