Question 1

If the market price is $50 per unit for a good produced in a perfectly competitive market and the firm's average total cost is $52,then the firm

Accepted Answer

A)   incurs an economic loss of $2 per unit.
B)   makes an economic profit of $2 per unit.
C)   makes zero economic profit.
D)   incurs a total economic loss of $52.
E)   More information is needed to determine the firm's economic profit or loss per unit. A

Question 2

Suppose a perfectly competitive market is in short-run equilibrium.Firms that are incurring a ________ economic loss ________.

Accepted Answer

A)   persistent; increase their output to increase their profit
B)   temporary; exit the industry
C)   temporary; decrease their production but definitely stay open
D)   persistent; exit the industry and shift the market supply curve leftward
E)   persistent; exit the industry and shift the market supply curve rightward D

Question 3

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

Accepted Answer

An economic profit attracts entry by new firms.As new firms enter the market,the market supply increases and the market supply curve shifts rightward.The increase in supply decreases the price.And,as the price falls,the economic profit is eliminated.

Question 4

Which of the following will increase a perfectly competitive seller's short-run supply and shift the firm's short-run supply curve rightward?

Accepted Answer

A)   an increase in the market price
B)   a decrease in average fixed costs
C)   a decrease in marginal cost
D)   Both answers A and B are correct.
E)   Both answers A and C are correct.

Question 5

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

Question 6

"For a perfectly competitive market,an economic profit attracts new firms.But when these firms enter the market,the price falls and the economic profit is eliminated." Are the previous statements correct or incorrect? What is the long-run profit or loss outcome for firms in a perfectly competitive market?

Accepted Answer

The answer of "For a perfectly competitive market,an economic profit...

Question 7

The above figure shows some a firm's cost curves and its marginal revenue curve.
-Suppose the price of a can was $5.14.In this case,to maximize its profit the firm illustrated in the figure above would

Accepted Answer

A)   increase its production and would make an economic profit.
B)   not change its production and would make zero economic profit.
C)   not change its production and would make an economic profit.
D)   increase its production and would incur an economic loss.
E)   not change its production and would incur an economic loss.

Question 8

A perfectly competitive firm will continue to operate in the short run when the market price is below its average total cost if the

Accepted Answer

A)   marginal revenue is greater than marginal cost.
B)   price is at least equal to the minimum average variable cost.
C)   total fixed costs are less than total revenue.
D)   marginal cost is minimized.
E)   price is also less than the minimum average variable cost.

Question 9

The above figure shows some a firm's cost curves and its marginal revenue curve.
-The price for the shutdown point is ________.

Accepted Answer

A)   $5.14
B)   between $3.01 and $5.13
C)   $3.00
D)   between $0 and $2.99
E)   greater than $5.15

Question 10

The U.S.oil industry has only a few firms in it,so an economists is likely to describe the industry as

Accepted Answer

A)   a monopoly.
B)   an oligopoly.
C)   perfectly competitive.
D)   monopolistically competitive.
E)   Both answers C and D can be correct.

Question 11

In a perfectly competitive market,the type of decision a firm has to make is different in the short run than in the long run.Which of the following is an example of a perfectly competitive firm's short-run decision?

Accepted Answer

A)   the profit-maximizing level of output
B)   how much to spend on advertising and sales promotion
C)   what price to charge buyers for the product
D)   whether or not to enter or exit an industry
E)   whether or not to change its plant size

Question 12

-The above diagram shows the cost curves for a perfectly competitive wheat farmer.At what price does the wheat farmer shut down?

Accepted Answer

The answer of 
-The above diagram shows the cost curves...

Question 13

The figure above shows some of a firm's cost curves and its marginal revenue curve.
-The firm in the figure above is ________ that is equal to ________.

Accepted Answer

A)   making an economic profit; $8.00 × 10
B)   making an economic profit; $5.10 × 10
C)   incurring an economic loss; $5.10 × 10
D)   incurring an economic loss; ($8.00 - $5.10)  × 10
E)   making an economic profit; ($8.00 - $5.10)  × 10

Question 14

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.

Question 15

Peter's Pencils is a perfectly competitive company producing pencils.Suppose Peter is producing 1,000 pencils an hour.If the total cost of 1,000 pencils is $500,the market price per pencil is $2,and the marginal cost is $2,then Peter

Accepted Answer

A)   makes an economic profit because marginal revenue is equal to marginal cost at this output level.
B)   should decrease his output to increase his profit.
C)   is maximizing his profit and is making an economic profit.
D)   should increase his output to increase his profit.
E)   is not maximizing his profit but is making zero economic profit anyway.

