Question 1

The firm's overriding objective is to

Accepted Answer

A) earn a normal profit. 
B) maximize normal profit. 
C) maximize economic profit. 
D) maximize total revenue. 
E) avoid an economic loss. 
A) earn a normal profit. 
B) maximize normal profit. 
C) maximize economic profit. 
D) maximize total revenue. 
E) avoid an economic loss.

Question 2

Suppose a farmer raising beef is making a normal profit.Then,because of a scare about mad cow disease,the demand for beef decreases drastically.What happens to the profits of the beef farmer in the short run and in the long run?

Accepted Answer

In the short run,the fall in beef prices

Question 3

In the long run,perfectly competitive firms cannot make an economic profit.Why?

Accepted Answer

An economic profit attracts entry by new

Question 4

The firm in the figure above has a total revenue equal to ________.

Accepted Answer

A) $5.14 × 7 
B) $3.00 × 7 
C) ($5.14 - $3.00)× 7 
D) ($3.00 - $5.14)× 7 
E) None of the above answers is correct because more information is needed. 
A) $5.14 × 7 
B) $3.00 × 7 
C) ($5.14 - $3.00)× 7 
D) ($3.00 - $5.14)× 7 
E) None of the above answers is correct because more information is needed.

Question 5

-Acme is a perfectly competitive firm.It has the total cost schedule given in the above table.Acme's product sells for $8.00 per unit.What amount of output is the most profitable and what is Acme's economic profit or economic loss?

Accepted Answer

Acme's profit-maximizing level of output

Question 6

Suppose that each of 10,000 perfectly competitive firm in an industry produces 1,000 units of a good and earns an economic profit when the price of the good is $10.In the long run,definitely

Accepted Answer

A) each firm increases its production above 1,000 units. 
B) the number of firms is more than 10,000. 
C) consumer surplus decreases. 
D) producer surplus increases. 
E) the number of firms is less than 10,000. 
A) each firm increases its production above 1,000 units. 
B) the number of firms is more than 10,000. 
C) consumer surplus decreases. 
D) producer surplus increases. 
E) the number of firms is less than 10,000.

Question 7

A permanent decrease in demand definitely

Accepted Answer

A) shifts a firm's average total cost curve downward. 
B) creates diseconomies for individual firms. 
C) lowers the market price. 
D) decreases the number of firms in the industry. 
E) shifts a firm's average total cost curve upward. 
A) shifts a firm's average total cost curve downward. 
B) creates diseconomies for individual firms. 
C) lowers the market price. 
D) decreases the number of firms in the industry. 
E) shifts a firm's average total cost curve upward.

Question 8

Because perfectly competitive firms are price takers,each firm faces a demand that is

Accepted Answer

A) perfectly inelastic. 
B) perfectly elastic. 
C) highly inelastic but never is it perfectly inelastic. 
D) unit elastic. 
E) highly elastic but never is it perfectly elastic. 
A) perfectly inelastic. 
B) perfectly elastic. 
C) highly inelastic but never is it perfectly inelastic. 
D) unit elastic. 
E) highly elastic but never is it perfectly elastic.

Question 9

Normal profit is

Accepted Answer

A) the same thing as economic profit. 
B) the return to entrepreneurship. 
C) total revenue minus the total opportunity cost of production. 
D) the point of profit when total revenue is maximized. 
E) part of the firm's total revenue. 
A) the same thing as economic profit. 
B) the return to entrepreneurship. 
C) total revenue minus the total opportunity cost of production. 
D) the point of profit when total revenue is maximized. 
E) part of the firm's total revenue.

Question 10

In a perfectly competitive market,the market price is $23.At the current level of output,a firm has a marginal cost of $28.What should the firm do?

Accepted Answer

A) produce a larger output to make more profit 
B) nothing,it is currently maximizing profit 
C) produce less output to make more profit 
D) shut down 
E) raise the price of its product 
A) produce a larger output to make more profit 
B) nothing,it is currently maximizing profit 
C) produce less output to make more profit 
D) shut down 
E) raise the price of its product

Question 11

Henry,a perfectly competitive lime grower in Southern California,notices that the market price of limes is greater than his marginal cost.What should Henry do?

Accepted Answer

A) expand his output to increase profits 
B) shut down and incur a loss equal to his total fixed cost 
C) advertise his limes to be able to sell more output 
D) look for the output level where marginal revenue minus marginal cost is maximized 
E) shut down and earn no profit but also incur no loss 
A) expand his output to increase profits 
B) shut down and incur a loss equal to his total fixed cost 
C) advertise his limes to be able to sell more output 
D) look for the output level where marginal revenue minus marginal cost is maximized 
E) shut down and earn no profit but also incur no loss

Question 12

-The above table has the total revenue and total cost schedule for Omar,a perfectly competitive grower of rutabagas.Omar's total profit is maximized when he produces ________ bushels of rutabagas.

