Question 1

Table 9-1
 $$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Total Cost } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Variable Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & \$ 1,000 & \$ 0 \
\hline 100 & 1,360 & 360 \
\hline 200 & 1,560 & 560 \
\hline 300 & 1,960 & 960 \
\hline 400 & 2,760 & 1,760 \
\hline 500 & 4,000 & 3,000 \
\hline 600 & 5,800 & 4,800 \
\hline
\end{array}$$ 
Table 9-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
-Refer to Table 9-1.What is the fixed cost of production?

Accepted Answer

A) $0 
B) $500 
C) $1,000 
D) It cannot be determined.

Question 2

Letters are used to represent the terms used to answer this question: price (P),quantity of output (Q),total cost (TC)and average total cost (ATC).Which of the following equations is equal to a firm's profit?

Accepted Answer

A) P - ATC 
B) (P × Q)- TC 
C) (P × Q)- (P × AT
C)  
D) P - TC

Question 3

What is a long-run supply curve? What does a long-run supply curve look like on a perfectly competitive market graph?

Accepted Answer

The answer of What is a long-run supply curve? What...

Question 4

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21.Which of the following will happen?

Accepted Answer

A) The firm's profits will increase. 
B) The firm's revenue will increase. 
C) The firm will not sell any output. 
D) The firm will sell more output than its competitors.

Question 5

Suppose Veronica sells teapots in the perfectly competitive teapot market.Her output per day and her costs are as follows:
 $\begin{array}{|c|c|}
\hline\text { Output per } & \
\text { Day }& \text { Total Cost } \
\hline 0 & \$ 20 \
\hline 1 & 32 \
\hline 2 & 37 \
\hline 3 & 48 \
\hline 4 & 61 \
\hline 5 & 75 \
\hline 6 & 92 \
\hline 7 & 113 \
\hline 8 & 136 \
\hline
\end{array}$ 
Suppose the current equilibrium price in the teapot market is $20.To maximize profit,how many teapots will Veronica produce,what price will she charge,and how much profit (or loss)will she make? Draw a graph to illustrate your answer.Your graph should include Veronica's demand,ATC,AVC,MC,and MR curves,the price she is charging,the quantity she is producing,and the area representing her profit (or loss).

Accepted Answer

The answer of Suppose Veronica sells teapots in the perfectly...

Question 6

A constant cost,perfectly competitive market is in long-run equilibrium.At present,there are 1,000 firms each producing 400 units of output.The price of the good is $60.Now suppose there is a sudden increase in demand for the industry's product which causes the price of the good to rise to $64.In the new long-run equilibrium,how will the average total cost of producing the good compare to what it was before the price of the good rose?

Accepted Answer

A) The average total cost will be higher than it was before the price increase since the increase in demand will drive up input prices. 
B) The average total cost will be lower than it was before the price increase because of economies of scale. 
C) The average total cost will be higher than it was before the price increase because of diseconomies of scale arising from the increased demand. 
D) The average total cost will be the same as it was before the price increase.

Question 7

Which of the following describes a difference between allocative efficiency and productive efficiency in a perfectly competitive market?

Accepted Answer

A) Allocative efficiency is achieved only in the long run.Productive efficiency is achieved only in the short run. 
B) Allocative efficiency is achieved only in the long run.Productive efficiency is achieved in the short run and the long run. 
C) Allocative efficiency is achieved only in the short run.Productive efficiency is achieved only in the long run. 
D) Allocative efficiency is achieved in the short run and the long run.Productive efficiency is achieved only in the long run.

Question 8

Producing where marginal revenue equals marginal cost is equivalent to producing where

Accepted Answer

A) average total cost equals average revenue. 
B) average fixed cost is minimized. 
C) total revenue is equal to total cost. 
D) total profit is maximized.

Question 9

Figure 9-1
 
-Refer to Figure 9-1.If the firm is producing 500 units

Accepted Answer

A) it is making a profit. 
B)  it is making a loss. 
C) it should maintain its output to maximize profit. 
D) it should increase its output to maximize profit.

Question 10

Figure 9-1
 
-Refer to Figure 9-1.If the firm is producing 500 units,what is the amount of its profit or loss?

Accepted Answer

A) profit of $280 
B) loss equivalent to the area A 
C) profit equivalent to the area A 
D) There is insufficient information to answer the question.

Question 11

The supply curve of a perfectly competitive firm in the short run is

Accepted Answer

A) the firm's average variable cost curve. 
B) the portion of the firm's marginal cost curve below the minimum point of the average variable cost curve. 
C) the portion of the firm's marginal cost curve above the minimum point of the average variable cost curve. 
D) the portion of the firm's marginal cost curve above the minimum point of the average total cost curve.

Question 12

A perfectly competitive firm's marginal revenue

Accepted Answer

A) is greater than price. 
B) is less than price because a firm must lower its price to sell more. 
C) is equal to price. 
D) may be either greater or less than price, depending on the quantity sold.

