Question 1

In the short run, the price at which a firm's total revenues equal its total costs is

Accepted Answer

A)  a point of positive profits. 
B)  a no return price. 
C)  the short-run shutdown point. 
D)  the short-run break-even point. 
A)  a point of positive profits. 
B)  a no return price. 
C)  the short-run shutdown point. 
D)  the short-run break-even point.

Question 2

The demand curve faced by a perfectly competitive industry

Accepted Answer

A)  slopes upward. 
B)  slopes downward. 
C)  has no slope. 
D)  is horizontal. 
A)  slopes upward. 
B)  slopes downward. 
C)  has no slope. 
D)  is horizontal.

Question 3

Assuming fixed factor prices, the short-run industry supply curve for a perfectly competitive industry is equal to the sum of the

Accepted Answer

A)  AVC curves above minimum AVC. 
B)  ATC curves above minimum ATC. 
C)  MC curves above minimum AVC. 
D)  MC curves above minimum ATC. 
A)  AVC curves above minimum AVC. 
B)  ATC curves above minimum ATC. 
C)  MC curves above minimum AVC. 
D)  MC curves above minimum ATC.

Question 4

-In the above figure, what is the price the firm receives if the output is 8?

Accepted Answer

A)  $10 
B)  $2 
C)  $7 
D)  $8 
A)  $10 
B)  $2 
C)  $7 
D)  $8

Question 5

In the long run when a perfectly competitive firm experiences negative economic profits

Accepted Answer

A)  the high barriers to entry prevent further competition. 
B)  that firm exit the industry. 
C)  new firms enter the industry. 
D)  firms have no incentive to exit or enter the industry. 
A)  the high barriers to entry prevent further competition. 
B)  that firm exit the industry. 
C)  new firms enter the industry. 
D)  firms have no incentive to exit or enter the industry.

Question 6

-In the above figure, the firm will shut down if price falls below

Accepted Answer

A)  F. 
B)  I. 
C)  H. 
D)  E. 
A)  F. 
B)  I. 
C)  H. 
D)  E.

Question 7

The demand curve for the product of a perfectly competitive firm is

Accepted Answer

A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  elastic at high prices and inelastic at low prices. 
D)  identical to the elasticity of demand on the market demand curve. 
A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  elastic at high prices and inelastic at low prices. 
D)  identical to the elasticity of demand on the market demand curve.

Question 8

If a perfectly competitive industry is in long-run equilibrium, then

Accepted Answer

A)  price equals average cost. 
B)  price is greater than average cost and equal to marginal cost. 
C)  all firms earn the same accounting profits. 
D)  marginal cost is less than average cost. 
A)  price equals average cost. 
B)  price is greater than average cost and equal to marginal cost. 
C)  all firms earn the same accounting profits. 
D)  marginal cost is less than average cost.

Question 9

A firm will continue to produce in the short run even though economic profits are negative as long as

Accepted Answer

A)  the amount of the loss is no greater than the amount of fixed cost. 
B)  MC = MR. 
C)  it earned positive economic profits last year. 
D)  it has fixed obligations to pay. 
A)  the amount of the loss is no greater than the amount of fixed cost. 
B)  MC = MR. 
C)  it earned positive economic profits last year. 
D)  it has fixed obligations to pay.

Question 10

The rising portion of a perfectly competitive firm's marginal cost curve, above the intersection with AVC, is its

Accepted Answer

A)  demand curve. 
B)  economic profit. 
C)  supply curve. 
D)  accounting profit. 
A)  demand curve. 
B)  economic profit. 
C)  supply curve. 
D)  accounting profit.

Question 11

Why is the demand curve horizontal for a perfectly competitive firm?

Accepted Answer

The demand curve for a perfect

Question 12

In principle, how do we determine a perfectly competitive firm's profit-maximizing output and maximum profits given information about the market clearing price, and about the marginal cost and average total cost curves of the firm? Explain in words.

Accepted Answer

For a perfectly competitive firm, the ma

Question 13

Which of the following is closest to a perfectly competitive market?

Accepted Answer

A)  the pizza market 
B)  the market for breakfast cereal 
C)  the market for corn 
D)  the market for automobiles 
A)  the pizza market 
B)  the market for breakfast cereal 
C)  the market for corn 
D)  the market for automobiles

Question 14

-Refer to the above figure. The figure represents the market demand and supply curves for widgets. What statement can be made about the demand curve for an individual firm in this market?