Accepted Answer

A) 3 
B) 5 
C) 6 
D) 8 
E) 7 
A) 3 
B) 5 
C) 6 
D) 8 
E) 7

Question 13

A perfectly competitive firm is producing at the quantity where marginal cost is $6 and average total cost is $4.The price of the good is $5.To maximize its profit,this firm should

Accepted Answer

A) raise its price. 
B) lower its price. 
C) increase its output. 
D) decrease its output. 
E) increase the price it charges for its product. 
A) raise its price. 
B) lower its price. 
C) increase its output. 
D) decrease its output. 
E) increase the price it charges for its product.

Question 14

-The above table gives the quantity of output and the total cost for a perfectly competitive firm that can sell all of its output at $9 per unit.
a.Find the profit maximizing level of output for this firm.
b.How much economic profit is the firm making?

Accepted Answer

@#IMG-DLM& a.Total revenue equals price times quan

Question 15

If a firm in a perfectly competitive market faces an equilibrium price of $5,its marginal revenue

Accepted Answer

A) will be greater than $5. 
B) will be less than $5. 
C) maybe either greater or less than $5. 
D) will also be $5. 
E) will be any amount but $5. 
A) will be greater than $5. 
B) will be less than $5. 
C) maybe either greater or less than $5. 
D) will also be $5. 
E) will be any amount but $5.

Question 16

In a market undergoing technological change,firms that

Accepted Answer

A) adopt the new technology temporarily incur an economic loss. 
B) adopt the new technology temporarily make an economic profit. 
C) do not adopt the new technology temporarily make an economic profit. 
D) do not adopt the new technology increase their market share. 
E) do not adopt the new technology continue to make a normal profit. 
A) adopt the new technology temporarily incur an economic loss. 
B) adopt the new technology temporarily make an economic profit. 
C) do not adopt the new technology temporarily make an economic profit. 
D) do not adopt the new technology increase their market share. 
E) do not adopt the new technology continue to make a normal profit.

Question 17

A perfectly competitive firm is producing 50 units of output and selling at the market price of $23.The firm's average total cost is $20.What is the firm's economic profit?

Accepted Answer

A) $23 
B) $150 
C) $1,000 
D) $1,150 
E) $50 
A) $23 
B) $150 
C) $1,000 
D) $1,150 
E) $50

Question 18

-Bill owns a lawn-care company in Windermere,Florida,whose cost curves are illustrated in the above figure.The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed.Bill's average total cost curve is ATC,so his total cost of production equals

Accepted Answer

A) $0 because Bill shuts down. 
B) more than $0 and less than $1,200 per week. 
C) more than $1,200 and less than $1,400 per week. 
D) more than $1,400 per week and less than $1,800 per week. 
E) more than $1,800 per week. 
A) $0 because Bill shuts down. 
B) more than $0 and less than $1,200 per week. 
C) more than $1,200 and less than $1,400 per week. 
D) more than $1,400 per week and less than $1,800 per week. 
E) more than $1,800 per week.

Question 19

If a perfectly competitive firm's average total cost is less than the price,then the firm

Accepted Answer

A) incurs an economic loss. 
B) makes an economic profit. 
C) makes zero economic profit. 
D) makes either zero economic profit or an economic profit depending on whether the marginal revenue is equal to or greater than the price. 
E) None of the above answers is correct because the relationship between the price and average total cost has nothing to do with the firm's profit. 
A) incurs an economic loss. 
B) makes an economic profit. 
C) makes zero economic profit. 
D) makes either zero economic profit or an economic profit depending on whether the marginal revenue is equal to or greater than the price. 
E) None of the above answers is correct because the relationship between the price and average total cost has nothing to do with the firm's profit.

Question 20

Consider a perfectly competitive market experiencing good times.In the short run,the equilibrium price will ________ and firms will earn a(n)________.

Accepted Answer

A) increase;economic profit as the new price exceeds average total cost 
B) increase;normal profit as the new price exceeds average total cost 
C) decrease;economic loss as new firms enter the industry 
D) decrease;economic profit as firms exit the industry 
E) may increase or decrease;normal profit depending on their costs 
A) increase;economic profit as the new price exceeds average total cost 
B) increase;normal profit as the new price exceeds average total cost 
C) decrease;economic loss as new firms enter the industry 
D) decrease;economic profit as firms exit the industry 
E) may increase or decrease;normal profit depending on their costs

The firm's overriding objective is to

Suppose a farmer raising beef is making a normal profit.Then,because of a scare about mad cow disease,the demand for beef decreases drastically.What happens to the profits of the beef farmer in the short run and in the long run?

