Question 1

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 2

If firms do not earn economic profits in a competitive equilibrium,why would the firms choose to stay in business?

Accepted Answer

When firms earn no economic profit but e

Question 3

Market supply is found by

Accepted Answer

A)  vertically summing the relevant part of each individual producer's marginal cost curve. 
B)  horizontally summing the relevant part of each individual producer's marginal cost curve. 
C)  vertically summing each individual producer's average total cost curve. 
D)  horizontally summing each individual producer's average total cost curve. 
A)  vertically summing the relevant part of each individual producer's marginal cost curve. 
B)  horizontally summing the relevant part of each individual producer's marginal cost curve. 
C)  vertically summing each individual producer's average total cost curve. 
D)  horizontally summing each individual producer's average total cost curve.

Question 4

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 5

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

Accepted Answer

A) True 
 B)False

Question 6

-Refer to Figure 7-11.Suppose the prevailing price is P1 and the firm is currently producing its loss-minimising quantity.In the long-run equilibrium

Accepted Answer

A)  there will be fewer firms in the industry and total industry output decreases. 
B)  there will be more firms in the industry and total industry output increases. 
C)  there will be fewer firms in the industry but total industry output increases. 
D)  there will be more firms in the industry and total industry output remains constant. 
A)  there will be fewer firms in the industry and total industry output decreases. 
B)  there will be more firms in the industry and total industry output increases. 
C)  there will be fewer firms in the industry but total industry output increases. 
D)  there will be more firms in the industry and total industry output remains constant.

Question 7

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

Accepted Answer

A) MR AVC. C) MR > AVC. D) AFC < AVC. A) MR AVC. C) MR > AVC. D) AFC < AVC.

Question 8

For a perfectly competitive firm,which of the following is not true at profit maximisation?

Accepted Answer

A)  Market price is greater than marginal cost. 
B)  Marginal revenue equals marginal cost. 
C)  Total revenue minus total cost is maximised. 
D)  Price equals marginal cost. 
A)  Market price is greater than marginal cost. 
B)  Marginal revenue equals marginal cost. 
C)  Total revenue minus total cost is maximised. 
D)  Price equals marginal cost.

Question 9

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 10

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 11

A perfectly competitive firm in a constant-cost industry produces 1000 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 its 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 12

Table 7-1
   Table 7-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
-Refer to Table 7-1.What is the fixed cost of production?

Accepted Answer

A)  $0 
B)  $500 
C)  $1000 
D)  It cannot be determined. 
A)  $0 
B)  $500 
C)  $1000 
D)  It cannot be determined.

Question 13

In a perfectly competitive industry,in the long-run equilibrium

Accepted Answer

A)  the typical firm is producing at the output where its long-run average total cost is not minimised. 
B)  the typical firm is earning an accounting profit greater than its implicit costs. 
C)  the typical firm earns zero profit. 
D)  the typical firm is maximising its revenue. 
A)  the typical firm is producing at the output where its long-run average total cost is not minimised. 
B)  the typical firm is earning an accounting profit greater than its implicit costs. 
C)  the typical firm earns zero profit. 
D)  the typical firm is maximising its revenue.

Question 14

In a graph that illustrates a perfectly competitive firm,marginal revenue is

Accepted Answer

A)  a diagonal line that lies below the firm's demand curve. 
B)  a line that intersects the firm's demand curve from below at its lowest point. 
C)  a line that intersects the firm's average total cost curve from below at its lowest point. 
D)  the same as the firm's demand curve. 
A)  a diagonal line that lies below the firm's demand curve. 
B)  a line that intersects the firm's demand curve from below at its lowest point. 
C)  a line that intersects the firm's average total cost curve from below at its lowest point. 
D)  the same as the firm's demand curve.

Question 15

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102,then the firm is probably producing more than its profit-maximising quantity.

Accepted Answer

A) True 
 B)False

Question 16

Under what conditions should a competitive firm shut down in the short run?