Question 13

Figure 9-6
  
Figure 9-6 shows the demand, marginal cost (MC)and average total cost (ATC)curves for Jason's House of Apples.
-Refer to Figure 9-6.To maximize his profit,Jason should produce the rate of output indicated by point

Accepted Answer

A) a. 
B) b. 
C) e. 
D) d.

Question 14

Figure 9-16
 
-Refer to Figure 9-16.Which panel best represents the perfectly competitive organic produce market in which some firms are experiencing short-run losses,and consumers are displaying an increased preference for organic produce?

Accepted Answer

A) Panel A 
B) Panel B 
C) Panel C 
D) Panel D

Question 15

Table 9-3
 $$\begin{array} { | c | c | c | c | } 
\hline \text { Quantity } & \text { Total Cost } & \begin{array} { c } 
\text { Average } \
\text { Total Cost }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Cost }
\end{array} \
\hline 0 & \$ 10.00 & \cdots & \cdots \
\hline 1 & 15.00 & \$ 15.00 & \$ 5.00 \
\hline 2 & 17.50 & 8.75 & 2.50 \
\hline 3 & 22.50 & 7.50 & 5.00 \
\hline 4 & 30.00 & 7.50 & 7.50 \
\hline 5 & 40.00 & 8.00 & 10.00 \
\hline 6 & 52.50 & 8.75 & 12.50 \
\hline 7 & 67.50 & 9.64 & 15.00 \
\hline 8 & 85.00 & 10.63 & 17.50 \
\hline 9 & 105.00 & 11.67 & 20.00 \
\hline
\end{array}$$ 
Arnie sells basketballs in a perfectly competitive market.Table 9-3 summarizes Arnie's output per day (Q), total cost (TC), average total cost (ATC)and marginal cost (MC).
-Refer to Table 9-3.What price (P)will Arnie charge and how much profit will he earn if the market price of basketballs is $12.50?

Accepted Answer

A) Price and profit cannot be determined from the information given. 
B) P = $12.50; profit = $52.50 
C) P = $12.50; profit = $22.50 
D) P = $20; profit = $75.00.

Question 16

Both individual buyers and sellers in perfect competition

Accepted Answer

A) can influence the market price by their own individual actions. 
B) can influence the market price by joining with a few of their competitors. 
C) have to take the market price as a given. 
D) have the market price dictated to them by government.

Question 17

Figure 9-9
  
Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 9-9.At price P₃,the firm would

Accepted Answer

A) lose an amount equal to its fixed cost. 
B) lose an amount more than fixed cost. 
C) lose an amount less than fixed cost. 
D) break even.

Question 18

Figure 9-3
 
-Refer to Figure 9-3.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.Identify the area that represents the loss.

Accepted Answer

A) P₂ deP₁ 
B) P₃cbP₁ 
C) P₃caP₀ 
D) 0P₁ bQ₁

Question 19

Figure 9-2
 
-Refer to Figure 9-2.What is the amount of profit if the firm produces Q₂ units?

Accepted Answer

A) It is equal to the vertical distance c to g. 
B)  It is equal to the vertical distance c to Q₂. 
C)  It is equal to the vertical distance g to Q₂. 
D) It is equal to the vertical distance c to g multiplied by Q₂ units.

Question 20

A perfectly competitive firm faces a demand curve that is

Accepted Answer

A) horizontal. 
B) vertical. 
C) perpendicular to the quantity axis. 
D) perfectly inelastic.

Exam 9: Firms in Perfectly Competitive Markets

Letters are used to represent the terms used to answer this question: price (P) ,quantity of output (Q) ,total cost (TC) and average total cost (ATC) .Which of the following equations is equal to a firm's profit?

What is a long-run supply curve? What does a long-run supply curve look like on a perfectly competitive market graph?

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21.Which of the following will happen?

Which of the following describes a difference between allocative efficiency and productive efficiency in a perfectly competitive market?

Producing where marginal revenue equals marginal cost is equivalent to producing where

Figure 9-1 -Refer to Figure 9-1.If the firm is producing 500 units

Figure 9-1 -Refer to Figure 9-1.If the firm is producing 500 units,what is the amount of its profit or loss?

The supply curve of a perfectly competitive firm in the short run is

A perfectly competitive firm's marginal revenue

Figure 9-6 Figure 9-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples. -Refer to Figure 9-6.To maximize his profit,Jason should produce the rate of output indicated by point

Figure 9-16 -Refer to Figure 9-16.Which panel best represents the perfectly competitive organic produce market in which some firms are experiencing short-run losses,and consumers are displaying an increased preference for organic produce?

Both individual buyers and sellers in perfect competition

Figure 9-9 Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 9-9.At price P₃,the firm would

Figure 9-3 -Refer to Figure 9-3.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.Identify the area that represents the loss.

Figure 9-2 -Refer to Figure 9-2.What is the amount of profit if the firm produces Q₂ units?

A perfectly competitive firm faces a demand curve that is