Question 1

The perfectly competitive market structure benefits consumers because

Accepted Answer

A)  firms do not produce goods at the lowest possible price in the long run. 
B)  firms are forced by competitive pressure to be as efficient as possible. 
C)  firms add a much smaller markup over average cost than firms in any other type of market structure. 
D)  firms produce high quality goods at low prices.

Question 2

Max Shreck,an accountant,quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner,Sylvia Sidney.The lease has five years remaining and requires a monthly payment of $4,000.The lease

Accepted Answer

A)  is a fixed cost of operating the tattoo parlor. 
B)  is a variable cost of operating the tattoo parlor. 
C)  is an implicit cost of operating the tattoo parlor. 
D)  is part of the marginal cost of operating the tattoo parlor.

Question 3

Figure 12-10 
-Refer to Figure 12-10.The total cost at the profit-maximizing output level equals

Accepted Answer

A)  $4,800. 
B)  $3,300. 
C)  $2,500. 
D)  $1,800.

Question 4

If the market price is $40,the average revenue of selling five units is

Accepted Answer

A)  $8. 
B)  $20. 
C)  $40. 
D)  $200.

Question 5

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102,then the firm is probably producing more than its profit-maximizing quantity.

Accepted Answer

A) True 
 B)False

Question 6

Assume that the medical screening industry is perfectly competitive.Consider a typical firm that is making short-run losses.Suppose the medical screening industry runs an effective advertising campaign which convinces a large number of people that yearly CT scans are critical for good health.How will this affect a typical firm that remains in the industry?

Accepted Answer

A)  The firm's supply curve shifts right and its marginal revenue curve shifts upwards as the market price rises and ultimately the firm starts making profits. 
B)  The firm's marginal revenue curve and average cost curve shift upwards in response to the increase in market price and advertising expenditure. The firm increases output until it starts breaking even. 
C)  The marginal revenue curve shifts upwards, the firm's output increases along its marginal cost curve, it expands production and eventually starts making profits. 
D)  The marginal revenue curve shifts upwards, the firm's output increases along its marginal cost curve, it expands production until it breaks even.

Question 7

An increase in a firm's fixed cost will not change the firm's profit-maximizing output in the short run.

Accepted Answer

A) True 
 B)False

Question 8

Figure 12-9  Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9.At price P4,the firm would

Accepted Answer

A)  lose an amount equal to its fixed cost. 
B)  make a profit. 
C)  lose an amount less than fixed cost. 
D)  make a normal profit.

Question 9

Which of the following is a characteristic of a monopoly?

Accepted Answer

A)  It is easy for new firms to enter the market. 
B)  There is only one seller in the market. 
C)  The product is not unique. 
D)  The firm has no control over price.

Question 10

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 11

All of the following can be used to compute average profit except

Accepted Answer

A)  marginal profit minus marginal cost. 
B)  total profit divided by quantity. 
C)  average revenue minus average total cost 
D)  price minus average total cost.

Question 12

Firms in perfect competition produce the productively efficient output level in the short run and in the long run.

Accepted Answer

A) True 
 B)False

Question 13

A perfectly competitive wheat farmer in a constant-cost industry produces 1,000 bushels of wheat at a total cost of $50,000.The prevailing market price is $48.What will happen to the market price of wheat in the long run?

Accepted Answer

A)  The price remains constant at $48. 
B)  The price falls below $48. 
C)  The price rises above $48. 
D)  There is insufficient information to answer the question.

Question 14

Figure 12-4  Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
-Refer to Figure 12-4.If the market price is $30,should the firm represented in the diagram continue to stay in business?

Accepted Answer

A)  No, it should shut down because it is making a loss. 
B)  No, it should shut down because it cannot cover its variable cost. 
C)  Yes, because it is covering part of its fixed cost. 
D)  Yes, because it is making a profit.

Question 15

Figure 12-1 
-Refer to Figure 12-1.If the firm is producing 200 units

Accepted Answer

A)  it breaks even. 
B)  it is making a loss. 
C)  it should cut back its output to maximize profit. 
D)  it should increase its output to maximize profit.

