Question 1

A perfectly competitive firm is maximizing profit if

Accepted Answer

A) marginal cost equals price and price is not below minimum average variable cost. 
B) marginal cost equals price and price is not below minimum average fixed cost. 
C) total revenue is at a maximum. 
D) average variable cost is at a minimum. 
E) average total cost is at a minimum. 
A) marginal cost equals price and price is not below minimum average variable cost. 
B) marginal cost equals price and price is not below minimum average fixed cost. 
C) total revenue is at a maximum. 
D) average variable cost is at a minimum. 
E) average total cost is at a minimum. A

Question 2

Technological change spreads through a perfectly competitive market.Choose the statement that is incorrect.

Accepted Answer

A) The market price falls and the equilibrium quantity increases. 
B) The technological change brings permanent gains for consumers and producers. 
C) Firms that do not change to the new technology will incur an economic loss and eventually go out of business. 
D) Firms that are quick to adopt to the new technology will make economic profits initially,but in the long run they will make zero economic profit. 
E) Average cost will fall for firms who adopt the new technology. 
A) The market price falls and the equilibrium quantity increases. 
B) The technological change brings permanent gains for consumers and producers. 
C) Firms that do not change to the new technology will incur an economic loss and eventually go out of business. 
D) Firms that are quick to adopt to the new technology will make economic profits initially,but in the long run they will make zero economic profit. 
E) Average cost will fall for firms who adopt the new technology. B

Question 3

Use the table below to answer the following questions.
Table 12.2.1
 $$\begin{array} { c c c } 
\hline\text { Output } &\text { Total Revenue} & \text { Total Cost } \
\text { (units) }&\text { (dollars) }&\text { (dollars) }\
\hline 0 & 0 & 25 \
1 & 30 & 49 \
2 & 60 & 69 \
3 & 90 & 86 \
4 & 120 & 100 \
5 & 150 & 114 \
6 & 180 & 128 \
7 & 210 & 170 \
\hline
\end{array}$$
-Refer to Table 12.2.1,which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.If the firm produces 3 units of output,it will

Accepted Answer

A) make an economic profit of $4. 
B) make an economic profit of $90. 
C) incur an economic loss of $4. 
D) break even. 
E) incur an economic loss of $86. 
A) make an economic profit of $4. 
B) make an economic profit of $90. 
C) incur an economic loss of $4. 
D) break even. 
E) incur an economic loss of $86. A

Question 4

Use the figure below to answer the following questions.
   Figure 12.4.2
-Refer to Figure 12.4.2 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

Accepted Answer

A) demand will increase. 
B) demand will decrease. 
C) supply will increase. 
D) supply will decrease. 
E) supply and market demand will decrease. 
A) demand will increase. 
B) demand will decrease. 
C) supply will increase. 
D) supply will decrease. 
E) supply and market demand will decrease.

Question 5

A perfectly competitive firm's supply curve includes its marginal cost curve at all prices above minimum

Accepted Answer

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

Question 6

A firm in a perfectly competitive industry is maximizing its economic profit by producing 500 units of output.At 500 units of output,which one of the following must be false?

Accepted Answer

A) MC  ATC 
D) MR  AVC 
A) MC  ATC 
D) MR  AVC

Question 7

Use the figure below to answer the following questions.
   Figure 12.4.3
-Refer to Figure 12.4.3 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.Firms are

Accepted Answer

A) making an economic profit,and some firms leave the market.Market supply decreases. 
B) making an economic profit,and some firms enter the market.Market supply increases. 
C) incurring an economic loss,and some firms leave the market.Market supply decreases. 
D) incurring an economic loss,and some firms enter the market.Market supply increases. 
E) loss,but since they are covering average variable cost,no one will exit the market in the long run. 
A) making an economic profit,and some firms leave the market.Market supply decreases. 
B) making an economic profit,and some firms enter the market.Market supply increases. 
C) incurring an economic loss,and some firms leave the market.Market supply decreases. 
D) incurring an economic loss,and some firms enter the market.Market supply increases. 
E) loss,but since they are covering average variable cost,no one will exit the market in the long run.

Question 8

Use the figure below to answer the following question.
   Figure 12.5.1
-Refer to Figure 12.5.1.Given the increase in market demand from D0 to D1,the graph represents

Accepted Answer

A) a constant cost industry. 
B) an increasing cost industry. 
C) a decreasing cost industry. 
D) an inefficient market. 
E) a market experiencing a technological change. 
A) a constant cost industry. 
B) an increasing cost industry. 
C) a decreasing cost industry. 
D) an inefficient market. 
E) a market experiencing a technological change.

