Question 1

Producing where marginal revenue equals marginal cost is equivalent to producing where

Accepted Answer

A)  average total cost equals average revenue. 
B)  average fixed cost is minimised. 
C)  total revenue is equal to total cost. 
D)  total profit is maximised. 
A)  average total cost equals average revenue. 
B)  average fixed cost is minimised. 
C)  total revenue is equal to total cost. 
D)  total profit is maximised.

Question 2

If,in a perfectly competitive industry,the market price facing a firm is below its average total cost but above average variable cost at the output where marginal cost equals marginal revenue,

Accepted Answer

A)  the industry supply will not change. 
B)  new firms are attracted to the industry. 
C)  some existing firms will exit the industry. 
D)  firms are breaking even. 
A)  the industry supply will not change. 
B)  new firms are attracted to the industry. 
C)  some existing firms will exit the industry. 
D)  firms are breaking even.

Question 3

Suppose Veronica sells teapots in the perfectly competitive teapot market.Her output per day and her costs are as follows:
   Suppose the current equilibrium price in the teapot market is $15.To maximise profit,how many teapots will Veronica produce,what price will she charge,and how much profit (or loss)will she make? Draw a graph to illustrate your answer.Your graph should include Veronica's demand,ATC,AVC,MC,and MR curves,the price she is charging,the quantity she is producing,and the area representing her profit (or loss).

Accepted Answer

Veronica will produce 5 teapot

Question 4

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 5

If total variable cost exceeds total revenue at all output levels,a perfectly competitive firm

Accepted Answer

A)  should produce in the short run. 
B)  is making short-run profits. 
C)  should shut down in the short run. 
D)  has covered its fixed cost. 
A)  should produce in the short run. 
B)  is making short-run profits. 
C)  should shut down in the short run. 
D)  has covered its fixed cost.

Question 6

The market demand curve in a perfectly competitive market is downward sloping.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is not an option for a perfectly competitive firm that suffers short-run losses?

Accepted Answer

A)  Shutting down 
B)  Reducing production 
C)  Reducing the use of variable factors 
D)  Raising price 
A)  Shutting down 
B)  Reducing production 
C)  Reducing the use of variable factors 
D)  Raising price

Question 8

For a firm in a perfectly competitive market,price is

Accepted Answer

A)  equal to both average revenue and marginal revenue. 
B)  equal to average revenue but greater than marginal revenue. 
C)  greater than marginal revenue but less than average revenue. 
D)  less than both average revenue and marginal revenue. 
A)  equal to both average revenue and marginal revenue. 
B)  equal to average revenue but greater than marginal revenue. 
C)  greater than marginal revenue but less than average revenue. 
D)  less than both average revenue and marginal revenue.

Question 9

Figure 7-4   Figure 7-4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market.
-Refer to Figure 7-4.If the market price is $30 and the firm is producing output,what is the amount of the firm's profit or loss?

Accepted Answer

A)  Loss of $1080 
B)  Profit of $1440 
C)  Loss of $2520 
D)  Profit of $1300 
A)  Loss of $1080 
B)  Profit of $1440 
C)  Loss of $2520 
D)  Profit of $1300

Question 10

A firm's total profit can be calculated as all of the following except

Accepted Answer

A)  total revenue minus total cost. 
B)  average profit per unit times quantity sold. 
C)  (price minus average total cost) times quantity sold. 
D)  marginal profit times quantity sold. 
A)  total revenue minus total cost. 
B)  average profit per unit times quantity sold. 
C)  (price minus average total cost) times quantity sold. 
D)  marginal profit times quantity sold.

Question 11

The price of a seller's product in perfect competition is determined by

Accepted Answer

A)  the individual seller. 
B)  a few of the sellers. 
C)  market demand and market supply. 
D)  the individual demander. 
A)  the individual seller. 
B)  a few of the sellers. 
C)  market demand and market supply. 
D)  the individual demander.

Question 12

If a firm in a perfectly competitive industry experiences persistent losses,in the long run it should

Accepted Answer

A)  shut down temporarily and wait for market conditions to change. 
B)  exit the industry. 
C)  raise its price to cover average total cost. 
D)  continue to operate if it can raise the demand for its product through advertising and quality improvements. 
A)  shut down temporarily and wait for market conditions to change. 
B)  exit the industry. 
C)  raise its price to cover average total cost. 
D)  continue to operate if it can raise the demand for its product through advertising and quality improvements.

Question 13

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?

