Question 1

If the market price of oats is $2.5 per bushel and a farmer decides to sell at $2.8 per bushel, he is likely to sell:

Accepted Answer

A) more than 5 bushels per day. 
B) more than 10 bushels per day. 
C) less than 5 bushels per day. 
D) 10 bushels per day. 
E) nothing. 
A) more than 5 bushels per day. 
B) more than 10 bushels per day. 
C) less than 5 bushels per day. 
D) 10 bushels per day. 
E) nothing.

Question 2

Which of the following is true of the model of perfect competition?

Accepted Answer

A) There is a high degree of product differentiation. 
B) Consumers do not have adequate information concerning the prices and quality of products in the market. 
C) There are significant barriers to entry and exit. 
D) There are only a few, large firms in the market. 
E) An individual firm cannot affect the market price. 
A) There is a high degree of product differentiation. 
B) Consumers do not have adequate information concerning the prices and quality of products in the market. 
C) There are significant barriers to entry and exit. 
D) There are only a few, large firms in the market. 
E) An individual firm cannot affect the market price.

Question 3

A firm will shut down permanently if total revenue is not sufficient to pay for total costs in the long run.

Accepted Answer

A) True 
 B)False

Question 4

The table given below shows the price of each unit of the product manufactured by a firm and the marginal cost of producing different units of the output. Table: 23.1
  According to the information in Table 23.1, the marginal revenue of the firm:

Accepted Answer

A) is equal to the marginal cost at each level of output. 
B) is equal to price times output. 
C) is equal to price times marginal cost. 
D) is equal to $1 at all levels of the output. 
E) decreases with an increase in output. 
A) is equal to the marginal cost at each level of output. 
B) is equal to price times output. 
C) is equal to price times marginal cost. 
D) is equal to $1 at all levels of the output. 
E) decreases with an increase in output.

Question 5

The following figure shows equilibrium at the industry and firm level. Figure 23.6   In the figure,
S1, S2, S3 are the market supply curves.
D1 and D2 are the market demand curves.
MC is the marginal cost curve of the firm.
MR1 and MR2 are the marginal revenue curves of the firm.
ATC is the average-total-cost curve of the firm.
According to Figure 23.6, a shift of the S curves in the graph on the left side represents:

Accepted Answer

A) an increased supply because the firm produces more. 
B) an increased supply because more firms are producing. 
C) an increased supply resulting from a larger number of customers. 
D) an increased supply resulting from a lower demand. 
E) an increased supply resulting from a lower price. 
A) an increased supply because the firm produces more. 
B) an increased supply because more firms are producing. 
C) an increased supply resulting from a larger number of customers. 
D) an increased supply resulting from a lower demand. 
E) an increased supply resulting from a lower price.

Question 6

The table given below shows the price of each unit of the product manufactured by a firm and the marginal cost of producing different units of the output. Table: 23.1
  Refer to Table 23.1.If the market price of the good falls to $0.80 per unit, the firm:

Accepted Answer

A) should decrease its output to seven units. 
B) should decrease its output to seven Units. 
C) should increase its output to ten units. 
D) should produce nine units. 
E) should keep its output level unchanged. 
A) should decrease its output to seven units. 
B) should decrease its output to seven Units. 
C) should increase its output to ten units. 
D) should produce nine units. 
E) should keep its output level unchanged.

Question 7

Which of the following statements concerning perfect competition is not true?

Accepted Answer

A) Firms are price takers. 
B) The demand curve facing the individual firm is horizontal. 
C) The firm's demand curve is identical to its marginal revenue curve. 
D) The firms produce differentiated products. 
E) If the firm raises its price, it will lose all of its customers. 
A) Firms are price takers. 
B) The demand curve facing the individual firm is horizontal. 
C) The firm's demand curve is identical to its marginal revenue curve. 
D) The firms produce differentiated products. 
E) If the firm raises its price, it will lose all of its customers.

