Question 1

The marginal revenue curve of a perfectly competitive firm

Accepted Answer

A)  has a vertical intercept equal to exactly one-half of the vertical intercept for the demand curve. 
B)  lies below the demand curve and above the average revenue curve. 
C)  intersects the average revenue curve from above at the maximum point of the average revenue curve. 
D)  is also the demand curve faced by the firm. 
A)  has a vertical intercept equal to exactly one-half of the vertical intercept for the demand curve. 
B)  lies below the demand curve and above the average revenue curve. 
C)  intersects the average revenue curve from above at the maximum point of the average revenue curve. 
D)  is also the demand curve faced by the firm.

Question 2

For a firm in a perfectly competitive industry, the demand curve for its own product is

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  upward sloping. 
D)  downward sloping. 
A)  horizontal. 
B)  vertical. 
C)  upward sloping. 
D)  downward sloping.

Question 3

If marginal revenue is greater than marginal cost, the firm should

Accepted Answer

A)  raise price. 
B)  raise marginal revenue. 
C)  increase its rate of output. 
D)  decrease its rate of output. 
A)  raise price. 
B)  raise marginal revenue. 
C)  increase its rate of output. 
D)  decrease its rate of output.

Question 4

What are signals? How do profits function as signals?

Accepted Answer

Signals are compact ways of conveying to

Question 5

In reference to the long-run firm competitive equilibrium diagram, which of the following statements is INCORRECT?

Accepted Answer

A)  In the long run, the firm has no incentive to alter its scale of operations. 
B)  Because profits must be zero in the long run, the firm's short-run average costs (SA
C)  must equal P at Qe, which occurs at minimum SAC. 
C)  In the long run, the firm operates where price, marginal revenue, marginal cost, short-run minimum average cost, and long-run minimum average cost all are equal. 
D)  In the long run, this firm must be part of a constant-cost industry, because its marginal revenue curve is perfectly elastic. 
A)  In the long run, the firm has no incentive to alter its scale of operations. 
B)  Because profits must be zero in the long run, the firm's short-run average costs (SA
C)  must equal P at Qe, which occurs at minimum SAC. 
C)  In the long run, the firm operates where price, marginal revenue, marginal cost, short-run minimum average cost, and long-run minimum average cost all are equal. 
D)  In the long run, this firm must be part of a constant-cost industry, because its marginal revenue curve is perfectly elastic.

Question 6

In a perfectly competitive market, if P > MC, then

Accepted Answer

A)  too little output is being produced. 
B)  too much output is being produced. 
C)  production is efficient, as the firm is earning profits. 
D)  the firm is paying a price for resources that is too high. 
A)  too little output is being produced. 
B)  too much output is being produced. 
C)  production is efficient, as the firm is earning profits. 
D)  the firm is paying a price for resources that is too high.

Question 7

When demand is perfectly elastic, marginal revenue is

Accepted Answer

A)  zero. 
B)  equal to price. 
C)  declining. 
D)  increasing. 
A)  zero. 
B)  equal to price. 
C)  declining. 
D)  increasing.

Question 8

-In the above figure, the market price charged by this profit-maximizing, perfectly competitive firm is

Accepted Answer

A)  $5 per unit of output. 
B)  $10 per unit of output. 
C)  $8 per unit of output. 
D)  $14 per unit of output. 
A)  $5 per unit of output. 
B)  $10 per unit of output. 
C)  $8 per unit of output. 
D)  $14 per unit of output.

Question 9

In a perfectly competitive market, if P < MC, then

Accepted Answer

A)  too little output is being produced. 
B)  too much output is being produced. 
C)  production is efficient, as the firm is earning profits. 
D)  the firm is paying a price for resources that is too high. 
A)  too little output is being produced. 
B)  too much output is being produced. 
C)  production is efficient, as the firm is earning profits. 
D)  the firm is paying a price for resources that is too high.

Question 10

Factors that cause the short-run supply curve to change are factors that affect

Accepted Answer

A)  demand. 
B)  fixed costs. 
C)  variable costs. 
D)  the market but not the individual firm. 
A)  demand. 
B)  fixed costs. 
C)  variable costs. 
D)  the market but not the individual firm.

Question 11

-Refer to the above table. This firm operates in a perfectly competitive market in which the market price is $10 per unit. What is its profit-maximizing rate of production?

Accepted Answer

A)  104 units 
B)  106 units 
C)  108 units 
D)  110 units 
A)  104 units 
B)  106 units 
C)  108 units 
D)  110 units

Question 12

If a firm is producing an output rate at which marginal cost is greater than price, the firm

Accepted Answer

A)  is sustaining economic loss. 
B)  should increase its output level. 
C)  should reduce its output level. 
D)  will not be covering its fixed cost. 
A)  is sustaining economic loss. 
B)  should increase its output level. 
C)  should reduce its output level. 
D)  will not be covering its fixed cost.

