Question 1

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 2

Figure 12-9   Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9.Identify the short-run shut down point for the firm.

Accepted Answer

A)  a 
B)  b 
C)  c 
D)  d 
A)  a 
B)  b 
C)  c 
D)  d

Question 3

Figure 12-15  
-Refer to Figure 12-15.Assume that the medical screening industry is perfectly competitive and that some firms are making short-run losses.Suppose the medical screening industry runs an effective advertising campaign which convinces a large number of people that yearly CT scans are critical for good health.Which of the diagrams in the figure best describes what happens in the industry?

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 4

If a typical firm in a perfectly competitive industry is earning profits,then

Accepted Answer

A)  all firms will continue to earn profits. 
B)  new firms will enter in the long run causing market supply to decrease, market price to rise and profits to increase. 
C)  new firms will enter in the long run causing market supply to increase, market price to fall and profits to decrease. 
D)  the number of firms in the industry will remain constant in the long run. 
A)  all firms will continue to earn profits. 
B)  new firms will enter in the long run causing market supply to decrease, market price to rise and profits to increase. 
C)  new firms will enter in the long run causing market supply to increase, market price to fall and profits to decrease. 
D)  the number of firms in the industry will remain constant in the long run.

Question 5

Table 12-3
   Arnie sells basketballs in a perfectly competitive market. Table 12-3 summarizes Arnie's output per day (Q), total cost (TC), average total cost (ATC) and marginal cost (MC).
-Refer to Table 12-3.What will Arnie's output be and how much profit will he earn if the market price of basketballs is $5.00?

Accepted Answer

A)  Q = 1; profit = -$10. 
B)  Q = 3; profit = -$7.50 
C)  Q = 0; profit = -$10.00 
D)  Price and profit cannot be determined from the information given. 
A)  Q = 1; profit = -$10. 
B)  Q = 3; profit = -$7.50 
C)  Q = 0; profit = -$10.00 
D)  Price and profit cannot be determined from the information given.

Question 6

If a perfectly competitive firm's total revenue is less than its total variable cost,the firm

Accepted Answer

A)  should raise its price above its average variable cost. 
B)  should continue to produce and increase its demand. 
C)  should stop production by shutting down temporarily. 
D)  should adopt new technology in order to lower its costs of production. 
A)  should raise its price above its average variable cost. 
B)  should continue to produce and increase its demand. 
C)  should stop production by shutting down temporarily. 
D)  should adopt new technology in order to lower its costs of production.

Question 7

To maximize profit,a perfectly competitive firm

Accepted Answer

A)  should sell the quantity of output determined by the interaction between industry demand and supply. 
B)  should sell the quantity of output that results in a value for total revenue that is equal to total cost. 
C)  should produce the quantity of output that results in the greatest difference between total revenue and total cost. 
D)  should produce the quantity of output that results in the greatest difference between marginal revenue and marginal cost. 
A)  should sell the quantity of output determined by the interaction between industry demand and supply. 
B)  should sell the quantity of output that results in a value for total revenue that is equal to total cost. 
C)  should produce the quantity of output that results in the greatest difference between total revenue and total cost. 
D)  should produce the quantity of output that results in the greatest difference between marginal revenue and marginal cost.

Question 8

Assume that after the record year for U.S.farm income in 2013,farmers are expected to break even in 2014.This means that at the quantity being produced in 2014

Accepted Answer

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

Question 9

Consider the market for wheat which is a perfectly competitive market.Is the market demand curve the same as the demand curve facing an individual producer? If not,explain how and why they are different? Illustrate your answer graphically.

Accepted Answer

The market demand is downward sloping wh

Question 10

Writing in the New York Times on the technology boom of the late 1990s,Michael Lewis argues,"The sad truth,for investors,seems to be that most of the benefits of new technologies are passed right through to consumers free of charge." What does Lewis means by the benefits of new technology being "passed right through to consumers free of charge"?

Accepted Answer

A)  Firms in perfect competition are price takers. Since they cannot influence price, they cannot dictate who benefits from new technologies, even if the benefits of new technology are being "passed right through to consumers free of charge." 
B)  In perfect competition, price equals marginal cost of production. In this sense, consumers receive the new technology "free of charge." 
C)  In the long run, price equals the lowest possible average cost of production. In this sense, consumers receive the new technology "free of charge." 
D)  In perfect competition, consumers place a value on the good equal to its marginal cost of production and since they are willing to pay the marginal valuation of the good, they are essentially receiving the new technology "free of charge." 
A)  Firms in perfect competition are price takers. Since they cannot influence price, they cannot dictate who benefits from new technologies, even if the benefits of new technology are being "passed right through to consumers free of charge." 
B)  In perfect competition, price equals marginal cost of production. In this sense, consumers receive the new technology "free of charge." 
C)  In the long run, price equals the lowest possible average cost of production. In this sense, consumers receive the new technology "free of charge." 
D)  In perfect competition, consumers place a value on the good equal to its marginal cost of production and since they are willing to pay the marginal valuation of the good, they are essentially receiving the new technology "free of charge."