In the long run,perfectly competitive firms cannot make an economic profit.Why?

The firm in the figure above has a total revenue equal to ________.

-Acme is a perfectly competitive firm.It has the total cost schedule given in the above table.Acme's product sells for $8.00 per unit.What amount of output is the most profitable and what is Acme's economic profit or economic loss?

Suppose that each of 10,000 perfectly competitive firm in an industry produces 1,000 units of a good and earns an economic profit when the price of the good is $10.In the long run,definitely

A permanent decrease in demand definitely

Because perfectly competitive firms are price takers,each firm faces a demand that is

Normal profit is

In a perfectly competitive market,the market price is $23.At the current level of output,a firm has a marginal cost of $28.What should the firm do?

Henry,a perfectly competitive lime grower in Southern California,notices that the market price of limes is greater than his marginal cost.What should Henry do?

-The above table has the total revenue and total cost schedule for Omar,a perfectly competitive grower of rutabagas.Omar's total profit is maximized when he produces ________ bushels of rutabagas.

A perfectly competitive firm is producing at the quantity where marginal cost is $6 and average total cost is $4.The price of the good is $5.To maximize its profit,this firm should

-The above table gives the quantity of output and the total cost for a perfectly competitive firm that can sell all of its output at $9 per unit. a.Find the profit maximizing level of output for this firm. b.How much economic profit is the firm making?

If a firm in a perfectly competitive market faces an equilibrium price of $5,its marginal revenue

In a market undergoing technological change,firms that

A perfectly competitive firm is producing 50 units of output and selling at the market price of $23.The firm's average total cost is $20.What is the firm's economic profit?

-Bill owns a lawn-care company in Windermere,Florida,whose cost curves are illustrated in the above figure.The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed.Bill's average total cost curve is ATC,so his total cost of production equals

If a perfectly competitive firm's average total cost is less than the price,then the firm

Consider a perfectly competitive market experiencing good times.In the short run,the equilibrium price will and firms will earn a(n).

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, education, and Health Care

Production and Cost

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Exam 11: Perfect Competition

The firm's overriding objective is to

Suppose a farmer raising beef is making a normal profit.Then,because of a scare about mad cow disease,the demand for beef decreases drastically.What happens to the profits of the beef farmer in the short run and in the long run?

In the long run,perfectly competitive firms cannot make an economic profit.Why?

The firm in the figure above has a total revenue equal to ________.

-Acme is a perfectly competitive firm.It has the total cost schedule given in the above table.Acme's product sells for $8.00 per unit.What amount of output is the most profitable and what is Acme's economic profit or economic loss?

Suppose that each of 10,000 perfectly competitive firm in an industry produces 1,000 units of a good and earns an economic profit when the price of the good is $10.In the long run,definitely

A permanent decrease in demand definitely

Because perfectly competitive firms are price takers,each firm faces a demand that is

Normal profit is

In a perfectly competitive market,the market price is $23.At the current level of output,a firm has a marginal cost of $28.What should the firm do?

Henry,a perfectly competitive lime grower in Southern California,notices that the market price of limes is greater than his marginal cost.What should Henry do?

-The above table has the total revenue and total cost schedule for Omar,a perfectly competitive grower of rutabagas.Omar's total profit is maximized when he produces ________ bushels of rutabagas.

A perfectly competitive firm is producing at the quantity where marginal cost is $6 and average total cost is $4.The price of the good is $5.To maximize its profit,this firm should

-The above table gives the quantity of output and the total cost for a perfectly competitive firm that can sell all of its output at $9 per unit. a.Find the profit maximizing level of output for this firm. b.How much economic profit is the firm making?

If a firm in a perfectly competitive market faces an equilibrium price of $5,its marginal revenue

In a market undergoing technological change,firms that

A perfectly competitive firm is producing 50 units of output and selling at the market price of $23.The firm's average total cost is $20.What is the firm's economic profit?

-Bill owns a lawn-care company in Windermere,Florida,whose cost curves are illustrated in the above figure.The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed.Bill's average total cost curve is ATC,so his total cost of production equals

If a perfectly competitive firm's average total cost is less than the price,then the firm

Consider a perfectly competitive market experiencing good times.In the short run,the equilibrium price will ________ and firms will earn a(n)________.

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, education, and Health Care

Production and Cost

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Consider a perfectly competitive market experiencing good times.In the short run,the equilibrium price will and firms will earn a(n).