Question 1

Which of the following is a characteristic of an oligopolistic market structure?

Accepted Answer

A)  There are few dominant sellers. 
B)  Each firm sells a unique product. 
C)  It is easy for new firms to enter the industry. 
D)  Each firm need not react to the actions of rivals. 
A)  There are few dominant sellers. 
B)  Each firm sells a unique product. 
C)  It is easy for new firms to enter the industry. 
D)  Each firm need not react to the actions of rivals.

Question 2

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

Accepted Answer

A)  Each firm produces up to the point where the price of the good equals the marginal cost of producing the last unit. 
B)  Each firm produces up to the point where all scale economies are exhausted. 
C)  Production occurs at the lowest average total cost. 
D)  Firms use an input combination that minimizes cost and maximizes output. 
A)  Each firm produces up to the point where the price of the good equals the marginal cost of producing the last unit. 
B)  Each firm produces up to the point where all scale economies are exhausted. 
C)  Production occurs at the lowest average total cost. 
D)  Firms use an input combination that minimizes cost and maximizes output.

Question 3

What is the difference between "shutting down temporarily" and "exiting the industry"?

Accepted Answer

The difference between the two has to do

Question 4

Jason,a high-school student,mows lawns for families in his neighborhood.The going rate is $12 for each lawn-mowing service.Jason would like to charge $20 because he believes he has more experience mowing lawns than the many other teenagers who also offer the same service.If the market for lawn mowing services is perfectly competitive,what would happen if Jason raised his price?

Accepted Answer

A)  He would lose some but not all his customers. 
B)  Initially, his customers might complain but over time they will come to accept the new rate. 
C)  If Jason raises his price he would lose all his customers. 
D)  If Jason raises his price, then all others supplying the same service will also raise their prices. 
A)  He would lose some but not all his customers. 
B)  Initially, his customers might complain but over time they will come to accept the new rate. 
C)  If Jason raises his price he would lose all his customers. 
D)  If Jason raises his price, then all others supplying the same service will also raise their prices.

Question 5

Mark Frost grows apples in a perfectly competitive market.If we drew a line in a graph that illustrates Mark's total revenue from selling apples,it would be

Accepted Answer

A)  a straight, upward-sloping line. 
B)  a horizontal line. 
C)  a straight, downward-sloping line. 
D)  a curve that is negatively sloped at low levels of output and positively sloped at higher levels of output. 
A)  a straight, upward-sloping line. 
B)  a horizontal line. 
C)  a straight, downward-sloping line. 
D)  a curve that is negatively sloped at low levels of output and positively sloped at higher levels of output.

Question 6

Article Summary
According to the Department of Agriculture, net farm income will grow to a record high of $120.6 billion in 2013, up from the previous high mark in 2011 and after adjusting for inflation, its second highest level since 1973. Net cash income, however, is expected to fall by 10 percent due to unsold inventories. Exports of chickens and milk are expected to rise by 3 percent and 17 percent, respectively.
Source: Ros Krasny, "Farm income poised for record 2013: USDA," Reuters, August 27, 2013.
-Refer to the Article Summary.All else equal,the increase in demand for chicken and milk exports will ________ the market prices for these exports and ________ economic profit in these markets.

Accepted Answer

A)  increase; decrease 
B)  decrease; increase 
C)  increase; increase 
D)  decrease; decrease 
A)  increase; decrease 
B)  decrease; increase 
C)  increase; increase 
D)  decrease; decrease

Question 7

What is productive efficiency?

Accepted Answer

A)  a situation in which resources are allocated to their highest profit use 
B)  a situation in which resources are allocated such that goods can be produced at their lowest possible average cost 
C)  a situation in which resources are allocated such the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it 
D)  a situation in which firms produce as much as possible 
A)  a situation in which resources are allocated to their highest profit use 
B)  a situation in which resources are allocated such that goods can be produced at their lowest possible average cost 
C)  a situation in which resources are allocated such the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it 
D)  a situation in which firms produce as much as possible

Question 8

An industry's long-run supply curve shows

Accepted Answer

A)  the relationship in the long run between market price and quantity supplied. 
B)  how the government determines the price of the product. 
C)  how average productivity is changing. 
D)  greater than normal profit. 
A)  the relationship in the long run between market price and quantity supplied. 
B)  how the government determines the price of the product. 
C)  how average productivity is changing. 
D)  greater than normal profit.

Question 9

Table 12-1
   Table 12-1 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 12-1.Suppose the fixed cost of production rises by $500 and the price per unit is still $8.What happens to the firm's profit-maximizing output level?

Accepted Answer

A)  It must fall. 
B)  It must rise to offset the increased cost. 
C)  It will remain the same. 
D)  The firm will shut down. 
A)  It must fall. 
B)  It must rise to offset the increased cost. 
C)  It will remain the same. 
D)  The firm will shut down.

Question 10

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 11

Figure 12-13  
-Refer to Figure 12-13.Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity.If the firm represented in the diagram continues to stay in business,in the long-run equilibrium

Accepted Answer

A)  it will reduce its output to Q0 and face a price of P0. 
B)  it will continue to produce Q1 but faces the higher price of P2. 
C)  it will expand its output to Q2 and face a price of P2. 
D)  it will expand its output to Q3 and face a price of P1. 
A)  it will reduce its output to Q0 and face a price of P0. 
B)  it will continue to produce Q1 but faces the higher price of P2. 
C)  it will expand its output to Q2 and face a price of P2. 
D)  it will expand its output to Q3 and face a price of P1.

Question 12

Figure 12-5   Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 12-5.If the market price is $20,what is the amount of the firm's profit?