Question 9

Use the table below to answer the following questions.
Table 12.2.1
 $$\begin{array} { c c c } 
\hline\text { Output } &\text { Total Revenue} & \text { Total Cost } \
\text { (units) }&\text { (dollars) }&\text { (dollars) }\
\hline 0 & 0 & 25 \
1 & 30 & 49 \
2 & 60 & 69 \
3 & 90 & 86 \
4 & 120 & 100 \
5 & 150 & 114 \
6 & 180 & 128 \
7 & 210 & 170 \
\hline
\end{array}$$
-Refer to Table 12.2.1,which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.If the firm produces 2 units of output,it

Accepted Answer

A) makes an economic profit of $9. 
B) makes an economic profit of $60. 
C) incurs an economic loss of $9. 
D) incurs an economic loss of $60. 
E) incurs an economic loss of $69. 
A) makes an economic profit of $9. 
B) makes an economic profit of $60. 
C) incurs an economic loss of $9. 
D) incurs an economic loss of $60. 
E) incurs an economic loss of $69.

Question 10

Which one of the following does not occur in perfect competition?

Accepted Answer

A) No single firm can exert a significant influence on the market price of the good. 
B) There are many buyers. 
C) There are significant restrictions on entry into the market. 
D) Sellers and buyers are well informed about prices. 
E) Established firms have no advantage over new ones. 
A) No single firm can exert a significant influence on the market price of the good. 
B) There are many buyers. 
C) There are significant restrictions on entry into the market. 
D) Sellers and buyers are well informed about prices. 
E) Established firms have no advantage over new ones.

Question 11

Consumers choose ________. Consumers are efficient on the market demand curve because ________.

Accepted Answer

A) to maximize profit;they only purchase goods and services that they can afford 
B) to buy a good or service only if they will receive a consumer surplus;every point on the market demand curve maximizes consumer surplus 
C) to purchase goods and services made with the newest technology;the market demand curve traces out the same path as the marginal revenue curve 
D) to allocate their budgets to get the most value possible out of them;we derive a consumer's demand curve by finding how the best budget allocation changes as the price of a good changes 
E) to allocate their budgets to get the most value possible out of them;they only purchase goods and services that they can afford 
A) to maximize profit;they only purchase goods and services that they can afford 
B) to buy a good or service only if they will receive a consumer surplus;every point on the market demand curve maximizes consumer surplus 
C) to purchase goods and services made with the newest technology;the market demand curve traces out the same path as the marginal revenue curve 
D) to allocate their budgets to get the most value possible out of them;we derive a consumer's demand curve by finding how the best budget allocation changes as the price of a good changes 
E) to allocate their budgets to get the most value possible out of them;they only purchase goods and services that they can afford

Question 12

A firm maximizes profit by producing the output at which marginal cost equals

Accepted Answer

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

Question 13

The shutdown point occurs at the point of minimum

Accepted Answer

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

Question 14

Use the table below to answer the following questions.
Table 12.1.1
 $$\begin{array}{l}\begin{array} { c c } 
\hline\text { Quantity} & \text { Price }\
\text { (units) } & \text { (dollars) } \
\hline 5 & 15 \
6 & 15 \
7 & 15
\end{array}
\end{array}$$
-Refer to Table 12.1.1 which gives the demand schedule for a perfectly competitive firm.If the quantity sold by the firm rises from 5 to 6,marginal revenue is

Accepted Answer

A) $15. 
B) $30. 
C) $75. 
D) $90. 
E) $105. 
A) $15. 
B) $30. 
C) $75. 
D) $90. 
E) $105.

Question 15

A firm that temporarily shuts down and produces no output incurs a loss equal to its

Accepted Answer

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

Question 16

A firm will shut down temporarily when the price is so low that total revenue is insufficient to cover the

Accepted Answer

A) total cost of production. 
B) total variable cost of production. 
C) total fixed cost of production. 
D) marginal cost of production. 
E) none of the above. 
A) total cost of production. 
B) total variable cost of production. 
C) total fixed cost of production. 
D) marginal cost of production. 
E) none of the above.

Question 17

Use the table below to answer the following questions.
Table 12.2.3
 $$\begin{array}{l}\begin{array} { c c } 
\hline\text { Output } & \text { Total Cost }\
\text { (balloons per hour) } & \text { (dollars per hour) } \
\hline 0 & 4.00 \
1 & 7.00 \
2 & 8.00 \
3 & 12.50 \
4 & 17.20 \
5 & 22.00 \
6 & 29.00
\end{array}
\end{array}$$
-Refer to Table 12.2.3,which gives the total cost schedule for Brenda's Balloon Shop,a perfectly competitive firm.The marginal cost of increasing production from 4 balloons an hour to 5 balloons an hour is

Accepted Answer

A) $1. 
B) $4.50. 
C) $4.70. 
D) $4.80. 
E) $4.40. 
A) $1. 
B) $4.50. 
C) $4.70. 
D) $4.80. 
E) $4.40.

Question 18

Use the table below to answer the following questions.
Table 12.2.3
 $$\begin{array}{l}\begin{array} { c c } 
\hline\text { Output } & \text { Total Cost }\
\text { (balloons per hour) } & \text { (dollars per hour) } \
\hline 0 & 4.00 \
1 & 7.00 \
2 & 8.00 \
3 & 12.50 \
4 & 17.20 \
5 & 22.00 \
6 & 29.00
\end{array}
\end{array}$$
-Refer to Table 12.2.3,which gives the total cost schedule for Brenda's Balloon Shop,a perfectly competitive firm.Brenda's total fixed cost is

Accepted Answer

A) $3 an hour. 
B) $4 an hour. 
C) $7 an hour. 
D) $29 an hour. 
E) zero. 
A) $3 an hour. 
B) $4 an hour. 
C) $7 an hour. 
D) $29 an hour. 
E) zero.

