Question 1

A situation in which the price charged is less than society's opportunity cost would lead to

Accepted Answer

A)  too little being produced. 
B)  too much being produced. 
C)  an efficient amount being produced. 
D)  marginal cost pricing. 
A)  too little being produced. 
B)  too much being produced. 
C)  an efficient amount being produced. 
D)  marginal cost pricing.

Question 2

-Refer to the above table. The table represents information on the costs for Ajax Corporation. Ajax operates in a perfectly competitive market and the price of the product is $7. What will be the value of total revenue when quantity sold equals 2?

Accepted Answer

A)  $7 
B)  $14 
C)  $21 
D)  $16 
A)  $7 
B)  $14 
C)  $21 
D)  $16

Question 3

The price per unit times the total quantity sold is

Accepted Answer

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

Question 4

-Refer to the above figure. If the market price is equal to A, which statement can be made about economic profits?

Accepted Answer

A)  Economic profits are positive and equal to ABCG. 
B)  Economic profits are positive and equal to ABEF. 
C)  Economic profits are negative and equal to GCEF. 
D)  Economic profits are negative and equal to ABQ0.   
A)  Economic profits are positive and equal to ABCG. 
B)  Economic profits are positive and equal to ABEF. 
C)  Economic profits are negative and equal to GCEF. 
D)  Economic profits are negative and equal to ABQ0.

Question 5

What is marginal cost pricing? Why is marginal cost pricing important?

Accepted Answer

Marginal cost pricing is a situation in

Question 6

In a perfectly competitive industry, any restrictions that prevent new firms from entering

Accepted Answer

A)  lead to negative profits. 
B)  guarantee that all existing firms will earn exactly a zero profit. 
C)  hinder economic efficiency. 
D)  reduce the average cost of production. 
A)  lead to negative profits. 
B)  guarantee that all existing firms will earn exactly a zero profit. 
C)  hinder economic efficiency. 
D)  reduce the average cost of production.

Question 7

The break-even price for a perfectly competitive firm is the price that is equal to

Accepted Answer

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

Question 8

Describe and explain how a perfectly competitive firm's demand curve is found.

Accepted Answer

The interaction of supply and demand in

Question 9

Which of the following conditions is TRUE for a profit-maximizing firm in a perfectly competitive industry?

Accepted Answer

A)  MR = TC 
B)  ATC = AFC 
C)  MR = MC 
D)  MC = AVC 
A)  MR = TC 
B)  ATC = AFC 
C)  MR = MC 
D)  MC = AVC

Question 10

When marginal cost pricing occurs

Accepted Answer

A)  price equals the additional cost society incurs in producing the next unit of an item. 
B)  the firm can only break even if it does not set price to marginal cost. 
C)  price equals average variable cost but exceeds average total cost. 
D)  the firm is at the shutdown point. 
A)  price equals the additional cost society incurs in producing the next unit of an item. 
B)  the firm can only break even if it does not set price to marginal cost. 
C)  price equals average variable cost but exceeds average total cost. 
D)  the firm is at the shutdown point.

Question 11

Suppose that at the current level of output, price = $12, MC = $4, AVC = $7, and ATC = $11. Which of the following is TRUE?

Accepted Answer

A)  The firm should decrease output. 
B)  The firm should shut down. 
C)  The firm should increase output. 
D)  The firm should maintain the current level of output. 
A)  The firm should decrease output. 
B)  The firm should shut down. 
C)  The firm should increase output. 
D)  The firm should maintain the current level of output.

Question 12

-In the above figure, if d3 is the relevant demand curve for this firm, then which level of output will maximize this firm's profits or minimize its losses?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 13

The demand curve for a perfectly competitive industry is

Accepted Answer

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

Question 14

-Using the above figure, the price facing the perfectly competitive firm in the long run will be

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  P4.

Question 15

If a firm shuts down in the short run

Accepted Answer

A)  it will lose its operating costs. 
B)  its losses will be equal to zero. 
C)  it will incur its fixed costs. 
D)  it will incur only its explicit costs. 
A)  it will lose its operating costs. 
B)  its losses will be equal to zero. 
C)  it will incur its fixed costs. 
D)  it will incur only its explicit costs.

Question 16

For a perfectly competitive firm at its long-run equilibrium

Accepted Answer

A)  P = MR = MC = AC. 
B)  P = MR > MC. 
C)  accounting profit must be zero. 
D)  there are no opportunity costs to be concerned with. 
A)  P = MR = MC = AC. 
B)  P = MR > MC. 
C)  accounting profit must be zero. 
D)  there are no opportunity costs to be concerned with.

Question 17

-Refer to the above table. The table represents information on the costs for Ajax Corporation. Ajax operates in a perfectly competitive market and the price of the product is $10. What does total revenue equal when quantity equals 4?

Accepted Answer

A)  $4 
B)  $6 
C)  $36 
D)  $40 
A)  $4 
B)  $6 
C)  $36 
D)  $40

Question 18

When a perfectly competitive firm experiences positive economic profits in the short run

Accepted Answer

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

Question 19

For a perfectly competitive firm, when MC is less than MR

Accepted Answer

A)  the producer has an incentive to expand output. 
B)  the producer has an incentive to decrease output. 
C)  the producer has no incentive to change production. 
D)  economic profits must be positive. 
A)  the producer has an incentive to expand output. 
B)  the producer has an incentive to decrease output. 
C)  the producer has no incentive to change production. 
D)  economic profits must be positive.

Question 20

-In the above figure, if the market price is less than $7, the firm

Accepted Answer

A)  produces 10 units. 
B)  produces 8 units. 
C)  produces 0 units. 
D)  produces 11 units. 
A)  produces 10 units. 
B)  produces 8 units. 
C)  produces 0 units. 
D)  produces 11 units.

Exam 23: Perfect Competition

A situation in which the price charged is less than society's opportunity cost would lead to

-Refer to the above table. The table represents information on the costs for Ajax Corporation. Ajax operates in a perfectly competitive market and the price of the product is $7. What will be the value of total revenue when quantity sold equals 2?

The price per unit times the total quantity sold is

-Refer to the above figure. If the market price is equal to A, which statement can be made about economic profits?

What is marginal cost pricing? Why is marginal cost pricing important?

In a perfectly competitive industry, any restrictions that prevent new firms from entering

The break-even price for a perfectly competitive firm is the price that is equal to

Describe and explain how a perfectly competitive firm's demand curve is found.

Which of the following conditions is TRUE for a profit-maximizing firm in a perfectly competitive industry?

When marginal cost pricing occurs

Suppose that at the current level of output, price = $12, MC = $4, AVC = $7, and ATC = $11. Which of the following is TRUE?

-In the above figure, if d3 is the relevant demand curve for this firm, then which level of output will maximize this firm's profits or minimize its losses?

The demand curve for a perfectly competitive industry is

-Using the above figure, the price facing the perfectly competitive firm in the long run will be

If a firm shuts down in the short run

For a perfectly competitive firm at its long-run equilibrium

-Refer to the above table. The table represents information on the costs for Ajax Corporation. Ajax operates in a perfectly competitive market and the price of the product is $10. What does total revenue equal when quantity equals 4?

When a perfectly competitive firm experiences positive economic profits in the short run

For a perfectly competitive firm, when MC is less than MR

-In the above figure, if the market price is less than $7, the firm

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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