Question 1

In the short run, a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

Accepted Answer

A) True 
 B)False

Question 2

For a firm in a perfectly competitive market, price is

Accepted Answer

A) equal to both average revenue and marginal revenue. 
B) equal to average revenue but greater than marginal revenue. 
C) greater than marginal revenue but less than average revenue. 
D) less than both average revenue and marginal revenue.

Question 3

When plasma television sets were first introduced, prices were high and few firms were in the market.Later, economic profits attracted new firms, and the price of plasma televisions fell.This example illustrates

Accepted Answer

A) a decreasing-cost industry. 
B) that consumers receive this new technology 'free of charge' in the sense that they only have to pay a price for plasma televisions equal to the lowest production cost. 
C) an industry with a low minimum efficient scale. 
D) how fickle consumer demands are.

Question 4

The long-run supply curve for a perfectly competitive, constant-cost industry

Accepted Answer

A) is upward sloping. 
B) is horizontal. 
C) is downward sloping. 
D) is found by adding up the marginal cost curves for all firms in the industry.

Question 5

Being a price-taker, a perfectly competitive firm cannot receive a producer surplus in the short run.

Accepted Answer

A) True 
 B)False

Question 6

In long-run perfectly competitive equilibrium, which of the following is false?

Accepted Answer

A) There is efficient, low-cost production at the minimum efficient scale. 
B) Economic surplus is maximised. 
C) Firms earn economic profit. 
D) Economies of scale are exhausted.

Question 7

Figure 8.5  Figure 8.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 8.5.The firm's manager suggests that the firm's goal should be to maximise average profit. If the firm does this, the amount of profit that it will earn is

Accepted Answer

A) $6600 
B) $6750 
C) $12 150 
D) $36 000

Question 8

For a perfectly competitive firm, to what is average revenue equal?

Accepted Answer

A) Marginal cost. 
B) The market price. 
C) Total revenue. 
D) Average fixed cost.

Question 9

For a perfectly competitive firm, which of the following is not true at profit maximisation?

Accepted Answer

A) Market price is greater than marginal cost. 
B) Marginal revenue equals marginal cost. 
C) Total revenue minus total cost is maximised. 
D) Price equals marginal cost.

Question 10

A perfectly competitive firm in a constant-cost industry produces 3000 units of a good at a total cost of $36 000.The prevailing market price is $15.What will happen to the number of firms in the industry and to the industry's output in the long run?

Accepted Answer

A) The number of firms and the industry's output increase. 
B) The number of firms and the industry's output decrease. 
C) The number of firms remains constant and the industry's output increases. 
D) The number of firms remains constant and the industry's output decreases.

Question 11

Figure 8.10 
-Refer to Figure 8.10.Consider a typical firm in a perfectly competitive industry that makes short-run profits.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Accepted Answer

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

Question 12

Figure 8.7  Figure 8.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm.
-Refer to Figure 8.7.At price P3, the firm would produce

Accepted Answer

A) Q2 units. 
B) Q3 units. 
C) Q4 units. 
D) Q5 units.

Question 13

Figure 8.4  Figure 8.4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market.
-Refer to Figure 8.4.If the market price is $30, what is the firm's profit-maximising output level?

Accepted Answer

A) 0) 
B) 130. 
C) 180. 
D) 240.

Question 14

Figure 8.4  Figure 8.4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market.
-Refer to Figure 8.4.If the market price is $30 and the firm is producing output, the amount of the firm's profit or loss is

Accepted Answer

A) loss of $1080 
B) profit of $1440 
C) loss of $2520 
D) profit of $1300

Question 15

Which of the following is not true for a firm in perfect competition?

Accepted Answer

A) Profit equals total revenue minus total cost. 
B) Price equals average revenue. 
C) Average revenue is greater than marginal revenue. 
D) Marginal revenue equals the change in total revenue from selling one more unit.

Question 16

The price a perfectly competitive firm receives for its output

Accepted Answer

A) is determined by the interaction of the firm and all of the consumers who buy from the firm. 
B) is determined by the interaction of all sellers and all buyers in the firm's market. 
C) will not change in response to changes in market demand and supply because the firm is a price taker. 
D) will be lowered by the firm in order to sell more output.

Question 17

Under what conditions should a competitive firm shut down in the short run?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The answer of Under what conditions should a competitive firm...

Question 18

Figure 8.8 
-Refer to Figure 8.8.What is total cost at the profit-maximising output level?

Accepted Answer

A) $4800. 
B) $3300. 
C) $2500. 
D) $1800.

Question 19

The short-run supply curve for a perfectly competitive firm is that part of the firm's marginal cost curve that lies above the minimum point of its average variable cost curve.

