Question 1

Why does the profit-maximizing level of production occur at the point where marginal revenue equals marginal cost?

Accepted Answer

If a firm produces at a level where marg

Question 2

A perfectly competitive firm is a price taker because

Accepted Answer

A) many other firms produce the same product. 
B) only one firm produces the product. 
C) many firms produce a slightly differentiated product. 
D) a few firms compete. 
E) it faces a vertical demand curve. 
A) many other firms produce the same product. 
B) only one firm produces the product. 
C) many firms produce a slightly differentiated product. 
D) a few firms compete. 
E) it faces a vertical demand curve.

Question 3

A perfectly competitive firm will shut down when the price is just below the minimum point on the

Accepted Answer

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

Question 4

Catfish farming is a perfectly competitive industry.Catfish farmers suffered tremendous economic losses in the late 2000s.As a result,

Accepted Answer

A) some new catfish farmers entered the market. 
B) some catfish farmers exited the market. 
C) no catfish farmers entered or exited this market. 
D) the supply of catfish increased in 2010. 
E) new demanders entered the market after some firms had exited. 
A) some new catfish farmers entered the market. 
B) some catfish farmers exited the market. 
C) no catfish farmers entered or exited this market. 
D) the supply of catfish increased in 2010. 
E) new demanders entered the market after some firms had exited.

Question 5

If a perfectly competitive seller is maximizing profit and is making zero economic profit,which of the following will this seller do?

Accepted Answer

A) go to work in the next-best earning opportunity 
B) shut down,with a loss equal to total fixed cost 
C) continue at the current output,making zero economic profit 
D) increase production in order to make an economic profit 
E) remain open but decrease production in order to make an economic profit 
A) go to work in the next-best earning opportunity 
B) shut down,with a loss equal to total fixed cost 
C) continue at the current output,making zero economic profit 
D) increase production in order to make an economic profit 
E) remain open but decrease production in order to make an economic profit

Question 6

Each firm in a perfectly competitive industry

Accepted Answer

A) produces a good that is slightly different from that of the other firms. 
B) produces a good that is identical to that of the other firms. 
C) attains economies of scale so that its efficient size is large compared to the market as a whole. 
D) has control over at least one unique resource to separate themselves from their competitors. 
E) has an important influence on the market price of the good or service being produced. 
A) produces a good that is slightly different from that of the other firms. 
B) produces a good that is identical to that of the other firms. 
C) attains economies of scale so that its efficient size is large compared to the market as a whole. 
D) has control over at least one unique resource to separate themselves from their competitors. 
E) has an important influence on the market price of the good or service being produced.

Question 7

In the long run,a firm in a perfectly competitive market will

Accepted Answer

A) make zero economic profit,so that its owners earn a normal profit. 
B) make zero normal profit but its owners will make an economic profit. 
C) remove all competitors and become a monopolistically competitive firm. 
D) incur an economic normal loss but not earn a positive economic profit. 
E) remove all competitors and become a monopoly. 
A) make zero economic profit,so that its owners earn a normal profit. 
B) make zero normal profit but its owners will make an economic profit. 
C) remove all competitors and become a monopolistically competitive firm. 
D) incur an economic normal loss but not earn a positive economic profit. 
E) remove all competitors and become a monopoly.

Question 8

One part of a perfectly competitive trout farm's supply curve is its

Accepted Answer

A) marginal cost curve below the shutdown point. 
B) entire marginal cost curve. 
C) marginal cost curve above the shutdown point. 
D) average variable cost curve above the shutdown point. 
E) marginal revenue curve above the demand curve. 
A) marginal cost curve below the shutdown point. 
B) entire marginal cost curve. 
C) marginal cost curve above the shutdown point. 
D) average variable cost curve above the shutdown point. 
E) marginal revenue curve above the demand curve.

Question 9

A large number of sellers all selling an identical product implies which of the following?

Accepted Answer

A) market chaos 
B) the inability of any seller to change the price of the product 
C) large losses incurred by all sellers 
D) horizontal market supply curves 
E) vertical market supply curves 
A) market chaos 
B) the inability of any seller to change the price of the product 
C) large losses incurred by all sellers 
D) horizontal market supply curves 
E) vertical market supply curves

Question 10

-The above figure shows the cost curves of a profit-maximizing perfectly competitive firm.If the price equals $7,
a.how much will the firm produce?
b.how much is the firm's average total,average variable,and marginal costs?
c.how much is the firm's total,total variable,and total fixed costs?
d.how much is the firm's total revenue and economic profit?
e.what will happen in this market in the long run?