Question 8

One method that firms in many nations use to exit the market is the use of:

Accepted Answer

A) antitrust laws. 
B) the uniform commercial code. 
C) bankruptcy laws. 
D) statutes laws. 
E) the federal code. 
A) antitrust laws. 
B) the uniform commercial code. 
C) bankruptcy laws. 
D) statutes laws. 
E) the federal code.

Question 9

Under the long-run equilibrium for perfectly competitive markets without any government intervention:

Accepted Answer

A) producer surplus is greater than consumer surplus. 
B) consumer surplus is greater than producer surplus. 
C) the sum of consumer and producer surplus is maximized. 
D) consumer surplus is maximized. 
E) producer surplus is maximized. 
A) producer surplus is greater than consumer surplus. 
B) consumer surplus is greater than producer surplus. 
C) the sum of consumer and producer surplus is maximized. 
D) consumer surplus is maximized. 
E) producer surplus is maximized.

Question 10

If at the profit maximizing level of output, the AR curve lies below the ATC curve in the short run, the firm is earning positive economic profit.

Accepted Answer

A) True 
 B)False

Question 11

Graphically, producer surplus is the area:

Accepted Answer

A) above the equilibrium price and below the demand curve. 
B) below the equilibrium price and below the supply curve. 
C) above the supply curve and below the demand curve. 
D) below the equilibrium price and above the supply curve. 
E) below the equilibrium price and above the demand curve. 
A) above the equilibrium price and below the demand curve. 
B) below the equilibrium price and below the supply curve. 
C) above the supply curve and below the demand curve. 
D) below the equilibrium price and above the supply curve. 
E) below the equilibrium price and above the demand curve.

Question 12

At an output level above the profit-maximizing one for a perfectly competitive firm, a reduction in output will:

Accepted Answer

A) reduce total revenue more than total cost. 
B) reduce total cost more than total revenue. 
C) increase total revenue more than total cost. 
D) increase total cost more than total revenue. 
E) decrease total revenue and total cost by the same amount. 
A) reduce total revenue more than total cost. 
B) reduce total cost more than total revenue. 
C) increase total revenue more than total cost. 
D) increase total cost more than total revenue. 
E) decrease total revenue and total cost by the same amount.

Question 13

In the short run, the firm's break-even point is:

Accepted Answer

A) the minimum point of the firm's demand curve. 
B) the minimum point of the firm's average-total-cost curve. 
C) the minimum point of the firm's average-variable-cost curve. 
D) the minimum point of the firm's marginal-cost curve. 
E) the minimum point on the average-fixed-cost curve. 
A) the minimum point of the firm's demand curve. 
B) the minimum point of the firm's average-total-cost curve. 
C) the minimum point of the firm's average-variable-cost curve. 
D) the minimum point of the firm's marginal-cost curve. 
E) the minimum point on the average-fixed-cost curve.

Question 14

At the twenty-fifth anniversary of the Woodstock Festival in 1994, there were many vendors who sold tie-dyed t-shirts.No matter where one went, each vendor was selling these t-shirts for $15 apiece.Which market structure model would best characterize such a situation?

Accepted Answer

A) Perfect competition 
B) Monopolistic competition 
C) Monopoly 
D) Oligopoly 
E) Duopoly 
A) Perfect competition 
B) Monopolistic competition 
C) Monopoly 
D) Oligopoly 
E) Duopoly

Question 15

A perfectly competitive firm decides to shut down if:

Accepted Answer

A) the price falls below the average-total-cost. 
B) average revenue falls below the average-variable-cost. 
C) the price falls below the marginal cost. 
D) the average revenue curve lies below the marginal cost curve. 
E) the total revenue is less than total cost. 
A) the price falls below the average-total-cost. 
B) average revenue falls below the average-variable-cost. 
C) the price falls below the marginal cost. 
D) the average revenue curve lies below the marginal cost curve. 
E) the total revenue is less than total cost.