Question 16

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Accepted Answer

A) True 
 B)False

Question 17

Why would a company continue to operate for many years while never once turning a profit rather than shut down immediately? Using revenue and cost analysis,explain when the company would shut down.

Accepted Answer

The answer of Why would a company continue to operate...

Question 18

Suppose there are economies of scale in the production of a specialized memory chip that is used in manufacturing microwaves.This suggests that the microwave industry is a decreasing-cost industry.

Accepted Answer

A) True 
 B)False

Question 19

If the market price is $40 in a perfectly competitive market,the marginal revenue from selling the fifth unit is

Accepted Answer

A)  $8. 
B)  $20. 
C)  $40. 
D)  $200.

Question 20

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

Accepted Answer

A) True 
 B)False

Exam 12: Firms in Perfectly Competitive Markets

The perfectly competitive market structure benefits consumers because

Max Shreck,an accountant,quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner,Sylvia Sidney.The lease has five years remaining and requires a monthly payment of $4,000.The lease

Figure 12-10 -Refer to Figure 12-10.The total cost at the profit-maximizing output level equals

If the market price is $40,the average revenue of selling five units is

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102,then the firm is probably producing more than its profit-maximizing quantity.

An increase in a firm's fixed cost will not change the firm's profit-maximizing output in the short run.

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₄,the firm would

Which of the following is a characteristic of a monopoly?

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?

All of the following can be used to compute average profit except

Firms in perfect competition produce the productively efficient output level in the short run and in the long run.

A perfectly competitive wheat farmer in a constant-cost industry produces 1,000 bushels of wheat at a total cost of $50,000.The prevailing market price is $48.What will happen to the market price of wheat in the long run?

Figure 12-4 Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. -Refer to Figure 12-4.If the market price is $30,should the firm represented in the diagram continue to stay in business?

Figure 12-1 -Refer to Figure 12-1.If the firm is producing 200 units

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Why would a company continue to operate for many years while never once turning a profit rather than shut down immediately? Using revenue and cost analysis,explain when the company would shut down.

Suppose there are economies of scale in the production of a specialized memory chip that is used in manufacturing microwaves.This suggests that the microwave industry is a decreasing-cost industry.

If the market price is $40 in a perfectly competitive market,the marginal revenue from selling the fifth unit is

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

Exam 12: Firms in Perfectly Competitive Markets

The perfectly competitive market structure benefits consumers because

Max Shreck,an accountant,quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner,Sylvia Sidney.The lease has five years remaining and requires a monthly payment of $4,000.The lease

Figure 12-10 -Refer to Figure 12-10.The total cost at the profit-maximizing output level equals

If the market price is $40,the average revenue of selling five units is

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102,then the firm is probably producing more than its profit-maximizing quantity.

An increase in a firm's fixed cost will not change the firm's profit-maximizing output in the short run.

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P4,the firm would

Which of the following is a characteristic of a monopoly?

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?

All of the following can be used to compute average profit except

Firms in perfect competition produce the productively efficient output level in the short run and in the long run.

A perfectly competitive wheat farmer in a constant-cost industry produces 1,000 bushels of wheat at a total cost of $50,000.The prevailing market price is $48.What will happen to the market price of wheat in the long run?

Figure 12-4 Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. -Refer to Figure 12-4.If the market price is $30,should the firm represented in the diagram continue to stay in business?

Figure 12-1 -Refer to Figure 12-1.If the firm is producing 200 units

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Why would a company continue to operate for many years while never once turning a profit rather than shut down immediately? Using revenue and cost analysis,explain when the company would shut down.

Suppose there are economies of scale in the production of a specialized memory chip that is used in manufacturing microwaves.This suggests that the microwave industry is a decreasing-cost industry.

If the market price is $40 in a perfectly competitive market,the marginal revenue from selling the fifth unit is

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

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₄,the firm would