Accepted Answer

a.The firm will produce 40 units of outp

Question 11

Juan's Software Service Company is in a perfectly competitive market.Juan has total fixed cost of $25,000,average variable cost for 1,000 service calls is $45,and marginal revenue is $75.Juan's makes 1,000 service calls a month.What is his economic profit?

Accepted Answer

A) $5,000 
B) $25,000 
C) $45,000 
D) $75,000 
E) $50,000 
A) $5,000 
B) $25,000 
C) $45,000 
D) $75,000 
E) $50,000

Question 12

In the long run,new firms enter a perfectly competitive market when

Accepted Answer

A) normal profit is greater than zero. 
B) economic profit is equal to zero. 
C) normal profit is equal to zero. 
D) economic profit is greater than zero. 
E) the existing firms are weak because they are incurring economic losses. 
A) normal profit is greater than zero. 
B) economic profit is equal to zero. 
C) normal profit is equal to zero. 
D) economic profit is greater than zero. 
E) the existing firms are weak because they are incurring economic losses.

Question 13

If a struggling perfectly competitive furniture store in Detroit shuts down,it incurs an economic loss equal to its

Accepted Answer

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

Question 14

-The above figure shows a perfectly competitive firm.If the market price is $15 per unit,the firm

Accepted Answer

A) will definitely shut down to minimize its losses. 
B) will stay open to produce and will make zero economic profit. 
C) will stay open to produce and will incur an economic loss. 
D) will stay open to produce and will make an economic profit. 
E) might shut down but more information is needed about the fixed cost. 
A) will definitely shut down to minimize its losses. 
B) will stay open to produce and will make zero economic profit. 
C) will stay open to produce and will incur an economic loss. 
D) will stay open to produce and will make an economic profit. 
E) might shut down but more information is needed about the fixed cost.

Question 15

If perfectly competitive firms are making an economic profit,the economic profit

Accepted Answer

A) attracts entry by more firms,which lowers the price. 
B) can be earned both in the short run and the long run. 
C) is less than the normal profit. 
D) leads to a decrease in market demand. 
E) generally leads to firms exiting as they seek higher profit in other markets. 
A) attracts entry by more firms,which lowers the price. 
B) can be earned both in the short run and the long run. 
C) is less than the normal profit. 
D) leads to a decrease in market demand. 
E) generally leads to firms exiting as they seek higher profit in other markets.

Question 16

Suppose that marginal revenue for a perfectly competitive firm is $20 .When the firm produces 10 units,its marginal cost is $20,its average total cost is $22,and its average variable cost is $17.Then to maximize its profit in the short run,the firm

Accepted Answer

A) should stay open and incur an economic loss of $20. 
B) must increase its output to increase its profit. 
C) must decrease its output to increase its profit. 
D) should shut down. 
E) should not change its production because it is already maximizing its profit and is making an economic profit. 
A) should stay open and incur an economic loss of $20. 
B) must increase its output to increase its profit. 
C) must decrease its output to increase its profit. 
D) should shut down. 
E) should not change its production because it is already maximizing its profit and is making an economic profit.

Question 17

Cynthia is an Oklahoma wheat farmer.The demand for her wheat is

Accepted Answer

A) perfectly inelastic. 
B) inelastic but not perfectly inelastic. 
C) elastic but not perfectly elastic. 
D) perfectly elastic. 
E) unit elastic. 
A) perfectly inelastic. 
B) inelastic but not perfectly inelastic. 
C) elastic but not perfectly elastic. 
D) perfectly elastic. 
E) unit elastic.

Question 18

-The figure above shows a perfectly competitive firm.If the market price is $20 per unit,then the firm produces ________ units and makes an economic profit that is ________.

Accepted Answer

A) more than 30;more than $100 
B) 30;more than $100 
C) 20;less than $400 
D) 0;zero 
E) 30;zero 
A) more than 30;more than $100 
B) 30;more than $100 
C) 20;less than $400 
D) 0;zero 
E) 30;zero

Question 19

Which of the following is true if a firm shuts down?
I.The price is less than minimum average variable cost.
Ii.The firm is able to avoid an economic loss.
Iii.The firm incurs a loss equal to its total variable cost.