Accepted Answer

When market price is below ave

Question 17

If the market price is $25,the average revenue of selling five units is

Accepted Answer

A)  $5. 
B)  $12.50. 
C)  $25. 
D)  $125. 
A)  $5. 
B)  $12.50. 
C)  $25. 
D)  $125.

Question 18

Figure 7-2  
-Refer to Figure 7-2.What happens if the firm produces more than Q4 units?

Accepted Answer

A)  Its profit increases. 
B)  It incurs a loss. 
C)  Its total revenue is increasing faster than its total cost. 
D)  It could make a profit or a loss depending on what happens to demand. 
A)  Its profit increases. 
B)  It incurs a loss. 
C)  Its total revenue is increasing faster than its total cost. 
D)  It could make a profit or a loss depending on what happens to demand.

Question 19

To maximise profit,a firm will produce the level of output where MR = MC.If a firm actually makes a profit depends on the relationship of price to average total cost.What are the three possible relationships between price and average total cost that determine if a firm will make a profit,experience a loss,or break even?

Accepted Answer

If P > ATC,the firm makes a pr

Question 20

A perfectly competitive firm in a constant-cost industry produces 1000 units of a good at a total cost of $50 000.If the prevailing market price is $48,the number of firms and the industry's output will decrease in the long run.

Accepted Answer

A) True 
 B)False

A constant-cost industry is an industry in which

If firms do not earn economic profits in a competitive equilibrium,why would the firms choose to stay in business?

Market supply is found by

A perfectly competitive firm's marginal revenue

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

-Refer to Figure 7-11.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimising quantity.In the long-run equilibrium

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

For a perfectly competitive firm,which of the following is not true at profit maximisation?

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

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.

A perfectly competitive firm in a constant-cost industry produces 1000 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 its output level in the long run?

Table 7-1 Table 7-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units. -Refer to Table 7-1.What is the fixed cost of production?

In a perfectly competitive industry,in the long-run equilibrium

In a graph that illustrates a perfectly competitive firm,marginal revenue is

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102,then the firm is probably producing more than its profit-maximising quantity.

Under what conditions should a competitive firm shut down in the short run?

If the market price is $25,the average revenue of selling five units is

Figure 7-2 -Refer to Figure 7-2.What happens if the firm produces more than Q₄ units?

A perfectly competitive firm in a constant-cost industry produces 1000 units of a good at a total cost of $50 000.If the prevailing market price is $48,the number of firms and the industry's output will decrease in the long run.

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

A constant-cost industry is an industry in which

If firms do not earn economic profits in a competitive equilibrium,why would the firms choose to stay in business?

Market supply is found by

A perfectly competitive firm's marginal revenue

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

-Refer to Figure 7-11.Suppose the prevailing price is P1 and the firm is currently producing its loss-minimising quantity.In the long-run equilibrium

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

For a perfectly competitive firm,which of the following is not true at profit maximisation?

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

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.

A perfectly competitive firm in a constant-cost industry produces 1000 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 its output level in the long run?

Table 7-1 Table 7-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units. -Refer to Table 7-1.What is the fixed cost of production?

In a perfectly competitive industry,in the long-run equilibrium

In a graph that illustrates a perfectly competitive firm,marginal revenue is

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102,then the firm is probably producing more than its profit-maximising quantity.

Under what conditions should a competitive firm shut down in the short run?

If the market price is $25,the average revenue of selling five units is

Figure 7-2 -Refer to Figure 7-2.What happens if the firm produces more than Q4 units?

A perfectly competitive firm in a constant-cost industry produces 1000 units of a good at a total cost of $50 000.If the prevailing market price is $48,the number of firms and the industry's output will decrease in the long run.

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

-Refer to Figure 7-11.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimising quantity.In the long-run equilibrium

Figure 7-2 -Refer to Figure 7-2.What happens if the firm produces more than Q₄ units?