Question 1

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market. Figure 23.7   Refer to Figure 23.7 and calculate the consumer surplus.

Accepted Answer

A) $200 
B) $600 
C) $400 
D) $800 
E) $500 
A) $200 
B) $600 
C) $400 
D) $800 
E) $500

Question 2

An individual perfectly competitive firm's supply curve is its:

Accepted Answer

A) average-fixed-cost curve. 
B) marginal revenue curve. 
C) average-variable-cost curve. 
D) marginal cost curve. 
E) total cost curve. 
A) average-fixed-cost curve. 
B) marginal revenue curve. 
C) average-variable-cost curve. 
D) marginal cost curve. 
E) total cost curve.

Question 3

Why is a perfectly competitive firm said to be a price taker?

Accepted Answer

A) It produces such a good which is not produced by any other firm in the market. 
B) It faces the downward sloping market demand curve. 
C) The firm's individual production is insignificant relative to production in the industry. 
D) There does not exist any barrier to the entry of new firms in the industry. 
E) The firm's marginal-revenue curve is downward sloping. 
A) It produces such a good which is not produced by any other firm in the market. 
B) It faces the downward sloping market demand curve. 
C) The firm's individual production is insignificant relative to production in the industry. 
D) There does not exist any barrier to the entry of new firms in the industry. 
E) The firm's marginal-revenue curve is downward sloping.

Question 4

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.If the market price falls to $10, the firm would produce:

Accepted Answer

A) nothing. 
B) 15 units. 
C) 5 units. 
D) 10 units. 
E) 20 units. 
A) nothing. 
B) 15 units. 
C) 5 units. 
D) 10 units. 
E) 20 units.

Question 5

Since a firm is willing to sell its product at the marginal cost and since the firm receives the market price, the difference between the two is:

Accepted Answer

A) consumer surplus. 
B) economic profit. 
C) marginal revenue. 
D) producer surplus. 
E) a shortage. 
A) consumer surplus. 
B) economic profit. 
C) marginal revenue. 
D) producer surplus. 
E) a shortage.

Question 6

The table given below shows the total revenue and total cost of a firm at different levels of output. Table 23.2
  Consider the perfectly competitive firm described in Table 23.2.How much profit will the firm make if it is a profit maximizer?

Accepted Answer

A) $20 
B) $45 
C) $46 
D) $80 
E) $50 
A) $20 
B) $45 
C) $46 
D) $80 
E) $50

Question 7

To maximize profits in the short run, a perfectly competitive firm will produce that output at which:

Accepted Answer

A) marginal revenue equals demand. 
B) price equals marginal revenue. 
C) price equals marginal cost. 
D) marginal revenue equals average total cost. 
E) total revenue equals total cost. 
A) marginal revenue equals demand. 
B) price equals marginal revenue. 
C) price equals marginal cost. 
D) marginal revenue equals average total cost. 
E) total revenue equals total cost.

Question 8

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market. Figure 23.7   Refer to Figure 23.7 and calculate the producer surplus.

Accepted Answer

A) $600 
B) $500 
C) $800 
D) $400 
E) $200 
A) $600 
B) $500 
C) $800 
D) $400 
E) $200

Question 9

When the marginal costs, of firms in perfect competition increases, the short-run supply curve of the industry will shift to the left.

Accepted Answer

A) True 
 B)False

Question 10

Given a perfectly competitive market structure at the profit-maximizing output level, a firm's total fixed cost is $15, total variable cost is $137, marginal revenue is $4, and the quantity demanded is 65.The total profit earned by the firm is $108.

Accepted Answer

A) True 
 B)False

Question 11

What causes the market supply curve to shift rightward?

Accepted Answer

A) Increase in the aggregate demand 
B) Decrease in the number of existing firms 
C) Decrease in the price level 
D) Increase in the cost of production 
E) Entry of new firms 
A) Increase in the aggregate demand 
B) Decrease in the number of existing firms 
C) Decrease in the price level 
D) Increase in the cost of production 
E) Entry of new firms

Question 12

A perfectly competitive firm's supply curve is the portion of the:

Accepted Answer

A) TC curve that lies above the TR curve. 
B) MR curve that lies above the MC curve. 
C) AFC curve that lies above the AR curve. 
D) AVC curve that lies above the ATC curve. 
E) MC curve that lies above the AVC curve. 
A) TC curve that lies above the TR curve. 
B) MR curve that lies above the MC curve. 
C) AFC curve that lies above the AR curve. 
D) AVC curve that lies above the ATC curve. 
E) MC curve that lies above the AVC curve.

Question 13

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, this firm will maximize profit when total output is equal to _____ units.

Accepted Answer

A) nine 
B) eight 
C) seven 
D) six 
E) five 
A) nine 
B) eight 
C) seven 
D) six 
E) five

Question 14

Some competitive firms are willing to operate at a loss in the short run because their revenues are at least able to cover their variable costs.

