Question 1

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. C

Question 2

An increase in price facing a perfectly competitive firm means that the profit-maximizing output level will increase.

Accepted Answer

A) True 
 B)False  True

Question 3

The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 9.2   MC: Marginal cost curve
MR: Marginal revenue curve
ATC: Average-total-cost curve
AVC: Average-variable-cost curve
Refer to Figure 9.2.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 B

Question 4

Suppose a perfectly competitive firm's total revenue equals $210 and its output is 70 units when the firm's marginal-cost curve intersects its marginal-revenue curve.Since the firm is a profit-maximizing firm, what is marginal revenue equal to?

Accepted Answer

A) $15 
B) $3 
C) $30 
D) $7 
E) $70 
A) $15 
B) $3 
C) $30 
D) $7 
E) $70

Question 5

A firm's break-even price is the price that is just equal to the minimum point of the AVC curve in the short run.

Accepted Answer

A) True 
 B)False

Question 6

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 7

For which of the following types of firms does the average revenue curve coincide with the marginal revenue curve?

Accepted Answer

A) A monopolist 
B) An oligopoly firm 
C) A monopolistically competitive firm 
D) A perfectly competitive firm 
E) A monopsonist 
A) A monopolist 
B) An oligopoly firm 
C) A monopolistically competitive firm 
D) A perfectly competitive firm 
E) A monopsonist

Question 8

In the short run a firm continues to produce only if it can cover the:

Accepted Answer

A) fixed costs. 
B) sunk costs. 
C) explicit costs. 
D) variable costs. 
E) implicit costs. 
A) fixed costs. 
B) sunk costs. 
C) explicit costs. 
D) variable costs. 
E) implicit costs.

Question 9

At long run equilibrium of a perfectly competitive firm the following condition holds good: Long Run Average-Total-Cost = Long Run Marginal Cost = Average Revenue = Marginal Revenue = Price.

Accepted Answer

A) True 
 B)False

Question 10

The table given below shows the total revenue and total cost of a firm at different levels of output. Table 9.2
  Consider the perfectly competitive firm described in Table 9.2.How many units of the good should the firm produce to maximize profit?

Accepted Answer

A) 16 units 
B) 17 units 
C) 18 units 
D) 19 units 
E) 20 units 
A) 16 units 
B) 17 units 
C) 18 units 
D) 19 units 
E) 20 units

Question 11

The following figure shows equilibrium at the industry and firm level. Figure 9.6   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 9.6, an upward shift of the MR curve will result from:

Accepted Answer

A) a larger demand. 
B) more firms in the industry. 
C) fewer firms in the industry. 
D) a smaller demand. 
E) the firm being more efficient. 
A) a larger demand. 
B) more firms in the industry. 
C) fewer firms in the industry. 
D) a smaller demand. 
E) the firm being more efficient.

Question 12

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 13

A perfectly competitive firm's pricing decision depends on:

Accepted Answer

A) whether the firm wants to maximize profits. 
B) whether the firm wants to maximize sales revenue. 
C) the firm's costs. 
D) whether it wants to compete with other firms in the market. 
E) the market supply and demand. 
A) whether the firm wants to maximize profits. 
B) whether the firm wants to maximize sales revenue. 
C) the firm's costs. 
D) whether it wants to compete with other firms in the market. 
E) the market supply and demand.

Question 14

The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 9.5   MC: Marginal cost curve
MR: Marginal revenue curve.
ATC: Average-total-cost curve
AVC: Average-variable-cost curve
According to Figure 9.5, the firm has:

Accepted Answer

A) profits equal to the area AP1EF. 
B) profits equal to the area P1BDE. 
C) losses equal to the area 0AFQ1. 
D) losses equal to the area P1BDE. 
E) no profit no loss. 
A) profits equal to the area AP1EF. 
B) profits equal to the area P1BDE. 
C) losses equal to the area 0AFQ1. 
D) losses equal to the area P1BDE. 
E) no profit no loss.

