Question 1

A firm will break even when

Accepted Answer

A) P = ATC. B) P > ATC. C) P < AVC. D) P = AVC. A) P = ATC. B) P > ATC. C) P < AVC. D) P = AVC.

Question 2

In the short run,if a firm shuts down its maximum loss equals the amount of its fixed cost.

Accepted Answer

A) True 
 B)False

Question 3

Market supply is found by

Accepted Answer

A) vertically summing the relevant part of each individual producer's marginal cost curve. 
B) horizontally summing the relevant part of each individual producer's marginal cost curve. 
C) vertically summing each individual producer's average total cost curve. 
D) horizontally summing each individual producer's average total cost curve. 
A) vertically summing the relevant part of each individual producer's marginal cost curve. 
B) horizontally summing the relevant part of each individual producer's marginal cost curve. 
C) vertically summing each individual producer's average total cost curve. 
D) horizontally summing each individual producer's average total cost curve.

Question 4

$$\begin{array} { | c | c | c | c | c | } 
\hline \begin{array} { c } 
\text { Apples } \
\text { (pounds) }
\end{array} & \begin{array} { c } 
\text { Market Price } \
\text { per Pound }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Revenue } \
\text { (TR) }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Revenue } \
\text { (AR) }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Revenue } \
\text { (MR) }
\end{array} \
\hline 0 & \$ 3 & \$ 0 & - - - - & - \cdots - - \
\hline 100 & & & & \
\hline 150 & & & & \
\hline 200 & & & & \
\hline 250 & & & & \
\hline 300 & & & & \
\hline 350 & & & & \
\hline 400 & & & & \
\hline
\end{array}$$ Table 12-2 lists the various pounds (lbs. )of apples that Margie Stattler can sell.Assume that Margie operates in a perfectly competitive market.
-Refer to Table 12-2.What is Margie's total revenue if she sells 250 pounds of apples?

Accepted Answer

A) $250 
B) $500 
C) $750 
D) There is not enough information in the table to determine Margie's total revenue. 
A) $250 
B) $500 
C) $750 
D) There is not enough information in the table to determine Margie's total revenue.

Question 5

Ben's Peanut Shoppe suffers a short-run loss.Ben will not choose to shut down if

Accepted Answer

A) his Shoppe's total revenue exceeds his fixed cost. 
B) his Shoppe's total revenue exceeds his variable cost. 
C) his Shoppe's total revenue exceeds his implicit costs. 
D) his Shoppe's total revenue exceeds his capital costs. 
A) his Shoppe's total revenue exceeds his fixed cost. 
B) his Shoppe's total revenue exceeds his variable cost. 
C) his Shoppe's total revenue exceeds his implicit costs. 
D) his Shoppe's total revenue exceeds his capital costs.

Question 6

If a perfectly competitive apple farm's marginal revenue exceeds the marginal cost of the last bushel of apples sold,what should the farm do to maximize its profit?

Accepted Answer

A) determine what the total revenue and total cost of production are 
B) increase output 
C) decrease output 
D) lower its price to sell more 
A) determine what the total revenue and total cost of production are 
B) increase output 
C) decrease output 
D) lower its price to sell more

Question 7

In the short run,a profit-maximizing firm will shut down if its total revenue is greater than its variable costs.

Accepted Answer

A) True 
 B)False

Question 8

New York Times writer Michael Lewis wrote that "The sad truth,for investors,seems to be that most of the benefits....are passed through to consumers free of charge." To which of the following did Lewis refer?

Accepted Answer

A) apple farming in New York state 
B) the Enron accounting scandal 
C) the medical screening industry 
D) new technologies developed in the 1990s 
A) apple farming in New York state 
B) the Enron accounting scandal 
C) the medical screening industry 
D) new technologies developed in the 1990s

Question 9

Figure 12-9 shows cost and demand curves facing a profit-maximizing,perfectly competitive firm.
-Refer to Figure 12-9.At price P3,the firm would

Accepted Answer

A) lose an amount equal to its fixed cost. 
B) lose an amount more than fixed cost. 
C) lose an amount less than fixed cost. 
D) break even. 
A) lose an amount equal to its fixed cost. 
B) lose an amount more than fixed cost. 
C) lose an amount less than fixed cost. 
D) break even.