Question 19

If a perfectly competitive firm is producing an output at which price is equal to average total cost,the firm

Accepted Answer

A) should shut down. 
B) is breaking even. 
C) is making an economic profit. 
D) is incurring an economic loss. 
E) is not producing its profit-maximizing quantity. 
A) should shut down. 
B) is breaking even. 
C) is making an economic profit. 
D) is incurring an economic loss. 
E) is not producing its profit-maximizing quantity.

Question 20

A perfectly competitive market,with no external economies or diseconomies,is initially in long-run equilibrium.There is a permanent increase in demand.After adjustment to the new long-run equilibrium

Accepted Answer

A) the remaining firms in the market will each be producing more output than previously. 
B) the remaining firms in the market will each be producing less output than previously. 
C) the remaining firms in the market will each be producing the same output as previously. 
D) the remaining firms in the market may each be producing more output than previously,depending on the size of the change in demand. 
E) the remaining firms in the market will each be producing either the same or more output than previously. 
A) the remaining firms in the market will each be producing more output than previously. 
B) the remaining firms in the market will each be producing less output than previously. 
C) the remaining firms in the market will each be producing the same output as previously. 
D) the remaining firms in the market may each be producing more output than previously,depending on the size of the change in demand. 
E) the remaining firms in the market will each be producing either the same or more output than previously.

A perfectly competitive firm is maximizing profit if

Technological change spreads through a perfectly competitive market.Choose the statement that is incorrect.

Use the figure below to answer the following questions. Figure 12.4.2 -Refer to Figure 12.4.2 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

A perfectly competitive firm's supply curve includes its marginal cost curve at all prices above minimum

A firm in a perfectly competitive industry is maximizing its economic profit by producing 500 units of output.At 500 units of output,which one of the following must be false?

Use the figure below to answer the following questions. Figure 12.4.3 -Refer to Figure 12.4.3 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.Firms are

Use the figure below to answer the following question. Figure 12.5.1 -Refer to Figure 12.5.1.Given the increase in market demand from D₀ to D₁,the graph represents

Which one of the following does not occur in perfect competition?

Consumers choose . Consumers are efficient on the market demand curve because .

A firm maximizes profit by producing the output at which marginal cost equals

The shutdown point occurs at the point of minimum

Use the table below to answer the following questions. Table 12.1.1 Quantity Price (units) (dollars) 5 15 6 15 7 15 -Refer to Table 12.1.1 which gives the demand schedule for a perfectly competitive firm.If the quantity sold by the firm rises from 5 to 6,marginal revenue is

A firm that temporarily shuts down and produces no output incurs a loss equal to its

A firm will shut down temporarily when the price is so low that total revenue is insufficient to cover the

If a perfectly competitive firm is producing an output at which price is equal to average total cost,the firm

A perfectly competitive market,with no external economies or diseconomies,is initially in long-run equilibrium.There is a permanent increase in demand.After adjustment to the new long-run equilibrium

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities,preferences,and Choices

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters

Exam 12: Perfect Competition

A perfectly competitive firm is maximizing profit if

Technological change spreads through a perfectly competitive market.Choose the statement that is incorrect.

Use the figure below to answer the following questions. Figure 12.4.2 -Refer to Figure 12.4.2 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

A perfectly competitive firm's supply curve includes its marginal cost curve at all prices above minimum

A firm in a perfectly competitive industry is maximizing its economic profit by producing 500 units of output.At 500 units of output,which one of the following must be false?

Use the figure below to answer the following questions. Figure 12.4.3 -Refer to Figure 12.4.3 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.Firms are

Use the figure below to answer the following question. Figure 12.5.1 -Refer to Figure 12.5.1.Given the increase in market demand from D0 to D1,the graph represents

Which one of the following does not occur in perfect competition?

Consumers choose ________. Consumers are efficient on the market demand curve because ________.

A firm maximizes profit by producing the output at which marginal cost equals

The shutdown point occurs at the point of minimum

Use the table below to answer the following questions. Table 12.1.1 Quantity Price (units) (dollars) 5 15 6 15 7 15 -Refer to Table 12.1.1 which gives the demand schedule for a perfectly competitive firm.If the quantity sold by the firm rises from 5 to 6,marginal revenue is

A firm that temporarily shuts down and produces no output incurs a loss equal to its

A firm will shut down temporarily when the price is so low that total revenue is insufficient to cover the

If a perfectly competitive firm is producing an output at which price is equal to average total cost,the firm

A perfectly competitive market,with no external economies or diseconomies,is initially in long-run equilibrium.There is a permanent increase in demand.After adjustment to the new long-run equilibrium

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities,preferences,and Choices

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters

Use the figure below to answer the following question. Figure 12.5.1 -Refer to Figure 12.5.1.Given the increase in market demand from D₀ to D₁,the graph represents

Consumers choose . Consumers are efficient on the market demand curve because .