Question 1

Figure 7-C  
-Refer to Figure 7-C.Total revenue for the firm in Graph C equals:

Accepted Answer

A) $120. 
B) $150. 
C) $600. 
D) $720. 
E) none of the above. 
A) $120. 
B) $150. 
C) $600. 
D) $720. 
E) none of the above.

Question 2

The fast-food industry is generally considered to be a constant cost industry in regards to its use of labor as an input.Why?

Accepted Answer

A) Few people prefer to work in the industry. 
B) Available labor is in short supply. 
C) Firms use a relatively small share of unskilled labor in most cities. 
D) The productivity of the workers is relatively low. 
A) Few people prefer to work in the industry. 
B) Available labor is in short supply. 
C) Firms use a relatively small share of unskilled labor in most cities. 
D) The productivity of the workers is relatively low.

Question 3

In long run equilibrium, a perfectly competitive firm:

Accepted Answer

A) can earn positive economic profits. 
B) earns zero economic profits. 
C) can earn negative economic profits. 
D) can do any of the above. 
A) can earn positive economic profits. 
B) earns zero economic profits. 
C) can earn negative economic profits. 
D) can do any of the above.

Question 4

Productive efficiency requires production at a quantity such that:

Accepted Answer

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

Question 5

For a perfectly competitive firm, which of the following is always true?

Accepted Answer

A) P = MR only 
B) ATC = MR only 
C) AR = D only 
D) P = MR = D 
E) none of the above 
A) P = MR only 
B) ATC = MR only 
C) AR = D only 
D) P = MR = D 
E) none of the above

Question 6

Figure 7-A  
-Refer to Figure 7-B.Suppose the market price equals $88 and the firm is currently producing 600 units of output.In this situation, the firm:

Accepted Answer

A) is maximizing profit. 
B) should increase production of output in order to maximize profit. 
C) should decrease production of output in order to maximize profit. 
D) should shut down in order to minimize economic losses. 
A) is maximizing profit. 
B) should increase production of output in order to maximize profit. 
C) should decrease production of output in order to maximize profit. 
D) should shut down in order to minimize economic losses.

Question 7

If a price-taking firm selling in a competitive market raises the price of its product above the market-clearing price, it will:

Accepted Answer

A) increase its profits. 
B) maintain its profit base since the demand for the product is inelastic. 
C) be able to increase its sales. 
D) not be able to sell any output. 
A) increase its profits. 
B) maintain its profit base since the demand for the product is inelastic. 
C) be able to increase its sales. 
D) not be able to sell any output.

Question 8

The market demand curve in a perfectly competitive industry is horizontal, while the demand curve faced by an individual perfectly competitive firm is downward sloping.

Accepted Answer

A) True 
 B)False

Question 9

Figure 7-D  
-Refer to Figure 7-D.A profit-maximizing firm in a perfectly competitive industry will produce ____ units of output if the market price equals $45.

Accepted Answer

A) 800 
B) 650 
C) 450 
D) 200 
E) 0 
A) 800 
B) 650 
C) 450 
D) 200 
E) 0

Question 10

Table 7-A
Revenue and Cost Data for a Perfectly Competitive Firm
 $$\begin{array} { c c c c c c c } 
\text { Daily } & \text { Price } & \text { Total } & \text { TFC } & \text { TVC } & \text { TC } & \text { Profit } \
\text { Output } && \text { Revenue } & & & & \
0 & \$ 20 & \$0 & V&\$0& \$ 50 & - \$ 50 \
1 & \$ 20 & \$ 20 & \$ 50 & \$ 12 & \$ W & - \$ 42 \
2 & \mathbf { X } & \$ 40 & \$ 50 & Y & \$ 78 & - \$ 38 \
3 & \$ 20 & \$ 60 & \$ 50 & \$ 45 & \$ 95 & Z
\end{array}$$
-Refer to Table 7-A.The AVC of producing three units of output equals:

Accepted Answer

A) $15. 
B) $31.66. 
C) $45. 
D) $50. 
E) 95. 
A) $15. 
B) $31.66. 
C) $45. 
D) $50. 
E) 95.

Question 11

In long-run equilibrium under perfect competition:

Accepted Answer

A) price will equal minimum average fixed cost. 
B) firms will earn economic profits due to the existence of barriers to entry. 
C) the demand curve facing individual firms will fall to the level tangent to the minimum average total cost curve. 
D) firms will produce at the level of output where marginal revenue exceeds marginal cost by the greatest dollar amount. 
A) price will equal minimum average fixed cost. 
B) firms will earn economic profits due to the existence of barriers to entry. 
C) the demand curve facing individual firms will fall to the level tangent to the minimum average total cost curve. 
D) firms will produce at the level of output where marginal revenue exceeds marginal cost by the greatest dollar amount.

