Question 1

Which of the following is NOT a characteristic of perfect competition?

Accepted Answer

A)  There are large numbers of buyers and sellers. 
B)  The firms in an industry produce goods that are different from each other. 
C)  Any firm can easily enter or leave the industry. 
D)  Both buyers and sellers have equally good information. 
A)  There are large numbers of buyers and sellers. 
B)  The firms in an industry produce goods that are different from each other. 
C)  Any firm can easily enter or leave the industry. 
D)  Both buyers and sellers have equally good information.

Question 2

A firm should continue producing until

Accepted Answer

A)  the cost of producing the output equals the revenues obtainable from selling the output. 
B)  the cost of increasing output by one more unit equals the revenues obtainable from selling the extra unit. 
C)  average costs are at a minimum. 
D)  the average cost when another unit is produced equals the average revenue obtainable from selling the extra unit. 
A)  the cost of producing the output equals the revenues obtainable from selling the output. 
B)  the cost of increasing output by one more unit equals the revenues obtainable from selling the extra unit. 
C)  average costs are at a minimum. 
D)  the average cost when another unit is produced equals the average revenue obtainable from selling the extra unit.

Question 3

-In the above figure, if d1 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 4

For a perfectly competitive firm, profit maximization occurs when

Accepted Answer

A)  marginal revenue equals average total cost. 
B)  marginal revenue equals marginal cost. 
C)  marginal cost is equal to average total cost. 
D)  average total cost is at its minimum. 
A)  marginal revenue equals average total cost. 
B)  marginal revenue equals marginal cost. 
C)  marginal cost is equal to average total cost. 
D)  average total cost is at its minimum.

Question 5

Suppose that at the current level of output, price = $12, MC = $14, AVC = $7, and ATC = $9. 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 6

The opportunity cost to society of producing one more unit of the good is

Accepted Answer

A)  average cost. 
B)  marginal cost. 
C)  efficiency costing. 
D)  the optimal cost. 
A)  average cost. 
B)  marginal cost. 
C)  efficiency costing. 
D)  the optimal cost.

Question 7

-According to the above figure, if the firm is earning zero economic profits, what quantity is the firm selling and at what price?

Accepted Answer

A)  Q = 200; P = $4 
B)  Q = 1,000; P = $5 
C)  Q = 800; P = $4 
D)  Q = 1,200; P = $7 
A)  Q = 200; P = $4 
B)  Q = 1,000; P = $5 
C)  Q = 800; P = $4 
D)  Q = 1,200; P = $7

Question 8

The perfectly competitive, profit-maximizing rate of production

Accepted Answer

A)  occurs at the point at which marginal revenue is equal to marginal cost. 
B)  occurs at the point at which the difference between marginal revenue and marginal cost is maximized. 
C)  is not measurable for a perfectly competitive firm. 
D)  ignores the relation of total revenues and total costs. 
A)  occurs at the point at which marginal revenue is equal to marginal cost. 
B)  occurs at the point at which the difference between marginal revenue and marginal cost is maximized. 
C)  is not measurable for a perfectly competitive firm. 
D)  ignores the relation of total revenues and total costs.

Question 9

-For a perfectly competitive firm, the short-run break-even point occurs at the level of output where

Accepted Answer

A) P > MR = MC. B) MR = P > MC. C) MR < P = MC. D) P = MC = ATC. A) P > MR = MC. B) MR = P > MC. C) MR < P = MC. D) P = MC = ATC.

Question 10

What is the short-run shutdown price? Using a graph and a market price of P, show that losses are less when shutting down than when producing.

Accepted Answer

@#IMG-DLM& The short-run shutdown price is the pri

Question 11

At a perfectly competitive firm's short-run break-even price

Accepted Answer

A) P = ATC. B) TR is more than TC. C) the average cost is below the total revenue line. D) P > AVC, but P < AFC. A) P = ATC. B) TR is more than TC. C) the average cost is below the total revenue line. D) P > AVC, but P < AFC.

Question 12

The short-run industry supply curve is found by

Accepted Answer

A)  taking the inverse of the industry demand curve. 
B)  horizontally summing the average total cost curve of all firms in the industry. 
C)  adding up the quantities supplied at each price by each firm in the industry. 
D)  adding up the quantities supplied at each price by each of the firms in the industry that are making a profit. 
A)  taking the inverse of the industry demand curve. 
B)  horizontally summing the average total cost curve of all firms in the industry. 
C)  adding up the quantities supplied at each price by each firm in the industry. 
D)  adding up the quantities supplied at each price by each of the firms in the industry that are making a profit.