Accepted Answer

A) True 
 B)False

Question 15

Many agricultural products, such as wheat, are produced by thousands of different producers that grow essentially the same product.The market structure model that would best characterize such a market is:

Accepted Answer

A) perfect competition. 
B) monopoly. 
C) monopolistic competition. 
D) oligopoly. 
E) perfect oligopoly. 
A) perfect competition. 
B) monopoly. 
C) monopolistic competition. 
D) oligopoly. 
E) perfect oligopoly.

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.The firm will suspend production if the price falls below:

Accepted Answer

A) $30. 
B) $50. 
C) $10. 
D) $20. 
E) $35. 
A) $30. 
B) $50. 
C) $10. 
D) $20. 
E) $35.

Question 17

On August 5, 2003, a tragic fire destroyed a large Jim Beam whiskey factory in Kentucky.Assume that the U.S.market for whiskey is perfectly competitive, and that the market was originally in long run equilibrium.What would be the effects of such a whiskey factory fire?

Accepted Answer

A) An increase in supply would cause a reduction in price, which would then lead to entry of firms. 
B) A decrease in supply would cause an increase in price, which would then lead to entry of firms.` 
C) An increase in supply would cause an increase in price, which would then lead to entry of firms 
D) A decrease in supply would cause an increase in price, which would then lead to exit of firms. 
E) Price of the whiskey remains unchanged and the existing firms continue to earn zero economic profit. 
A) An increase in supply would cause a reduction in price, which would then lead to entry of firms. 
B) A decrease in supply would cause an increase in price, which would then lead to entry of firms.` 
C) An increase in supply would cause an increase in price, which would then lead to entry of firms 
D) A decrease in supply would cause an increase in price, which would then lead to exit of firms. 
E) Price of the whiskey remains unchanged and the existing firms continue to earn zero economic profit.

Question 18

A perfectly competitive firm faces the downward sloping market demand curve.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements characterizes perfect competition?

Accepted Answer

A) Producers enjoy complete freedom of entry and exit from the industry. 
B) Producers sell differentiated products. 
C) Producers are price makers. 
D) Consumers are price makers. 
E) The firm is not free to choose the quantity that it wishes to produce. 
A) Producers enjoy complete freedom of entry and exit from the industry. 
B) Producers sell differentiated products. 
C) Producers are price makers. 
D) Consumers are price makers. 
E) The firm is not free to choose the quantity that it wishes to produce.

Question 20

Since the beginning of the millennium, the United States has witnessed closure of many Internet start-up companies.According to the model of perfect competition, these companies must have shut down in the short run because:

Accepted Answer

A) the price they were charging was too high to attract customers. 
B) the price they were charging was too low to provide sufficient revenues. 
C) they weren't earning enough revenue to cover their total costs. 
D) they were not earning enough revenue to cover their total variable costs. 
E) they were not earning enough revenue to cover their total fixed costs. 
A) the price they were charging was too high to attract customers. 
B) the price they were charging was too low to provide sufficient revenues. 
C) they weren't earning enough revenue to cover their total costs. 
D) they were not earning enough revenue to cover their total variable costs. 
E) they were not earning enough revenue to cover their total fixed costs.

Exam 44: Perfect Competition

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market. Figure 23.7 Refer to Figure 23.7 and calculate the consumer surplus.

An individual perfectly competitive firm's supply curve is its:

Why is a perfectly competitive firm said to be a price taker?

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.If the market price falls to $10, the firm would produce:

Since a firm is willing to sell its product at the marginal cost and since the firm receives the market price, the difference between the two is:

The table given below shows the total revenue and total cost of a firm at different levels of output. Table 23.2 Consider the perfectly competitive firm described in Table 23.2.How much profit will the firm make if it is a profit maximizer?

To maximize profits in the short run, a perfectly competitive firm will produce that output at which:

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market. Figure 23.7 Refer to Figure 23.7 and calculate the producer surplus.

When the marginal costs, of firms in perfect competition increases, the short-run supply curve of the industry will shift to the left.

Given a perfectly competitive market structure at the profit-maximizing output level, a firm's total fixed cost is $15, total variable cost is $137, marginal revenue is $4, and the quantity demanded is 65.The total profit earned by the firm is $108.

What causes the market supply curve to shift rightward?

A perfectly competitive firm's supply curve is the portion of the:

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, this firm will maximize profit when total output is equal to _____ units.

Some competitive firms are willing to operate at a loss in the short run because their revenues are at least able to cover their variable costs.

Many agricultural products, such as wheat, are produced by thousands of different producers that grow essentially the same product.The market structure model that would best characterize such a market is:

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.The firm will suspend production if the price falls below:

On August 5, 2003, a tragic fire destroyed a large Jim Beam whiskey factory in Kentucky.Assume that the U.S.market for whiskey is perfectly competitive, and that the market was originally in long run equilibrium.What would be the effects of such a whiskey factory fire?

A perfectly competitive firm faces the downward sloping market demand curve.

Which of the following statements characterizes perfect competition?

Since the beginning of the millennium, the United States has witnessed closure of many Internet start-up companies.According to the model of perfect competition, these companies must have shut down in the short run because:

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

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Macroeconomic Equilibrium: Aggregate Demand and Supply

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