Accepted Answer

A)  Productive efficiency 
B)  Allocative efficiency 
C)  Marginal efficiency 
D)  Profit maximisation 
A)  Productive efficiency 
B)  Allocative efficiency 
C)  Marginal efficiency 
D)  Profit maximisation

Question 14

Figure 7-13  
-Refer to Figure 7-13.Suppose a typical firm in a perfectly competitive market is earning economic profits in the short run.Which of the diagrams in the figure depicts what happens in the industry as it transitions to a long-run equilibrium?

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 15

If,in a perfectly competitive industry,the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost,then

Accepted Answer

A)  firms are breaking even. 
B)  new firms are attracted to the industry. 
C)  existing firms will exit the industry. 
D)  market supply will remain constant. 
A)  firms are breaking even. 
B)  new firms are attracted to the industry. 
C)  existing firms will exit the industry. 
D)  market supply will remain constant.

Question 16

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 17

Suppose there are economies of scale in the production of a specialised memory chip that is used in manufacturing microwaves.This suggests that the microwave industry is a decreasing-cost industry.

Accepted Answer

A) True 
 B)False

Question 18

Werner & Sons is a manufacturer of three-ring binders operating in a perfectly competitive industry.Table 7-4 shows the firm's cost schedule.
Table 7-4
   Use the table to answer the following questions.
a.Complete Table 7-4 by filling in the blank cells.
b.Werner is selling in a perfectly competitive market at a price of $40.What is the profit-maximising or loss-minimising 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-maximising 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-maximising or loss-minimising 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 shutdown 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 19

At the profit-maximising 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 20

Explain two different ways to determine the profit-maximising level of output for a firm in a perfectly competitive market.

Accepted Answer

One way is using total revenue and total

Producing where marginal revenue equals marginal cost is equivalent to producing where

If,in a perfectly competitive industry,the market price facing a firm is below its average total cost but above average variable cost at the output where marginal cost equals marginal revenue,

The price a perfectly competitive firm receives for its output

If total variable cost exceeds total revenue at all output levels,a perfectly competitive firm

The market demand curve in a perfectly competitive market is downward sloping.

Which of the following is not an option for a perfectly competitive firm that suffers short-run losses?

For a firm in a perfectly competitive market,price is

Figure 7-4 Figure 7-4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market. -Refer to Figure 7-4.If the market price is $30 and the firm is producing output,what is the amount of the firm's profit or loss?

A firm's total profit can be calculated as all of the following except

The price of a seller's product in perfect competition is determined by

If a firm in a perfectly competitive industry experiences persistent losses,in the long run it should

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?

Figure 7-13 -Refer to Figure 7-13.Suppose a typical firm in a perfectly competitive market is earning economic profits in the short run.Which of the diagrams in the figure depicts what happens in the industry as it transitions to a long-run equilibrium?

If,in a perfectly competitive industry,the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost,then

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

Suppose there are economies of scale in the production of a specialised memory chip that is used in manufacturing microwaves.This suggests that the microwave industry is a decreasing-cost industry.

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

Explain two different ways to determine the profit-maximising level of output for a firm in a perfectly competitive market.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 7: Consumer Choice and Elasticity

Producing where marginal revenue equals marginal cost is equivalent to producing where

If,in a perfectly competitive industry,the market price facing a firm is below its average total cost but above average variable cost at the output where marginal cost equals marginal revenue,

The price a perfectly competitive firm receives for its output

If total variable cost exceeds total revenue at all output levels,a perfectly competitive firm

The market demand curve in a perfectly competitive market is downward sloping.

Which of the following is not an option for a perfectly competitive firm that suffers short-run losses?

For a firm in a perfectly competitive market,price is

Figure 7-4 Figure 7-4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market. -Refer to Figure 7-4.If the market price is $30 and the firm is producing output,what is the amount of the firm's profit or loss?

A firm's total profit can be calculated as all of the following except

The price of a seller's product in perfect competition is determined by

If a firm in a perfectly competitive industry experiences persistent losses,in the long run it should

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?

Figure 7-13 -Refer to Figure 7-13.Suppose a typical firm in a perfectly competitive market is earning economic profits in the short run.Which of the diagrams in the figure depicts what happens in the industry as it transitions to a long-run equilibrium?

If,in a perfectly competitive industry,the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost,then

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

Suppose there are economies of scale in the production of a specialised memory chip that is used in manufacturing microwaves.This suggests that the microwave industry is a decreasing-cost industry.

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

Explain two different ways to determine the profit-maximising level of output for a firm in a perfectly competitive market.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters