Question 1

Figure 12-10  
-Refer to Figure 12-10.The firm's short-run supply curve is its

Accepted Answer

A) marginal cost curve. 
B) marginal cost curve from b and above. 
C) marginal cost curve from c and above. 
D) marginal cost curve from d and above. 
A) marginal cost curve. 
B) marginal cost curve from b and above. 
C) marginal cost curve from c and above. 
D) marginal cost curve from d and above.

Question 2

Which of the following does not hold true for a perfectly competitive firm in long-run equilibrium?

Accepted Answer

A) Its economic profit will be zero. 
B) It will minimize average total cost. 
C) It will charge a price equal to marginal cost. 
D) Marginal cost will be minimized. 
A) Its economic profit will be zero. 
B) It will minimize average total cost. 
C) It will charge a price equal to marginal cost. 
D) Marginal cost will be minimized.

Question 3

The minimum point on the average variable cost curve is called

Accepted Answer

A) the shutdown point. 
B) the break-even point. 
C) the loss-minimizing point. 
D) the point of diminishing returns. 
A) the shutdown point. 
B) the break-even point. 
C) the loss-minimizing point. 
D) the point of diminishing returns.

Question 4

Figure 12-6 shows the demand,marginal cost (MC)and average total cost (ATC)curves for Jason's House of Apples.
-Refer to Figure 12-6.If Jason maximizes his profit he will produce the output rate indicated by point ________ and his average profit will equal ________.

Accepted Answer

A) d;$3 minus ATC at point d 
B) b;$3 minus ATC at point b 
C) e;$3 minus ATC at point e 
D) a;$3 
A) d;$3 minus ATC at point d 
B) b;$3 minus ATC at point b 
C) e;$3 minus ATC at point e 
D) a;$3

Question 5

Using two graphs,illustrate how a positive technological change in the market for notebook computers could eliminate short-run economic profit for a firm in that market.On the first graph,use a supply and demand graph to illustrate the positive technological change.On the second graph,use demand,ATC,MC,and MR curves to illustrate the elimination of economic profit resulting from the positive technological change.Explain what is taking place in each graph.

Accepted Answer

On the first graph,supply shifts to the

Question 6

If the market price is $25,the average revenue of selling five units is

Accepted Answer

A) $5. 
B) $12.50. 
C) $25. 
D) $125. 
A) $5. 
B) $12.50. 
C) $25. 
D) $125.

Question 7

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

Accepted Answer

A) implicit costs. 
B) capital costs. 
C) nonmonetary opportunity costs. 
D) sunk costs. 
A) implicit costs. 
B) capital costs. 
C) nonmonetary opportunity costs. 
D) sunk costs.

Question 8

Why would a company continue to operate for many years while never once turning a profit rather than shut down immediately? Using revenue and cost analysis,explain when the company would shut down.

Accepted Answer

A company would continue to op

Question 9

Max Shreck,an accountant,quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner,Sylvia Sidney.The lease has five years remaining and requires a monthly payment of $4,000.The lease

Accepted Answer

A) is a fixed cost of operating the tattoo parlor. 
B) is a variable cost of operating the tattoo parlor. 
C) is an implicit cost of operating the tattoo parlor. 
D) is part of the marginal cost of operating the tattoo parlor. 
A) is a fixed cost of operating the tattoo parlor. 
B) is a variable cost of operating the tattoo parlor. 
C) is an implicit cost of operating the tattoo parlor. 
D) is part of the marginal cost of operating the tattoo parlor.

Question 10

Figure 12-6 shows the demand,marginal cost (MC)and average total cost (ATC)curves for Jason's House of Apples.
-Refer to Figure 12-6.Which of the following statements is true?

Accepted Answer

A) Jason should produce where MC equals $3 (point d)where he will minimize his losses. 
B) Jason should produce where the distance between MC and his demand curve is greatest (point b). 
C) Jason cannot earn a profit from selling any number of apples. 
D) Jason should produce where MC equals $3 (point d)where he will maximize his profit. 
A) Jason should produce where MC equals $3 (point d)where he will minimize his losses. 
B) Jason should produce where the distance between MC and his demand curve is greatest (point b). 
C) Jason cannot earn a profit from selling any number of apples. 
D) Jason should produce where MC equals $3 (point d)where he will maximize his profit.

Question 11

Jason,a high-school student,mows lawns for families in his neighborhood.The going rate is $12 for each lawn-mowing service.Jason would like to charge $20 because he believes he has more experience mowing lawns than the many other teenagers who also offer the same service.If the market for lawn mowing services is perfectly competitive,what would happen if Jason raised his price?

Accepted Answer

A) He would lose some but not all his customers. 
B) Initially,his customers might complain but over time they will come to accept the new rate. 
C) If Jason raises his price he would lose all his customers. 
D) If Jason raises his price,then all others supplying the same service will also raise their prices. 
A) He would lose some but not all his customers. 
B) Initially,his customers might complain but over time they will come to accept the new rate. 
C) If Jason raises his price he would lose all his customers. 
D) If Jason raises his price,then all others supplying the same service will also raise their prices.

Question 12

In the short run,if a firm shuts down it avoids its variable cost but not its fixed cost.

Accepted Answer

A) True 
 B)False

Question 13

A constant-cost industry is an industry in which

Accepted Answer

A) average costs fall as the industry expands output. 
B) average costs rise as the industry expands output. 
C) average costs remain constant as the industry expands output. 
D) input prices rise at a constant rate as firms in the industry use more inputs. 
A) average costs fall as the industry expands output. 
B) average costs rise as the industry expands output. 
C) average costs remain constant as the industry expands output. 
D) input prices rise at a constant rate as firms in the industry use more inputs.

Question 14

A perfectly competitive firm's short-run supply curve is

Accepted Answer

A) upward sloping and is the portion of the marginal cost curve that lies above the average total cost curve. 
B) upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve. 
C) perfectly elastic at the market price. 
D) horizontal at the minimum average total cost. 
A) upward sloping and is the portion of the marginal cost curve that lies above the average total cost curve. 
B) upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve. 
C) perfectly elastic at the market price. 
D) horizontal at the minimum average total cost.

Question 15

In the long run,a perfectly competitive market will

Accepted Answer

A) produce only the quantity of output that yields a long-run profit for the typical firm. 
B) supply whatever amount consumers will buy at a price which earns the market an economic profit. 
C) supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve. 
D) generate a long-run equilibrium where the typical firm operates at a loss. 
A) produce only the quantity of output that yields a long-run profit for the typical firm. 
B) supply whatever amount consumers will buy at a price which earns the market an economic profit. 
C) supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve. 
D) generate a long-run equilibrium where the typical firm operates at a loss.

Question 16

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Accepted Answer

A) each seller is too small to affect market price. 
B) the price is set by the government. 
C) all the sellers get together and set the price. 
D) all the demanders get together and set the price. 
A) each seller is too small to affect market price. 
B) the price is set by the government. 
C) all the sellers get together and set the price. 
D) all the demanders get together and set the price.

Question 17

If a perfectly competitive firm's price is above its average total cost,the firm

Accepted Answer

A) is earning a profit. 
B) should shut down. 
C) is incurring a loss. 
D) is breaking even. 
A) is earning a profit. 
B) should shut down. 
C) is incurring a loss. 
D) is breaking even.

Question 18

Which of the following is the best example of a perfectly competitive industry?

Accepted Answer

A) wheat production 
B) steel production 
C) electricity production 
D) airplane production 
A) wheat production 
B) steel production 
C) electricity production 
D) airplane production

Question 19

The price a perfectly competitive firm receives for its output

Accepted Answer

A) is determined by the interaction of the firm and all of the consumers who buy from the firm. 
B) is determined by the interaction of all sellers and all buyers in the firm's market. 
C) will not change in response to changes in market demand and supply because the firm is a price taker. 
D) will be lowered by the firm in order to sell more output. 
A) is determined by the interaction of the firm and all of the consumers who buy from the firm. 
B) is determined by the interaction of all sellers and all buyers in the firm's market. 
C) will not change in response to changes in market demand and supply because the firm is a price taker. 
D) will be lowered by the firm in order to sell more output.

Question 20

If a typical firm in a perfectly competitive industry is earning profits,then

Accepted Answer

A) all firms will continue to earn profits. 
B) new firms will enter in the long run causing market supply to decrease,market price to rise,and profits to increase. 
C) new firms will enter in the long run causing market supply to increase,market price to fall,and profits to decrease. 
D) the number of firms in the industry will remain constant in the long run. 
A) all firms will continue to earn profits. 
B) new firms will enter in the long run causing market supply to decrease,market price to rise,and profits to increase. 
C) new firms will enter in the long run causing market supply to increase,market price to fall,and profits to decrease. 
D) the number of firms in the industry will remain constant in the long run.

Exam 12: Firms in Perfectly Competitive Markets

Figure 12-10 -Refer to Figure 12-10.The firm's short-run supply curve is its

Which of the following does not hold true for a perfectly competitive firm in long-run equilibrium?

The minimum point on the average variable cost curve is called

Figure 12-6 shows the demand,marginal cost (MC)and average total cost (ATC)curves for Jason's House of Apples. -Refer to Figure 12-6.If Jason maximizes his profit he will produce the output rate indicated by point ________ and his average profit will equal ________.

If the market price is $25,the average revenue of selling five units is

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

Why would a company continue to operate for many years while never once turning a profit rather than shut down immediately? Using revenue and cost analysis,explain when the company would shut down.

Max Shreck,an accountant,quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner,Sylvia Sidney.The lease has five years remaining and requires a monthly payment of $4,000.The lease

Figure 12-6 shows the demand,marginal cost (MC)and average total cost (ATC)curves for Jason's House of Apples. -Refer to Figure 12-6.Which of the following statements is true?

In the short run,if a firm shuts down it avoids its variable cost but not its fixed cost.

A constant-cost industry is an industry in which

A perfectly competitive firm's short-run supply curve is

In the long run,a perfectly competitive market will

The demand curve for each seller's product in perfect competition is horizontal at the market price because

If a perfectly competitive firm's price is above its average total cost,the firm

Which of the following is the best example of a perfectly competitive industry?

The price a perfectly competitive firm receives for its output

If a typical firm in a perfectly competitive industry is earning profits,then

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

Filters

Figure 12-6 shows the demand,marginal cost (MC)and average total cost (ATC)curves for Jason's House of Apples. -Refer to Figure 12-6.If Jason maximizes his profit he will produce the output rate indicated by point and his average profit will equal .