Question 16

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

Question 17

-The above figure illustrates a perfectly competitive firm.Curve C represents the

Accepted Answer

A)   MR curve.
B)   ATC curve.
C)   MC curve.
D)   market demand curve.
E)   AFC curve.

Question 18

If a perfectly competitive firm finds that price is less than its ATC,then the firm

Accepted Answer

A)   will raise its price to increase its economic profit.
B)   will lower its price to increase its economic profit.
C)   is making an economic profit.
D)   is incurring an economic loss.
E)   is making zero economic profit.

Question 19

Firms exit a competitive market when they incur an economic loss.In the long run,this exit means that the economic losses of the surviving firms

Accepted Answer

A)   increase.
B)   decrease until they equal zero.
C)   decrease until economic profits are earned.
D)   do not change.
E)   might change but more information is needed about what happens to the price of the good as the firms exit.

Question 20

What is a perfectly competitive firm's short-run supply curve?

Accepted Answer

The answer of What is a perfectly competitive firm's short-run...

Exam 15: Perfect Competition

If the market price is $50 per unit for a good produced in a perfectly competitive market and the firm's average total cost is $52,then the firm

Suppose a perfectly competitive market is in short-run equilibrium.Firms that are incurring a economic loss .

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

Which of the following will increase a perfectly competitive seller's short-run supply and shift the firm's short-run supply curve rightward?

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

The above figure shows some a firm's cost curves and its marginal revenue curve. -Suppose the price of a can was $5.14.In this case,to maximize its profit the firm illustrated in the figure above would

A perfectly competitive firm will continue to operate in the short run when the market price is below its average total cost if the

The above figure shows some a firm's cost curves and its marginal revenue curve. -The price for the shutdown point is ________.

The U.S.oil industry has only a few firms in it,so an economists is likely to describe the industry as

In a perfectly competitive market,the type of decision a firm has to make is different in the short run than in the long run.Which of the following is an example of a perfectly competitive firm's short-run decision?

-The above diagram shows the cost curves for a perfectly competitive wheat farmer.At what price does the wheat farmer shut down?

The figure above shows some of a firm's cost curves and its marginal revenue curve. -The firm in the figure above is that is equal to .

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

Peter's Pencils is a perfectly competitive company producing pencils.Suppose Peter is producing 1,000 pencils an hour.If the total cost of 1,000 pencils is $500,the market price per pencil is $2,and the marginal cost is $2,then Peter

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?

-The above figure illustrates a perfectly competitive firm.Curve C represents the

If a perfectly competitive firm finds that price is less than its ATC,then the firm

Firms exit a competitive market when they incur an economic loss.In the long run,this exit means that the economic losses of the surviving firms

What is a perfectly competitive firm's short-run supply curve?

Exam 15: Perfect Competition

If the market price is $50 per unit for a good produced in a perfectly competitive market and the firm's average total cost is $52,then the firm

Suppose a perfectly competitive market is in short-run equilibrium.Firms that are incurring a ________ economic loss ________.

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

Which of the following will increase a perfectly competitive seller's short-run supply and shift the firm's short-run supply curve rightward?

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

The above figure shows some a firm's cost curves and its marginal revenue curve. -Suppose the price of a can was $5.14.In this case,to maximize its profit the firm illustrated in the figure above would

A perfectly competitive firm will continue to operate in the short run when the market price is below its average total cost if the

The above figure shows some a firm's cost curves and its marginal revenue curve. -The price for the shutdown point is ________.

The U.S.oil industry has only a few firms in it,so an economists is likely to describe the industry as

In a perfectly competitive market,the type of decision a firm has to make is different in the short run than in the long run.Which of the following is an example of a perfectly competitive firm's short-run decision?

-The above diagram shows the cost curves for a perfectly competitive wheat farmer.At what price does the wheat farmer shut down?

The figure above shows some of a firm's cost curves and its marginal revenue curve. -The firm in the figure above is ________ that is equal to ________.

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

Peter's Pencils is a perfectly competitive company producing pencils.Suppose Peter is producing 1,000 pencils an hour.If the total cost of 1,000 pencils is $500,the market price per pencil is $2,and the marginal cost is $2,then Peter

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?

-The above figure illustrates a perfectly competitive firm.Curve C represents the

If a perfectly competitive firm finds that price is less than its ATC,then the firm

Firms exit a competitive market when they incur an economic loss.In the long run,this exit means that the economic losses of the surviving firms

What is a perfectly competitive firm's short-run supply curve?

Suppose a perfectly competitive market is in short-run equilibrium.Firms that are incurring a economic loss .

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

The figure above shows some of a firm's cost curves and its marginal revenue curve. -The firm in the figure above is that is equal to .