Question 12

Which of the following is false of perfectly competitive firms?

Accepted Answer

A) A perfectly competitive market is approximated most closely in highly organized markets for securities and agricultural commodities. 
B) The perfectly competitive model does not require any knowledge on the part of individual buyers and sellers about market demand and supply curves. 
C) Because perfectly competitive firms are price takers, each firm's demand curve remains unchanged even when the market price changes. 
D) In a perfectly competitive market, marginal revenue is constant and equal to the market price. 
A) A perfectly competitive market is approximated most closely in highly organized markets for securities and agricultural commodities. 
B) The perfectly competitive model does not require any knowledge on the part of individual buyers and sellers about market demand and supply curves. 
C) Because perfectly competitive firms are price takers, each firm's demand curve remains unchanged even when the market price changes. 
D) In a perfectly competitive market, marginal revenue is constant and equal to the market price.

Question 13

Which of the following is true?

Accepted Answer

A) The objective of the firm is to maximize profits, by producing the amount that equates total revenue and total cost. 
B) The objective of the firm is to maximize profits, by producing the amount that equates average revenue and average total cost. 
C) The objective of the firm is to maximize profits, by producing the amount that equates average revenue and average variable cost. 
D) The objective of the firm is to maximize profits, by producing the amount that equates marginal revenue and marginal cost. 
E) None of the above is true. 
A) The objective of the firm is to maximize profits, by producing the amount that equates total revenue and total cost. 
B) The objective of the firm is to maximize profits, by producing the amount that equates average revenue and average total cost. 
C) The objective of the firm is to maximize profits, by producing the amount that equates average revenue and average variable cost. 
D) The objective of the firm is to maximize profits, by producing the amount that equates marginal revenue and marginal cost. 
E) None of the above is true.

Question 14

If in the long run, a firm doubles its output and its average cost falls as a result:

Accepted Answer

A) the firm is encountering diminishing returns. 
B) technological progress must have occurred. 
C) the firm is encountering economies of scale 
D) it must be a natural monopoly. 
E) none of the above need be true. 
A) the firm is encountering diminishing returns. 
B) technological progress must have occurred. 
C) the firm is encountering economies of scale 
D) it must be a natural monopoly. 
E) none of the above need be true.

Question 15

If a profit-maximizing firm finds that price exceeds average variable cost and marginal revenue is greater than marginal cost, it should:

Accepted Answer

A) reduce output, but continue producing in the short run. 
B) increase output. 
C) shut down. 
D) not alter its production level since it is earning a profit. 
A) reduce output, but continue producing in the short run. 
B) increase output. 
C) shut down. 
D) not alter its production level since it is earning a profit.

Question 16

A firm in a perfectly competitive industry will expand output as long as:

Accepted Answer

A) marginal revenue is less than average revenue. 
B) marginal cost is less than marginal revenue. 
C) marginal cost is less than average total cost. 
D) marginal revenue is less than average total cost. 
E) marginal revenue is less than marginal cost. 
A) marginal revenue is less than average revenue. 
B) marginal cost is less than marginal revenue. 
C) marginal cost is less than average total cost. 
D) marginal revenue is less than average total cost. 
E) marginal revenue is less than marginal cost.

Question 17

Figure 7-C  
-Refer to Figure 7-C.If the market price decreased to $4.70 in Graph B, this firm should:

Accepted Answer

A) immediately shut down if price is greater than average variable cost. 
B) increase output. 
C) decrease output. 
D) continue producing the same level of output. 
A) immediately shut down if price is greater than average variable cost. 
B) increase output. 
C) decrease output. 
D) continue producing the same level of output.

Question 18

A firm receives $10 per unit at an equilibrium level of output of 80 units.The average total cost at 80 units of output is $8.The firm makes a total economic profit of:

Accepted Answer

A) $120. 
B) $160. 
C) $100 
D) $80 
A) $120. 
B) $160. 
C) $100 
D) $80

Question 19

A firm that is a price taker:

Accepted Answer

A) competes with other producers who produce differentiated products. 
B) must be a relatively large producer compared to other firms in the market. 
C) can exert a major influence on the overall market. 
D) will lose all sales if it prices its product in excess of the market equilibrium price. 
A) competes with other producers who produce differentiated products. 
B) must be a relatively large producer compared to other firms in the market. 
C) can exert a major influence on the overall market. 
D) will lose all sales if it prices its product in excess of the market equilibrium price.