Accepted Answer

A)  An individual firm's demand curve will be a smaller version of the market demand curve. 
B)  An individual firm's demand curve will be horizontal at $5. 
C)  An individual firm's demand curve will be horizontal at a price below $5. 
D)  An individual firm's demand curve cannot be determined from the graph above. 
A)  An individual firm's demand curve will be a smaller version of the market demand curve. 
B)  An individual firm's demand curve will be horizontal at $5. 
C)  An individual firm's demand curve will be horizontal at a price below $5. 
D)  An individual firm's demand curve cannot be determined from the graph above.

Question 15

Why would it be economically inefficient for a firm to charge the price of a good greater than its marginal cost?

Accepted Answer

When price equals marginal cost, the mar

Question 16

"In the long run, a perfectly competitive firm's average total cost is always below the market clearing price." Agree or disagree? Why?

Accepted Answer

Disagree. In the long run, a perfectly c

Question 17

Which of the following could generate economic profits for perfectly competitive firms in the short run, if they initially earn zero economic profits?

Accepted Answer

A)  a fall in demand 
B)  a unit tax on output 
C)  an increase in total fixed costs 
D)  a decrease in input prices 
A)  a fall in demand 
B)  a unit tax on output 
C)  an increase in total fixed costs 
D)  a decrease in input prices

Question 18

A firm in a perfectly competitive industry faces the following cost and revenue conditions: ATC = $6; AVC = $3; MR = MC = $5. The firm is

Accepted Answer

A)  earning economic profits. 
B)  experiencing economic losses. 
C)  experiencing zero profits. 
D)  in a position in which it should shut down. 
A)  earning economic profits. 
B)  experiencing economic losses. 
C)  experiencing zero profits. 
D)  in a position in which it should shut down.

Question 19

-Refer to the above figure. Line C in Panel B does NOT represent

Accepted Answer

A)  the equilibrium price. 
B)  average revenue. 
C)  total revenue. 
D)  marginal revenue. 
A)  the equilibrium price. 
B)  average revenue. 
C)  total revenue. 
D)  marginal revenue.

Question 20

-If a firm is earning short-run economic profits shown in the above figure, in the long run

Accepted Answer

A)  firms exit the industry, the market supply curve shifts rightward, and the market price falls. 
B)  firms enter the industry, the market supply curve shifts rightward, and the market price falls. 
C)  firms exit the industry, the market supply curve shifts leftward, and the market price falls. 
D)  firms enter the industry, the market supply curve shifts rightward, and the market price rises. 
A)  firms exit the industry, the market supply curve shifts rightward, and the market price falls. 
B)  firms enter the industry, the market supply curve shifts rightward, and the market price falls. 
C)  firms exit the industry, the market supply curve shifts leftward, and the market price falls. 
D)  firms enter the industry, the market supply curve shifts rightward, and the market price rises.

Exam 23: Perfect Competition

In the short run, the price at which a firm's total revenues equal its total costs is

The demand curve faced by a perfectly competitive industry

Assuming fixed factor prices, the short-run industry supply curve for a perfectly competitive industry is equal to the sum of the

-In the above figure, what is the price the firm receives if the output is 8?

In the long run when a perfectly competitive firm experiences negative economic profits

-In the above figure, the firm will shut down if price falls below

The demand curve for the product of a perfectly competitive firm is

If a perfectly competitive industry is in long-run equilibrium, then

A firm will continue to produce in the short run even though economic profits are negative as long as

The rising portion of a perfectly competitive firm's marginal cost curve, above the intersection with AVC, is its

Why is the demand curve horizontal for a perfectly competitive firm?

In principle, how do we determine a perfectly competitive firm's profit-maximizing output and maximum profits given information about the market clearing price, and about the marginal cost and average total cost curves of the firm? Explain in words.

Which of the following is closest to a perfectly competitive market?

-Refer to the above figure. The figure represents the market demand and supply curves for widgets. What statement can be made about the demand curve for an individual firm in this market?

Why would it be economically inefficient for a firm to charge the price of a good greater than its marginal cost?

"In the long run, a perfectly competitive firm's average total cost is always below the market clearing price." Agree or disagree? Why?

Which of the following could generate economic profits for perfectly competitive firms in the short run, if they initially earn zero economic profits?

A firm in a perfectly competitive industry faces the following cost and revenue conditions: ATC = $6; AVC = $3; MR = MC = $5. The firm is

-Refer to the above figure. Line C in Panel B does NOT represent

-If a firm is earning short-run economic profits shown in the above figure, in the long run

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters