Question 1

The supply curve for a perfectly competitive industry is the horizontal summation of the individual firmsʹ

Accepted Answer

A) MC curves above ATC. 
B) MC curves above AVC. 
C) AVC curves above MC. 
D) MC curves above AFC. 
E) short-run average cost curves. 
A) MC curves above ATC. 
B) MC curves above AVC. 
C) AVC curves above MC. 
D) MC curves above AFC. 
E) short-run average cost curves. B

Question 2

The diagram below shows the short-run cost curves for 3 perfectly competitive firms in the same industry.
   FIGURE 9-6
-Refer to Figure 9-6.Given that Firms A,B and C are in the same industry,is this industry in long -run equilibrium?

Accepted Answer

A) No,because Firm A is not producing at a profit-maximizing level of output. 
B) No,because if the industry were in equilibrium,all 3 firms would be earning zero economic profits. 
C) Yes,because all 3 firms are producing at their minimum average total cost. 
D) Yes,because P = MC = MR for each of the 3 firms. 
E) Yes,because each of the 3 firms is operating at its minimum efficient scale. 
A) No,because Firm A is not producing at a profit-maximizing level of output. 
B) No,because if the industry were in equilibrium,all 3 firms would be earning zero economic profits. 
C) Yes,because all 3 firms are producing at their minimum average total cost. 
D) Yes,because P = MC = MR for each of the 3 firms. 
E) Yes,because each of the 3 firms is operating at its minimum efficient scale. B

Question 3

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry.
   FIGURE 9-2
-Refer to Figure 9-2.If the market price is $2,the firm will

Accepted Answer

A) produce zero output.and make zero profit. 
B) produce zero output.and suffer a loss equal to its fixed cost. 
C) continue operating in the short run and suffer a loss that is less than its fixed cost. 
D) produce 300 units and make a loss equal to total variable cost. 
E) produce 200 units and make a loss equal to its total fixed cost. 
A) produce zero output.and make zero profit. 
B) produce zero output.and suffer a loss equal to its fixed cost. 
C) continue operating in the short run and suffer a loss that is less than its fixed cost. 
D) produce 300 units and make a loss equal to total variable cost. 
E) produce 200 units and make a loss equal to its total fixed cost. C

Question 4

Suppose your trucking firm in a perfectly competitive industry is making zero economic profits in the short run.The federal government imposes a new safety regulation that affects all firms,thus shifting the marginal cost curve upward.As a result your firmʹs profit maximizing short-run output will

Accepted Answer

A) decrease because the new MC curve will intersect the horizontal demand curve at a lower rate of output. 
B) remain the same because you will pass on the extra costs to the consumers. 
C) remain the same since the new regulation does not affect ATC. 
D) increase as firms will leave the industry at the higher costs,thus driving up the market price. 
E) increase as price rises in the long run. 
A) decrease because the new MC curve will intersect the horizontal demand curve at a lower rate of output. 
B) remain the same because you will pass on the extra costs to the consumers. 
C) remain the same since the new regulation does not affect ATC. 
D) increase as firms will leave the industry at the higher costs,thus driving up the market price. 
E) increase as price rises in the long run.

Question 5

Under perfect competition,the demand curve facing an individual firm is

Accepted Answer

A) the same as the industryʹs demand curve. 
B) downward sloping. 
C) upward sloping. 
D) infinitely price elastic. 
E) a rectangular hyperbola. 
A) the same as the industryʹs demand curve. 
B) downward sloping. 
C) upward sloping. 
D) infinitely price elastic. 
E) a rectangular hyperbola.

Question 6

A perfectly competitive firmʹs demand curve coincides with

Accepted Answer

A) its average-revenue curve and total-revenue curve. 
B) its total-revenue curve. 
C) both its marginal and average-revenue curves. 
D) both its marginal and total-revenue curves. 
E) the market demand curve. 
A) its average-revenue curve and total-revenue curve. 
B) its total-revenue curve. 
C) both its marginal and average-revenue curves. 
D) both its marginal and total-revenue curves. 
E) the market demand curve.

Question 7

Consider the total cost and revenue curves shown below,for two perfectly competitive firms,Firm A and Firm B.
   FIGURE 9-4
-Refer to Figure 9-4.If both Firms A and B are producing a level of output such that the slope of the TC curve is equal to the slope of the TR curve,

Accepted Answer

A) then MC = MR and the firm is maximizing profit (or minimizing losses). 
B) then the ATC is at a minimum and the firm is maximizing profits. 
C) then both firms are suffering losses because the distance between TR and TC is the smallest. 
D) then both firms are earning positive economic profits because the distance between TR and TC is the greatest. 
E) then MC = MR but the firm may not be maximizing its profits. 
A) then MC = MR and the firm is maximizing profit (or minimizing losses). 
B) then the ATC is at a minimum and the firm is maximizing profits. 
C) then both firms are suffering losses because the distance between TR and TC is the smallest. 
D) then both firms are earning positive economic profits because the distance between TR and TC is the greatest. 
E) then MC = MR but the firm may not be maximizing its profits.

Question 8

A firm is said to have ʺmarket powerʺ only when

Accepted Answer

A) it has the ability to influence the price of its product. 
B) it has the ability to choose its own profit-maximizing level of output. 
C) its demand curve is the market demand curve. 
D) it is one of 10 or fewer firms in the industry. 
E) it is one of 25 or fewer firms in the industry. 
A) it has the ability to influence the price of its product. 
B) it has the ability to choose its own profit-maximizing level of output. 
C) its demand curve is the market demand curve. 
D) it is one of 10 or fewer firms in the industry. 
E) it is one of 25 or fewer firms in the industry.