Accepted Answer

A) True 
 B)False

Question 20

Figure 8.5  Figure 8.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 8.5.If the firm's fixed cost increases by $1000 due to a new environmental regulation, what happens in the diagram above?

Accepted Answer

A) All the cost curves shift upward. 
B) Only the average variable cost and average total cost curves shift upward; marginal cost is not affected. 
C) Only the average total cost curve shifts upward; the marginal cost and average variable cost curves are not affected. 
D) None of the curves shifts; only the fixed cost curve, which is not shown here, is affected.

Exam 8: Firms in Perfectly Competitive Markets

In the short run, a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

For a firm in a perfectly competitive market, price is

When plasma television sets were first introduced, prices were high and few firms were in the market.Later, economic profits attracted new firms, and the price of plasma televisions fell.This example illustrates

The long-run supply curve for a perfectly competitive, constant-cost industry

Being a price-taker, a perfectly competitive firm cannot receive a producer surplus in the short run.

In long-run perfectly competitive equilibrium, which of the following is false?

Figure 8.5 Figure 8.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 8.5.The firm's manager suggests that the firm's goal should be to maximise average profit. If the firm does this, the amount of profit that it will earn is

For a perfectly competitive firm, to what is average revenue equal?

For a perfectly competitive firm, which of the following is not true at profit maximisation?

A perfectly competitive firm in a constant-cost industry produces 3000 units of a good at a total cost of $36 000.The prevailing market price is $15.What will happen to the number of firms in the industry and to the industry's output in the long run?

Figure 8.10 -Refer to Figure 8.10.Consider a typical firm in a perfectly competitive industry that makes short-run profits.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Figure 8.7 Figure 8.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 8.7.At price P₃, the firm would produce

Figure 8.4 Figure 8.4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market. -Refer to Figure 8.4.If the market price is $30, what is the firm's profit-maximising output level?

Figure 8.4 Figure 8.4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market. -Refer to Figure 8.4.If the market price is $30 and the firm is producing output, the amount of the firm's profit or loss is

Which of the following is not true for a firm in perfect competition?

The price a perfectly competitive firm receives for its output

Under what conditions should a competitive firm shut down in the short run? __________________________________________________________________________________________________________________________________________________________________________________________

Figure 8.8 -Refer to Figure 8.8.What is total cost at the profit-maximising output level?

The short-run supply curve for a perfectly competitive firm is that part of the firm's marginal cost curve that lies above the minimum point of its average variable cost curve.

Figure 8.5 Figure 8.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 8.5.If the firm's fixed cost increases by $1000 due to a new environmental regulation, what happens in the diagram above?

Exam 8: Firms in Perfectly Competitive Markets

In the short run, a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

For a firm in a perfectly competitive market, price is

When plasma television sets were first introduced, prices were high and few firms were in the market.Later, economic profits attracted new firms, and the price of plasma televisions fell.This example illustrates

The long-run supply curve for a perfectly competitive, constant-cost industry

Being a price-taker, a perfectly competitive firm cannot receive a producer surplus in the short run.

In long-run perfectly competitive equilibrium, which of the following is false?

Figure 8.5 Figure 8.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 8.5.The firm's manager suggests that the firm's goal should be to maximise average profit. If the firm does this, the amount of profit that it will earn is

For a perfectly competitive firm, to what is average revenue equal?

For a perfectly competitive firm, which of the following is not true at profit maximisation?

A perfectly competitive firm in a constant-cost industry produces 3000 units of a good at a total cost of $36 000.The prevailing market price is $15.What will happen to the number of firms in the industry and to the industry's output in the long run?

Figure 8.10 -Refer to Figure 8.10.Consider a typical firm in a perfectly competitive industry that makes short-run profits.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Figure 8.7 Figure 8.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 8.7.At price P3, the firm would produce

Figure 8.4 Figure 8.4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market. -Refer to Figure 8.4.If the market price is $30, what is the firm's profit-maximising output level?

Figure 8.4 Figure 8.4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market. -Refer to Figure 8.4.If the market price is $30 and the firm is producing output, the amount of the firm's profit or loss is

Which of the following is not true for a firm in perfect competition?

The price a perfectly competitive firm receives for its output

Under what conditions should a competitive firm shut down in the short run? __________________________________________________________________________________________________________________________________________________________________________________________

Figure 8.8 -Refer to Figure 8.8.What is total cost at the profit-maximising output level?

The short-run supply curve for a perfectly competitive firm is that part of the firm's marginal cost curve that lies above the minimum point of its average variable cost curve.

Figure 8.5 Figure 8.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 8.5.If the firm's fixed cost increases by $1000 due to a new environmental regulation, what happens in the diagram above?

Figure 8.7 Figure 8.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 8.7.At price P₃, the firm would produce