Question 11

If a perfectly competitive firm's price is above its average total cost,the firm

Accepted Answer

A)  is earning a profit. 
B)  should shut down. 
C)  is incurring a loss. 
D)  is breaking even. 
A)  is earning a profit. 
B)  should shut down. 
C)  is incurring a loss. 
D)  is breaking even.

Question 12

A firm will break even when

Accepted Answer

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

Question 13

Maximizing average profit is equivalent to maximizing total profit.

Accepted Answer

A) True 
 B)False

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

How are sunk costs and fixed costs related?

Accepted Answer

A)  They are not related in any way. 
B)  Sunk costs cannot be recovered and fixed costs can be avoided by shutting down. 
C)  In the short run they are equal to each other. 
D)  In the long run they are equal to each other. 
A)  They are not related in any way. 
B)  Sunk costs cannot be recovered and fixed costs can be avoided by shutting down. 
C)  In the short run they are equal to each other. 
D)  In the long run they are equal to each other.

Question 16

Figure 12-16  
-Refer to Figure 12-16.Which panel best represents the perfectly competitive organic produce market in which firms are breaking even,economically,organic produce is considered a normal good,and the average income level of consumers is rising?

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 17

If a perfectly competitive firm achieves productive efficiency then

Accepted Answer

A)  it will raise its price in order to earn an economic profit. 
B)  the price of the good it sells is equal to the benefit consumers receive from consuming the last unit of the good sold. 
C)  it is producing at minimum efficient scale. 
D)  it is producing the good it sells at the lowest possible cost. 
A)  it will raise its price in order to earn an economic profit. 
B)  the price of the good it sells is equal to the benefit consumers receive from consuming the last unit of the good sold. 
C)  it is producing at minimum efficient scale. 
D)  it is producing the good it sells at the lowest possible cost.

Question 18

Figure 12-1  
-Refer to Figure 12-3.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.

Question 19

What is a long-run supply curve? What does a long-run supply curve look like on a perfectly competitive market graph?

Accepted Answer

A long run supply curve shows the relati

Question 20

Figure 12-16  
-Refer to Figure 12-16.Which panel best represents the perfectly competitive organic produce market in which some firms are earning short-run economic profits,and the Surgeon General announces that switching from non-organic produce to organic produce will add 5 years to the average life span of consumers?

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

For a firm in a perfectly competitive market,price is

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.Identify the short-run shut down point for the firm.

If a typical firm in a perfectly competitive industry is earning profits,then

If a perfectly competitive firm's total revenue is less than its total variable cost,the firm

To maximize profit,a perfectly competitive firm

Assume that after the record year for U.S.farm income in 2013,farmers are expected to break even in 2014.This means that at the quantity being produced in 2014

Consider the market for wheat which is a perfectly competitive market.Is the market demand curve the same as the demand curve facing an individual producer? If not,explain how and why they are different? Illustrate your answer graphically.

If a perfectly competitive firm's price is above its average total cost,the firm

A firm will break even when

Maximizing average profit is equivalent to maximizing total profit.

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

How are sunk costs and fixed costs related?

Figure 12-16 -Refer to Figure 12-16.Which panel best represents the perfectly competitive organic produce market in which firms are breaking even,economically,organic produce is considered a normal good,and the average income level of consumers is rising?

If a perfectly competitive firm achieves productive efficiency then

Figure 12-1 -Refer to Figure 12-3.If the firm is charging a price of $12 per unit

What is a long-run supply curve? What does a long-run supply curve look like on a perfectly competitive market graph?

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

For a firm in a perfectly competitive market,price is

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.Identify the short-run shut down point for the firm.

If a typical firm in a perfectly competitive industry is earning profits,then

If a perfectly competitive firm's total revenue is less than its total variable cost,the firm

To maximize profit,a perfectly competitive firm

Assume that after the record year for U.S.farm income in 2013,farmers are expected to break even in 2014.This means that at the quantity being produced in 2014

Consider the market for wheat which is a perfectly competitive market.Is the market demand curve the same as the demand curve facing an individual producer? If not,explain how and why they are different? Illustrate your answer graphically.

If a perfectly competitive firm's price is above its average total cost,the firm

A firm will break even when

Maximizing average profit is equivalent to maximizing total profit.

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

How are sunk costs and fixed costs related?

Figure 12-16 -Refer to Figure 12-16.Which panel best represents the perfectly competitive organic produce market in which firms are breaking even,economically,organic produce is considered a normal good,and the average income level of consumers is rising?

If a perfectly competitive firm achieves productive efficiency then

Figure 12-1 -Refer to Figure 12-3.If the firm is charging a price of $12 per unit

What is a long-run supply curve? What does a long-run supply curve look like on a perfectly competitive market graph?

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