Question 13

Suppose a perfectly competitive industry is in long-run equilibrium. If a decrease in demand leads to a lower long-run price, we know that

Accepted Answer

A)  this is a decreasing-cost industry. 
B)  this is an increasing-cost industry. 
C)  some firms will be losing money in the long run. 
D)  after further adjustments, price will rise to its original level. 
A)  this is a decreasing-cost industry. 
B)  this is an increasing-cost industry. 
C)  some firms will be losing money in the long run. 
D)  after further adjustments, price will rise to its original level.

Question 14

The long-run supply curve in a constant-cost, perfectly competitive industry is

Accepted Answer

A)  perfectly inelastic. 
B)  upward sloping. 
C)  downward sloping. 
D)  perfectly elastic. 
A)  perfectly inelastic. 
B)  upward sloping. 
C)  downward sloping. 
D)  perfectly elastic.

Question 15

-At the short-run break-even point, the firm is

Accepted Answer

A)  earning zero accounting profit. 
B)  losing money. 
C)  earning zero economic profit. 
D)  ready to shutdown. 
A)  earning zero accounting profit. 
B)  losing money. 
C)  earning zero economic profit. 
D)  ready to shutdown.

Question 16

-The firm in the above figure breaks even when market price is

Accepted Answer

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

Question 17

A perfectly competitive industry's market price is found by

Accepted Answer

A)  finding the point on the market demand curve where the largest number of units will be purchased. 
B)  locating the intersection of the market demand and market supply curves. 
C)  the horizontal summation of all the industry firms' individual supply curves. 
D)  identifying the price at which each firm realizes its largest economic profit. 
A)  finding the point on the market demand curve where the largest number of units will be purchased. 
B)  locating the intersection of the market demand and market supply curves. 
C)  the horizontal summation of all the industry firms' individual supply curves. 
D)  identifying the price at which each firm realizes its largest economic profit.

Question 18

An industry whose total output can be increased without a change in long-run per-unit costs is a(n)

Accepted Answer

A)  increasing-cost industry. 
B)  constant-cost industry. 
C)  zero-cost industry. 
D)  decreasing-cost industry. 
A)  increasing-cost industry. 
B)  constant-cost industry. 
C)  zero-cost industry. 
D)  decreasing-cost industry.

Question 19

A perfectly competitive firm is selling 300 units of output at $4 each. At this output level, total fixed cost is $100 and total variable cost is $500. The firm

Accepted Answer

A)  is maximizing its profit. 
B)  is earning a profit, but not necessarily the maximum profit. 
C)  is experiencing an economic loss. 
D)  should shut down. 
A)  is maximizing its profit. 
B)  is earning a profit, but not necessarily the maximum profit. 
C)  is experiencing an economic loss. 
D)  should shut down.

Question 20

A decreasing-cost industry will have

Accepted Answer

A)  a perfectly elastic long-run supply curve. 
B)  a perfectly inelastic long-run supply curve. 
C)  an upward sloping demand curve in the long run. 
D)  a downward sloping supply curve in the long run. 
A)  a perfectly elastic long-run supply curve. 
B)  a perfectly inelastic long-run supply curve. 
C)  an upward sloping demand curve in the long run. 
D)  a downward sloping supply curve in the long run.

Exam 23: Perfect Competition

The marginal revenue curve of a perfectly competitive firm

For a firm in a perfectly competitive industry, the demand curve for its own product is

If marginal revenue is greater than marginal cost, the firm should

What are signals? How do profits function as signals?

In reference to the long-run firm competitive equilibrium diagram, which of the following statements is INCORRECT?

In a perfectly competitive market, if P > MC, then

When demand is perfectly elastic, marginal revenue is

-In the above figure, the market price charged by this profit-maximizing, perfectly competitive firm is

In a perfectly competitive market, if P < MC, then

Factors that cause the short-run supply curve to change are factors that affect

-Refer to the above table. This firm operates in a perfectly competitive market in which the market price is $10 per unit. What is its profit-maximizing rate of production?

If a firm is producing an output rate at which marginal cost is greater than price, the firm

Suppose a perfectly competitive industry is in long-run equilibrium. If a decrease in demand leads to a lower long-run price, we know that

The long-run supply curve in a constant-cost, perfectly competitive industry is

-At the short-run break-even point, the firm is

-The firm in the above figure breaks even when market price is

A perfectly competitive industry's market price is found by

An industry whose total output can be increased without a change in long-run per-unit costs is a(n)

A perfectly competitive firm is selling 300 units of output at $4 each. At this output level, total fixed cost is $100 and total variable cost is $500. The firm

A decreasing-cost industry will have

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

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