Accepted Answer

A) i only 
B) i and ii 
C) i and iii 
D) iii only 
E) ii only 
A) i only 
B) i and ii 
C) i and iii 
D) iii only 
E) ii only

Question 20

Suppose the firm's marginal cost of producing a can increases by $1 per can.Then,based on the figure above,the firm would

Accepted Answer

A) produce zero cans. 
B) decrease the amount of cans it produces but not to zero cans. 
C) not change the amount of cans it produces. 
D) increase the amount of cans it produces. 
E) More information is needed to determine what action the firm will take. 
A) produce zero cans. 
B) decrease the amount of cans it produces but not to zero cans. 
C) not change the amount of cans it produces. 
D) increase the amount of cans it produces. 
E) More information is needed to determine what action the firm will take.

Why does the profit-maximizing level of production occur at the point where marginal revenue equals marginal cost?

A perfectly competitive firm is a price taker because

A perfectly competitive firm will shut down when the price is just below the minimum point on the

Catfish farming is a perfectly competitive industry.Catfish farmers suffered tremendous economic losses in the late 2000s.As a result,

If a perfectly competitive seller is maximizing profit and is making zero economic profit,which of the following will this seller do?

Each firm in a perfectly competitive industry

In the long run,a firm in a perfectly competitive market will

One part of a perfectly competitive trout farm's supply curve is its

A large number of sellers all selling an identical product implies which of the following?

Juan's Software Service Company is in a perfectly competitive market.Juan has total fixed cost of $25,000,average variable cost for 1,000 service calls is $45,and marginal revenue is $75.Juan's makes 1,000 service calls a month.What is his economic profit?

In the long run,new firms enter a perfectly competitive market when

If a struggling perfectly competitive furniture store in Detroit shuts down,it incurs an economic loss equal to its

-The above figure shows a perfectly competitive firm.If the market price is $15 per unit,the firm

If perfectly competitive firms are making an economic profit,the economic profit

Suppose that marginal revenue for a perfectly competitive firm is $20 .When the firm produces 10 units,its marginal cost is $20,its average total cost is $22,and its average variable cost is $17.Then to maximize its profit in the short run,the firm

Cynthia is an Oklahoma wheat farmer.The demand for her wheat is

-The figure above shows a perfectly competitive firm.If the market price is $20 per unit,then the firm produces units and makes an economic profit that is .

Which of the following is true if a firm shuts down? I.The price is less than minimum average variable cost. Ii.The firm is able to avoid an economic loss. Iii.The firm incurs a loss equal to its total variable cost.

Suppose the firm's marginal cost of producing a can increases by $1 per can.Then,based on the figure above,the firm would

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

Why does the profit-maximizing level of production occur at the point where marginal revenue equals marginal cost?

A perfectly competitive firm is a price taker because

A perfectly competitive firm will shut down when the price is just below the minimum point on the

Catfish farming is a perfectly competitive industry.Catfish farmers suffered tremendous economic losses in the late 2000s.As a result,

If a perfectly competitive seller is maximizing profit and is making zero economic profit,which of the following will this seller do?

Each firm in a perfectly competitive industry

In the long run,a firm in a perfectly competitive market will

One part of a perfectly competitive trout farm's supply curve is its

A large number of sellers all selling an identical product implies which of the following?

Juan's Software Service Company is in a perfectly competitive market.Juan has total fixed cost of $25,000,average variable cost for 1,000 service calls is $45,and marginal revenue is $75.Juan's makes 1,000 service calls a month.What is his economic profit?

In the long run,new firms enter a perfectly competitive market when

If a struggling perfectly competitive furniture store in Detroit shuts down,it incurs an economic loss equal to its

-The above figure shows a perfectly competitive firm.If the market price is $15 per unit,the firm

If perfectly competitive firms are making an economic profit,the economic profit

Suppose that marginal revenue for a perfectly competitive firm is $20 .When the firm produces 10 units,its marginal cost is $20,its average total cost is $22,and its average variable cost is $17.Then to maximize its profit in the short run,the firm

Cynthia is an Oklahoma wheat farmer.The demand for her wheat is

-The figure above shows a perfectly competitive firm.If the market price is $20 per unit,then the firm produces ________ units and makes an economic profit that is ________.

Which of the following is true if a firm shuts down? I.The price is less than minimum average variable cost. Ii.The firm is able to avoid an economic loss. Iii.The firm incurs a loss equal to its total variable cost.

Suppose the firm's marginal cost of producing a can increases by $1 per can.Then,based on the figure above,the firm would

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

-The figure above shows a perfectly competitive firm.If the market price is $20 per unit,then the firm produces units and makes an economic profit that is .