Question 10

Figure 12-20  
-Refer to Figure 12-20.If the market price is P1,what is the allocatively efficient output level?

Accepted Answer

A) Q0 
B) Q1 
C) Q2 
D) There is no allocatively efficient output level because the firm is making a loss. 
A) Q0 
B) Q1 
C) Q2 
D) There is no allocatively efficient output level because the firm is making a loss.

Question 11

Figure 12-2  
-Refer to Figure 12-2.Suppose the firm is currently producing Q2 units.What happens if it expands output to Q3 units?

Accepted Answer

A) Its profit increases by the size of the vertical distance df. 
B) It makes less profit. 
C) It incurs a loss. 
D) It will be moving toward its profit maximizing output. 
A) Its profit increases by the size of the vertical distance df. 
B) It makes less profit. 
C) It incurs a loss. 
D) It will be moving toward its profit maximizing output.

Question 12

A perfectly competitive firm earns a profit when price is

Accepted Answer

A) equal to minimum average total cost. 
B) above minimum average total cost. 
C) equal to minimum average variable cost. 
D) equal to minimum average fixed cost. 
A) equal to minimum average total cost. 
B) above minimum average total cost. 
C) equal to minimum average variable cost. 
D) equal to minimum average fixed cost.

Question 13

The marginal revenue curve for a perfectly competitive firm

Accepted Answer

A) is downward-sloping. 
B) is the same as its demand curve. 
C) is perfectly inelastic. 
D) is the same as its marginal cost curve. 
A) is downward-sloping. 
B) is the same as its demand curve. 
C) is perfectly inelastic. 
D) is the same as its marginal cost curve.

Question 14

Which of the following describes a situation in which a good or service is produced at the lowest possible cost?

Accepted Answer

A) productive efficiency 
B) allocative efficiency 
C) marginal efficiency 
D) profit maximization 
A) productive efficiency 
B) allocative efficiency 
C) marginal efficiency 
D) profit maximization

Question 15

Which of the following is a characteristic of an oligopolistic market structure?

Accepted Answer

A) There are few dominant sellers. 
B) Each firm sells a unique product. 
C) It is easy for new firms to enter the industry. 
D) Each firm need not react to the actions of rivals. 
A) There are few dominant sellers. 
B) Each firm sells a unique product. 
C) It is easy for new firms to enter the industry. 
D) Each firm need not react to the actions of rivals.

Question 16

Figure 12-1  
-Refer to Figure 12-1.If the firm is producing 500 units,what is the amount of its profit or loss?

Accepted Answer

A) profit of $280 
B) loss equivalent to the area A 
C) profit equivalent to the area A 
D) There is insufficient information to answer the question. 
A) profit of $280 
B) loss equivalent to the area A 
C) profit equivalent to the area A 
D) There is insufficient information to answer the question.

Exam 12: Firms in Perfectly Competitive Markets

A firm will break even when

In the short run,if a firm shuts down its maximum loss equals the amount of its fixed cost.

Market supply is found by

Ben's Peanut Shoppe suffers a short-run loss.Ben will not choose to shut down if

If a perfectly competitive apple farm's marginal revenue exceeds the marginal cost of the last bushel of apples sold,what should the farm do to maximize its profit?

In the short run,a profit-maximizing firm will shut down if its total revenue is greater than its variable costs.

New York Times writer Michael Lewis wrote that "The sad truth,for investors,seems to be that most of the benefits....are passed through to consumers free of charge." To which of the following did Lewis refer?

Figure 12-9 shows cost and demand curves facing a profit-maximizing,perfectly competitive firm. -Refer to Figure 12-9.At price P3,the firm would

Figure 12-20 -Refer to Figure 12-20.If the market price is P1,what is the allocatively efficient output level?

Figure 12-2 -Refer to Figure 12-2.Suppose the firm is currently producing Q2 units.What happens if it expands output to Q3 units?

A perfectly competitive firm earns a profit when price is

The marginal revenue curve for a perfectly competitive firm

Which of the following describes a situation in which a good or service is produced at the lowest possible cost?

Which of the following is a characteristic of an oligopolistic market structure?

Figure 12-1 -Refer to Figure 12-1.If the firm is producing 500 units,what is the amount of its profit or loss?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms,the Stock Market,and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology,production,and Costs

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, taxes, and the Distribution of Income

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money,banks,and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

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