Question 13

The short-run shutdown price occurs where price equals

Accepted Answer

A)  MC. 
B)  AVC at any point. 
C)  AVC at the minimum point. 
D)  AFC at the minimum point. 
A)  MC. 
B)  AVC at any point. 
C)  AVC at the minimum point. 
D)  AFC at the minimum point.

Question 14

When a firm is operating at an output rate at which total revenue equal total costs, this is called

Accepted Answer

A)  its shutdown point. 
B)  its breakeven point. 
C)  a short-run profit. 
D)  a loss. 
A)  its shutdown point. 
B)  its breakeven point. 
C)  a short-run profit. 
D)  a loss.

Question 15

-Refer to the above table. If the price is $5, the maximum economic profits this firm could earn is

Accepted Answer

A)  $520. 
B)  $420. 
C)  $414. 
D)  $106. 
A)  $520. 
B)  $420. 
C)  $414. 
D)  $106.

Question 16

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

Accepted Answer

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

Question 17

In long-run equilibrium, the perfectly competitive firm will

Accepted Answer

A)  go out of business. 
B)  produce to the point at which marginal cost is at its minimum. 
C)  produce to the point at which marginal cost equals average total cost. 
D)  produce on the upward sloping portion of its ATC curve. 
A)  go out of business. 
B)  produce to the point at which marginal cost is at its minimum. 
C)  produce to the point at which marginal cost equals average total cost. 
D)  produce on the upward sloping portion of its ATC curve.

Question 18

A perfectly competitive firm's short-run break-even output occurs

Accepted Answer

A)  at the minimum point of its average variable cost curve. 
B)  at the minimum point of its average total cost curve. 
C)  at the minimum point of its marginal cost curve. 
D)  at the intersection of its total cost curve and its marginal revenue curve. 
A)  at the minimum point of its average variable cost curve. 
B)  at the minimum point of its average total cost curve. 
C)  at the minimum point of its marginal cost curve. 
D)  at the intersection of its total cost curve and its marginal revenue curve.

Question 19

In the long run in a perfectly competitive industry

Accepted Answer

A)  opportunity costs are negligible. 
B)  economic profits will be zero. 
C)  some firms will be experiencing economic losses. 
D)  only entrepreneurs will earn more than their opportunity costs. 
A)  opportunity costs are negligible. 
B)  economic profits will be zero. 
C)  some firms will be experiencing economic losses. 
D)  only entrepreneurs will earn more than their opportunity costs.

Question 20

For a firm in a perfectly competitive industry

Accepted Answer

A)  the demand curve is unitary elastic throughout. 
B)  marginal revenue and product price are equal at every level of output. 
C)  the price elasticity of demand is zero. 
D)  more output can be sold only if the firm unilaterally lowers its product price. 
A)  the demand curve is unitary elastic throughout. 
B)  marginal revenue and product price are equal at every level of output. 
C)  the price elasticity of demand is zero. 
D)  more output can be sold only if the firm unilaterally lowers its product price.

Exam 23: Perfect Competition

Which of the following is NOT a characteristic of perfect competition?

A firm should continue producing until

-In the above figure, if d1 is the relevant demand curve for this firm, then which level of output will maximize this firm's profits or minimize its losses?

For a perfectly competitive firm, profit maximization occurs when

Suppose that at the current level of output, price = $12, MC = $14, AVC = $7, and ATC = $9. Which of the following is TRUE?

The opportunity cost to society of producing one more unit of the good is

-According to the above figure, if the firm is earning zero economic profits, what quantity is the firm selling and at what price?

The perfectly competitive, profit-maximizing rate of production

-For a perfectly competitive firm, the short-run break-even point occurs at the level of output where

What is the short-run shutdown price? Using a graph and a market price of P, show that losses are less when shutting down than when producing.

At a perfectly competitive firm's short-run break-even price

The short-run industry supply curve is found by

The short-run shutdown price occurs where price equals

When a firm is operating at an output rate at which total revenue equal total costs, this is called

-Refer to the above table. If the price is $5, the maximum economic profits this firm could earn is

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

In long-run equilibrium, the perfectly competitive firm will

A perfectly competitive firm's short-run break-even output occurs

In the long run in a perfectly competitive industry

For a firm in a perfectly competitive industry

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

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The Macroeconomy: Unemployment, Inflation, and Deflation

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