Question 20

Figure 7-H  
-Complete the chart below for a firm that is operating under conditions of perfect competition where the market price is $22.What level of output maximizes the firm's profits?
 $$\begin{array} { | c | c | c | c | c | c | c | } 
\hline \text { Quantity } & \text { Price } & \begin{array} { c } 
\text { Tatal } \
\text { Revenue }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Revenua }
\end{array} & \begin{array} { c } 
\text { Margiral } \
\text { Cast }
\end{array} & \begin{array} { c } 
\text { Trtal } \
\text { Cast }
\end{array} & \begin{array} { c } 
\text { Trtal } \
\text { Prafit }
\end{array} \
\hline 20 & & & & 16 & 389 & \
\hline 21 & & & & & 407 & \
\hline 22 & & & & & 427 & \
\hline 23 & & & & & 454 & \
\hline 24 & & & & & 484 & \
\hline
\end{array}$$

Accepted Answer

@#IMG-DLM& The firm maximizes

Figure 7-C -Refer to Figure 7-C.Total revenue for the firm in Graph C equals:

The fast-food industry is generally considered to be a constant cost industry in regards to its use of labor as an input.Why?

In long run equilibrium, a perfectly competitive firm:

Productive efficiency requires production at a quantity such that:

For a perfectly competitive firm, which of the following is always true?

Figure 7-A -Refer to Figure 7-B.Suppose the market price equals $88 and the firm is currently producing 600 units of output.In this situation, the firm:

If a price-taking firm selling in a competitive market raises the price of its product above the market-clearing price, it will:

The market demand curve in a perfectly competitive industry is horizontal, while the demand curve faced by an individual perfectly competitive firm is downward sloping.

Figure 7-D -Refer to Figure 7-D.A profit-maximizing firm in a perfectly competitive industry will produce ____ units of output if the market price equals $45.

Table 7-A Revenue and Cost Data for a Perfectly Competitive Firm Daily Price Total TFC TVC TC Profit Output Revenue 0 \ 20 \0 V \0 \ 50 -\ 50 1 \ 20 \ 20 \ 50 \ 12 \ W -\ 42 2 \ 40 \ 50 Y \ 78 -\ 38 3 \ 20 \ 60 \ 50 \ 45 \ 95 Z -Refer to Table 7-A.The AVC of producing three units of output equals:

In long-run equilibrium under perfect competition:

Which of the following is false of perfectly competitive firms?

Which of the following is true?

If in the long run, a firm doubles its output and its average cost falls as a result:

If a profit-maximizing firm finds that price exceeds average variable cost and marginal revenue is greater than marginal cost, it should:

A firm in a perfectly competitive industry will expand output as long as:

Figure 7-C -Refer to Figure 7-C.If the market price decreased to $4.70 in Graph B, this firm should:

A firm receives $10 per unit at an equilibrium level of output of 80 units.The average total cost at 80 units of output is $8.The firm makes a total economic profit of:

A firm that is a price taker:

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

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The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

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Exam 7: Firms in Competitive Markets

Figure 7-C -Refer to Figure 7-C.Total revenue for the firm in Graph C equals:

The fast-food industry is generally considered to be a constant cost industry in regards to its use of labor as an input.Why?

In long run equilibrium, a perfectly competitive firm:

Productive efficiency requires production at a quantity such that:

For a perfectly competitive firm, which of the following is always true?

Figure 7-A -Refer to Figure 7-B.Suppose the market price equals $88 and the firm is currently producing 600 units of output.In this situation, the firm:

If a price-taking firm selling in a competitive market raises the price of its product above the market-clearing price, it will:

The market demand curve in a perfectly competitive industry is horizontal, while the demand curve faced by an individual perfectly competitive firm is downward sloping.

Figure 7-D -Refer to Figure 7-D.A profit-maximizing firm in a perfectly competitive industry will produce ____ units of output if the market price equals $45.

Table 7-A Revenue and Cost Data for a Perfectly Competitive Firm Daily Price Total TFC TVC TC Profit Output Revenue 0 \ 20 \0 V \0 \ 50 -\ 50 1 \ 20 \ 20 \ 50 \ 12 \ W -\ 42 2 \ 40 \ 50 Y \ 78 -\ 38 3 \ 20 \ 60 \ 50 \ 45 \ 95 Z -Refer to Table 7-A.The AVC of producing three units of output equals:

In long-run equilibrium under perfect competition:

Which of the following is false of perfectly competitive firms?

Which of the following is true?

If in the long run, a firm doubles its output and its average cost falls as a result:

If a profit-maximizing firm finds that price exceeds average variable cost and marginal revenue is greater than marginal cost, it should:

A firm in a perfectly competitive industry will expand output as long as:

Figure 7-C -Refer to Figure 7-C.If the market price decreased to $4.70 in Graph B, this firm should:

A firm receives $10 per unit at an equilibrium level of output of 80 units.The average total cost at 80 units of output is $8.The firm makes a total economic profit of:

A firm that is a price taker:

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

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