Question 16

The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 23.2   MC: Marginal cost curve
MR: Marginal revenue curve
ATC: Average-total-cost curve
AVC: Average-variable-cost curve
Refer to Figure 23.2.What is the profit-maximizing price and output level?

Accepted Answer

A) $35 and 10 units 
B) $50 and 15 units 
C) $50 and 20 units 
D) $20 and 20 units 
E) $35 and 20 units 
A) $35 and 10 units 
B) $50 and 15 units 
C) $50 and 20 units 
D) $20 and 20 units 
E) $35 and 20 units

Question 17

The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 23.2   MC: Marginal cost curve
MR: Marginal revenue curve
ATC: Average-total-cost curve
AVC: Average-variable-cost curve
Refer to Figure 23.2.What is the firm's total fixed cost at the profit-maximizing output level?

Accepted Answer

A) $400 
B) $300 
C) $600 
D) $450 
E) $500 
A) $400 
B) $300 
C) $600 
D) $450 
E) $500

Question 18

Under perfect competition, existing firms leave the market in the long run if the price falls below total fixed cost.

Accepted Answer

A) True 
 B)False

Question 19

Economic efficiency is achieved when the price of a unit of a commodity is equal to the marginal cost of producing that unit.

Accepted Answer

A) True 
 B)False

Question 20

A perfectly competitive firm incurs loss in the short run if at the profit maximizing level of output:

Accepted Answer

A) the marginal revenue curve lies below the marginal cost curve. 
B) the marginal revenue curve lies above the average revenue curve. 
C) the average cost curve lies below the average revenue curve. 
D) the average revenue curve lies below the average cost curve. 
E) marginal revenue curve lies above the marginal cost curve. 
A) the marginal revenue curve lies below the marginal cost curve. 
B) the marginal revenue curve lies above the average revenue curve. 
C) the average cost curve lies below the average revenue curve. 
D) the average revenue curve lies below the average cost curve. 
E) marginal revenue curve lies above the marginal cost curve.

Exam 44: Perfect Competition

If the market price of oats is $2.5 per bushel and a farmer decides to sell at $2.8 per bushel, he is likely to sell:

Which of the following is true of the model of perfect competition?

A firm will shut down permanently if total revenue is not sufficient to pay for total costs in the long run.

The table given below shows the price of each unit of the product manufactured by a firm and the marginal cost of producing different units of the output. Table: 23.1 According to the information in Table 23.1, the marginal revenue of the firm:

The table given below shows the price of each unit of the product manufactured by a firm and the marginal cost of producing different units of the output. Table: 23.1 Refer to Table 23.1.If the market price of the good falls to $0.80 per unit, the firm:

Which of the following statements concerning perfect competition is not true?

One method that firms in many nations use to exit the market is the use of:

Under the long-run equilibrium for perfectly competitive markets without any government intervention:

If at the profit maximizing level of output, the AR curve lies below the ATC curve in the short run, the firm is earning positive economic profit.

Graphically, producer surplus is the area:

At an output level above the profit-maximizing one for a perfectly competitive firm, a reduction in output will:

In the short run, the firm's break-even point is:

At the twenty-fifth anniversary of the Woodstock Festival in 1994, there were many vendors who sold tie-dyed t-shirts.No matter where one went, each vendor was selling these t-shirts for $15 apiece.Which market structure model would best characterize such a situation?

A perfectly competitive firm decides to shut down if:

The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 23.2 MC: Marginal cost curve MR: Marginal revenue curve ATC: Average-total-cost curve AVC: Average-variable-cost curve Refer to Figure 23.2.What is the profit-maximizing price and output level?

Under perfect competition, existing firms leave the market in the long run if the price falls below total fixed cost.

Economic efficiency is achieved when the price of a unit of a commodity is equal to the marginal cost of producing that unit.

A perfectly competitive firm incurs loss in the short run if at the profit maximizing level of output:

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

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Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

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Resource Markets

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