Question 1

If a profit-maximizing, perfectly competitive firm is producing at a loss in the short run, then it implies that:

Accepted Answer

A) marginal revenue must be less than marginal cost. 
B) price must be less than the average variable cost. 
C) price must be less than average total cost but greater than average variable cost. 
D) the average revenue curve must lie below the average variable cost curve but above the average fixed cost curve. 
E) price must be less than both average variable cost and average fixed cost. 
A) marginal revenue must be less than marginal cost. 
B) price must be less than the average variable cost. 
C) price must be less than average total cost but greater than average variable cost. 
D) the average revenue curve must lie below the average variable cost curve but above the average fixed cost curve. 
E) price must be less than both average variable cost and average fixed cost.

Question 2

Which of the following faces a horizontal demand curve?

Accepted Answer

A) A monopolistic firm 
B) An oligopolistic firm 
C) A perfectly competitive firm 
D) A monopolistically competitive firm 
E) A duopolistic firm 
A) A monopolistic firm 
B) An oligopolistic firm 
C) A perfectly competitive firm 
D) A monopolistically competitive firm 
E) A duopolistic firm

Question 3

If losses are incurred in a competitive industry, then over the long run we can expect a greater quantity supplied because market price will rise.

Accepted Answer

A) True 
 B)False

Question 4

Graphically, consumer surplus is the area:

Accepted Answer

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

Question 5

The model of perfect competition best applies to markets with:

Accepted Answer

A) a few firms selling identical products. 
B) a few firms selling differentiated products. 
C) many firms selling differentiated products. 
D) many firms selling identical products. 
E) significant barriers to entry and exit. 
A) a few firms selling identical products. 
B) a few firms selling differentiated products. 
C) many firms selling differentiated products. 
D) many firms selling identical products. 
E) significant barriers to entry and exit.

Question 6

Which of the following statements is true in the context of the long run?

Accepted Answer

A) All the factors of production are fixed. 
B) No new firms enter the market. 
C) The producer can vary all the factors of production. 
D) The firms earn positive economic profit. 
E) Large firms tend to acquire market power. 
A) All the factors of production are fixed. 
B) No new firms enter the market. 
C) The producer can vary all the factors of production. 
D) The firms earn positive economic profit. 
E) Large firms tend to acquire market power.

Question 7

If significant barriers to entry exist in a market, then the market is best described through the model of perfect competition.

Accepted Answer

A) True 
 B)False

Question 8

The governmental interference with the market exchange often reduces the total surplus.

Accepted Answer

A) True 
 B)False

Question 9

In the long run, a perfectly competitive firm will leave the market if it is unable to cover all of its fixed costs.

Accepted Answer

A) True 
 B)False

Question 10

The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 23.1   In Figure 23.1, the firm's profit is equal to the area:

Accepted Answer

A) OIWR. 
B) JKEF 
C) OKET 
D) LMNG 
E) OJFS 
A) OIWR. 
B) JKEF 
C) OKET 
D) LMNG 
E) OJFS

Question 11

In the long run with the entry of new firms in a competitive market shifts the aggregate supply curve to the left.

Accepted Answer

A) True 
 B)False

Question 12

The figure given below shows the demand and cost curves of a perfectly competitive firm. Figure: 23.4   D: Demand curve
MC: Marginal cost curve
ATC: Average-total cost curve
AVC: Average-variable-cost curve
Refer to Figure 23.4.The presence of the average-variable-cost curve suggests that the firm is operating:

Accepted Answer

A) in the short run. 
B) in the long run. 
C) at a gain. 
D) in a monopoly. 
E) at a zero profit. 
A) in the short run. 
B) in the long run. 
C) at a gain. 
D) in a monopoly. 
E) at a zero profit.

Question 13

For a perfectly competitive firm in the short run, which of the following statements is true?

Accepted Answer

A) A price above minimum average variable cost, but below average total cost will produce an economic profit. 
B) A price below minimum average variable cost will cause the firm to shut down. 
C) Marginal cost is parallel to the axis showing quantity of output. 
D) Price is always greater than marginal revenue. 
E) Every firm contributes a significant amount to the total market output. 
A) A price above minimum average variable cost, but below average total cost will produce an economic profit. 
B) A price below minimum average variable cost will cause the firm to shut down. 
C) Marginal cost is parallel to the axis showing quantity of output. 
D) Price is always greater than marginal revenue. 
E) Every firm contributes a significant amount to the total market output.

Question 14

Given a perfectly competitive market structure at the profit-maximizing output level, a firm's total fixed cost is $10, total variable cost is $100, marginal revenue is $4, and the quantity demanded is 50.The total profit earned by the firm is:

Accepted Answer

A) $70. 
B) $65. 
C) $90. 
D) $75. 
A) $70. 
B) $65. 
C) $90. 
D) $75.

Question 15

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
According to Figure 23.2, the break-even price of the firm is:

Accepted Answer

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

Exam 44: Perfect Competition

If a profit-maximizing, perfectly competitive firm is producing at a loss in the short run, then it implies that:

Which of the following faces a horizontal demand curve?

If losses are incurred in a competitive industry, then over the long run we can expect a greater quantity supplied because market price will rise.

Graphically, consumer surplus is the area:

The model of perfect competition best applies to markets with:

Which of the following statements is true in the context of the long run?

If significant barriers to entry exist in a market, then the market is best described through the model of perfect competition.

The governmental interference with the market exchange often reduces the total surplus.

In the long run, a perfectly competitive firm will leave the market if it is unable to cover all of its fixed costs.

The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 23.1 In Figure 23.1, the firm's profit is equal to the area:

In the long run with the entry of new firms in a competitive market shifts the aggregate supply curve to the left.

For a perfectly competitive firm in the short run, which of the following statements is true?

Given a perfectly competitive market structure at the profit-maximizing output level, a firm's total fixed cost is $10, total variable cost is $100, marginal revenue is $4, and the quantity demanded is 50.The total profit earned by the firm 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 According to Figure 23.2, the break-even price of the firm is:

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

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

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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