Question 15

The figure given below shows the demand and cost curves of a perfectly competitive firm. Figure: 9.4   D: Demand curve
MC: Marginal cost curve
ATC: Average-total cost curve
AVC: Average-variable-cost curve
Refer to Figure 9.4.At the profit-maximizing output level, which of the following is true?

Accepted Answer

A) The firm is making a profit of $10 per unit. 
B) The firm is making a profit of $45 per unit. 
C) The firm is losing $35 per unit. 
D) The firm is losing $10 per unit. 
E) The firm is breaking even. 
A) The firm is making a profit of $10 per unit. 
B) The firm is making a profit of $45 per unit. 
C) The firm is losing $35 per unit. 
D) The firm is losing $10 per unit. 
E) The firm is breaking even.

Question 16

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 17

When firms leave a perfectly competitive market, then, other things remaining unchanged:

Accepted Answer

A) the market supply will decrease but the market price will rise. 
B) both the market supply and the market price will fall. 
C) both the market demand and the price will increase. 
D) the market demand will decrease but the market price will fall. 
E) both the market demand and the market supply will decrease. 
A) the market supply will decrease but the market price will rise. 
B) both the market supply and the market price will fall. 
C) both the market demand and the price will increase. 
D) the market demand will decrease but the market price will fall. 
E) both the market demand and the market supply will decrease.

Question 18

In which of the following situations will a perfectly competitive firm's profit always increase when it increases its output?

Accepted Answer

A) When price is greater than marginal revenue 
B) When price is less than marginal revenue 
C) When price is greater than marginal cost 
D) When price is less than marginal cost 
E) When price is equal to marginal cost 
A) When price is greater than marginal revenue 
B) When price is less than marginal revenue 
C) When price is greater than marginal cost 
D) When price is less than marginal cost 
E) When price is equal to marginal cost

Question 19

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 20

If a profit-maximizing, perfectly competitive firm is making only a normal profit in the short run, then the firm is in:

Accepted Answer

A) disequilibrium. 
B) equilibrium where MR exceeds minimum ATC. 
C) equilibrium where MR equals minimum AVC. 
D) equilibrium where P = AFC. 
E) equilibrium where P = ATC 
A) disequilibrium. 
B) equilibrium where MR exceeds minimum ATC. 
C) equilibrium where MR equals minimum AVC. 
D) equilibrium where P = AFC. 
E) equilibrium where P = ATC

Exam 14: Perfect Competition

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

An increase in price facing a perfectly competitive firm means that the profit-maximizing output level will increase.

Suppose a perfectly competitive firm's total revenue equals $210 and its output is 70 units when the firm's marginal-cost curve intersects its marginal-revenue curve.Since the firm is a profit-maximizing firm, what is marginal revenue equal to?

A firm's break-even price is the price that is just equal to the minimum point of the AVC curve in the short run.

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:

For which of the following types of firms does the average revenue curve coincide with the marginal revenue curve?

In the short run a firm continues to produce only if it can cover the:

At long run equilibrium of a perfectly competitive firm the following condition holds good: Long Run Average-Total-Cost = Long Run Marginal Cost = Average Revenue = Marginal Revenue = Price.

The table given below shows the total revenue and total cost of a firm at different levels of output. Table 9.2 Consider the perfectly competitive firm described in Table 9.2.How many units of the good should the firm produce to maximize profit?

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

A perfectly competitive firm's pricing decision depends on:

The figure given below shows the revenue and cost curves of a perfectly competitive firm. Figure 9.5 MC: Marginal cost curve MR: Marginal revenue curve. ATC: Average-total-cost curve AVC: Average-variable-cost curve According to Figure 9.5, the firm has:

The figure given below shows the demand and cost curves of a perfectly competitive firm. Figure: 9.4 D: Demand curve MC: Marginal cost curve ATC: Average-total cost curve AVC: Average-variable-cost curve Refer to Figure 9.4.At the profit-maximizing output level, which of the following is true?

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

When firms leave a perfectly competitive market, then, other things remaining unchanged:

In which of the following situations will a perfectly competitive firm's profit always increase when it increases its output?

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:

If a profit-maximizing, perfectly competitive firm is making only a normal profit in the short run, then the firm is in:

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

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

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

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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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