Accepted Answer

A)  $5,400 
B)  $6,750 
C)  $8,100 
D)  $16,200 
A)  $5,400 
B)  $6,750 
C)  $8,100 
D)  $16,200

Question 13

If a firm's fixed cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Accepted Answer

A) True 
 B)False

Question 14

Figure 12-7   Figure 12-7 illustrates the cost curves of a perfectly competitive firm.
-Refer to Figure 12-7.If the market price is P3 the firm

Accepted Answer

A)  will break even. 
B)  will make a profit. 
C)  will earn enough revenue to cover its variable costs but not its fixed costs. 
D)  will produce a quantity of Q1. 
A)  will break even. 
B)  will make a profit. 
C)  will earn enough revenue to cover its variable costs but not its fixed costs. 
D)  will produce a quantity of Q1.

Question 15

Which of the following arguments could be made as evidence that the market for produce sold at a farmers' market is perfectly competitive?

Accepted Answer

A)  The U.S. Department of Agriculture has established standards for the labeling of organic produce sold at farmers' markets. 
B)  Sales of organically grown food have increased at a rate of 20 percent per year. 
C)  As more farmers began selling their products at farmers' markets, the increase in supply has driven down prices to the point where they just cover the cost of production. 
D)  The profits earned by farmers who sell their products at farmers' markets have continued to grow, despite the increasing number of farmers entering this market. 
A)  The U.S. Department of Agriculture has established standards for the labeling of organic produce sold at farmers' markets. 
B)  Sales of organically grown food have increased at a rate of 20 percent per year. 
C)  As more farmers began selling their products at farmers' markets, the increase in supply has driven down prices to the point where they just cover the cost of production. 
D)  The profits earned by farmers who sell their products at farmers' markets have continued to grow, despite the increasing number of farmers entering this market.

Question 16

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

Accepted Answer

A)  upward sloping and is the portion of the marginal cost curve that lies above the average total cost curve. 
B)  upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve. 
C)  perfectly elastic at the market price. 
D)  horizontal at the minimum average total cost. 
A)  upward sloping and is the portion of the marginal cost curve that lies above the average total cost curve. 
B)  upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve. 
C)  perfectly elastic at the market price. 
D)  horizontal at the minimum average total cost.

Question 17

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 18

A firm would decide to shut down if its production resulted in

Accepted Answer

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

Question 19

Figure 12-17   The graphs in Figure 12-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry.
-Refer to Figure 12-17.Which of the following statements is true?

Accepted Answer

A)  The current market price is $3 but the firm will be able to increase the price in the future. 
B)  The current market price is $3 but the price will fall in the long-run as a result of a decrease in demand. 
C)  The current market price is $3 but the price will fall in the long-run as new firms enter the market. 
D)  The current market price is $3 but the price will increase in the future as the market demand increases. 
A)  The current market price is $3 but the firm will be able to increase the price in the future. 
B)  The current market price is $3 but the price will fall in the long-run as a result of a decrease in demand. 
C)  The current market price is $3 but the price will fall in the long-run as new firms enter the market. 
D)  The current market price is $3 but the price will increase in the future as the market demand increases.

Question 20

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21.Which of the following will happen?

Accepted Answer

A)  The firm's profits will increase. 
B)  The firm's revenue will increase. 
C)  The firm will not sell any output. 
D)  The firm will sell more output than its competitors. 
A)  The firm's profits will increase. 
B)  The firm's revenue will increase. 
C)  The firm will not sell any output. 
D)  The firm will sell more output than its competitors.

Which of the following is a characteristic of an oligopolistic market structure?

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

What is the difference between "shutting down temporarily" and "exiting the industry"?

Mark Frost grows apples in a perfectly competitive market.If we drew a line in a graph that illustrates Mark's total revenue from selling apples,it would be

What is productive efficiency?

An industry's long-run supply curve shows

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

Figure 12-13 -Refer to Figure 12-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.If the firm represented in the diagram continues to stay in business,in the long-run equilibrium

Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 12-5.If the market price is $20,what is the amount of the firm's profit?

If a firm's fixed cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Figure 12-7 Figure 12-7 illustrates the cost curves of a perfectly competitive firm. -Refer to Figure 12-7.If the market price is P₃ the firm

Which of the following arguments could be made as evidence that the market for produce sold at a farmers' market is perfectly competitive?

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

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

A firm would decide to shut down if its production resulted in

Figure 12-17 The graphs in Figure 12-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry. -Refer to Figure 12-17.Which of the following statements is true?

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21.Which of the following will happen?

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

Which of the following is a characteristic of an oligopolistic market structure?

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

What is the difference between "shutting down temporarily" and "exiting the industry"?

Mark Frost grows apples in a perfectly competitive market.If we drew a line in a graph that illustrates Mark's total revenue from selling apples,it would be

What is productive efficiency?

An industry's long-run supply curve shows

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

Figure 12-13 -Refer to Figure 12-13.Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity.If the firm represented in the diagram continues to stay in business,in the long-run equilibrium

Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 12-5.If the market price is $20,what is the amount of the firm's profit?

If a firm's fixed cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Figure 12-7 Figure 12-7 illustrates the cost curves of a perfectly competitive firm. -Refer to Figure 12-7.If the market price is P3 the firm

Which of the following arguments could be made as evidence that the market for produce sold at a farmers' market is perfectly competitive?

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

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

A firm would decide to shut down if its production resulted in

Figure 12-17 The graphs in Figure 12-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry. -Refer to Figure 12-17.Which of the following statements is true?

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21.Which of the following will happen?

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 12-13 -Refer to Figure 12-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.If the firm represented in the diagram continues to stay in business,in the long-run equilibrium

Figure 12-7 Figure 12-7 illustrates the cost curves of a perfectly competitive firm. -Refer to Figure 12-7.If the market price is P₃ the firm