Question 9

Suppose XYZ Corp.is producing and selling disposable wooden chopsticks in a perfectly competitive market.The market price is $0.05 per unit and the firm is currently producing 600 000 units is ________ per month. The firmʹs marginal revenue is ________.

Accepted Answer

A) $30 000; $0.05 
B) $12 million; $0.05 
C) $1.2 million; $0.01 
D) $3000; $0.50 
E) $3000; $0.05 
A) $30 000; $0.05 
B) $12 million; $0.05 
C) $1.2 million; $0.01 
D) $3000; $0.50 
E) $3000; $0.05

Question 10

The short-run supply curve for a perfectly competitive firm is

Accepted Answer

A) its entire marginal-cost curve. 
B) its rising portion of the average-variable-cost curve. 
C) its average-revenue curve. 
D) its marginal-cost curve above the average-variable-cost curve. 
E) the industry supply curve. 
A) its entire marginal-cost curve. 
B) its rising portion of the average-variable-cost curve. 
C) its average-revenue curve. 
D) its marginal-cost curve above the average-variable-cost curve. 
E) the industry supply curve.

Question 11

Suppose XYZ Corp.is producing and selling disposable wooden chopsticks in a perfectly competitive market.The market price is $0.05 per unit and the firm is currently producing 600 000 units per month.What is the firmʹs average revenue?

Accepted Answer

A) $3000 
B) $30 000 
C) $0.01 
D) $0.05 
E) $0.10 
A) $3000 
B) $30 000 
C) $0.01 
D) $0.05 
E) $0.10

Question 12

Farmer Anna is producing tomatoes in a perfectly competitive market.In Year 1 she sells 4000 bushels of tomatoes at a price of $12.00 each.In Year 2 she sells 4800 bushels at $13.00 each.In Year 2,her average revenue is ________ and her marginal revenue is ________.

Accepted Answer

A) $13.00; $1.00 
B) $12.50; $12.50 
C) $13.00; $13.00 
D) $12.00; $12.00 
E) $12.00; $1.00 
A) $13.00; $1.00 
B) $12.50; $12.50 
C) $13.00; $13.00 
D) $12.00; $12.00 
E) $12.00; $1.00

Question 13

In a perfectly competitive market,smaller-than-efficient sized firms can exist in

Accepted Answer

A) the short run. 
B) the long run. 
C) both the short and long run. 
D) the long run,and they will make positive economic profits. 
E) both the short run and the long run,but they must reduce plant size to remain competitive. 
A) the short run. 
B) the long run. 
C) both the short and long run. 
D) the long run,and they will make positive economic profits. 
E) both the short run and the long run,but they must reduce plant size to remain competitive.

Question 14

Consider the following total cost schedule for a perfectly competitive firm producing ball-point pens.   TABLE 9-3
-Refer to Table 9-3.Suppose the prevailing market price for this firmʹs product is $0.40.The profit -maximizing level of output for this firm is between

Accepted Answer

A) 0 and 10 units. 
B) 10 and 20 units. 
C) 20 and 30 units. 
D) 30 and 40 units. 
E) 40 and 50 units. 
A) 0 and 10 units. 
B) 10 and 20 units. 
C) 20 and 30 units. 
D) 30 and 40 units. 
E) 40 and 50 units.

Question 15

Consider a perfectly competitive firm when its industry is in long-run equilibrium.In this case,

Accepted Answer

A) price is greater than marginal cost. 
B) marginal revenue is greater than marginal cost. 
C) price equals minimum short-run and long-run average total cost. 
D) economic profits are greater than zero. 
E) average fixed costs are at the maximum. 
A) price is greater than marginal cost. 
B) marginal revenue is greater than marginal cost. 
C) price equals minimum short-run and long-run average total cost. 
D) economic profits are greater than zero. 
E) average fixed costs are at the maximum.

Question 16

Consider the total cost and revenue curves shown below,for two perfectly competitive firms,Firm A and Firm B.
   FIGURE 9-4
-Refer to Figure 9-4.Given its total cost and revenue curves,Firm B should

Accepted Answer

A) exit the industry. 
B) shut down temporarily. 
C) maximize its profits by producing that level of output such that the slope of the TC curve is equal to the slope of the TR curve. 
D) maximize its profits by producing that level of output such that the slope of the TVC curve is equal to the slope of the TR curve. 
E) produce the level of output where the TC curve intersects the TR curve. 
A) exit the industry. 
B) shut down temporarily. 
C) maximize its profits by producing that level of output such that the slope of the TC curve is equal to the slope of the TR curve. 
D) maximize its profits by producing that level of output such that the slope of the TVC curve is equal to the slope of the TR curve. 
E) produce the level of output where the TC curve intersects the TR curve.

Question 17

When a firm is referred to as a ʺprice taker,ʺ

Accepted Answer

A) the firm initially takes price as given and tries to influence it through advertising. 
B) the firm can alter its rate of production and sales without affecting the market price of the product. 
C) the firm will be willing to sell an infinite quantity at the market price. 
D) the demand curve that the firm faces is perfectly inelastic. 
E) the firm can alter the market price as it changes its rate of production. 
A) the firm initially takes price as given and tries to influence it through advertising. 
B) the firm can alter its rate of production and sales without affecting the market price of the product. 
C) the firm will be willing to sell an infinite quantity at the market price. 
D) the demand curve that the firm faces is perfectly inelastic. 
E) the firm can alter the market price as it changes its rate of production.

Question 18

Average revenue (AR)for an individual firm in a perfectly competitive market equals

Accepted Answer

A) p × q. 
B) (p × q)/q. 
C) △p × △q. 
D) △q/△p. 
E) (p × q)/△q. 
A) p × q. 
B) (p × q)/q. 
C) △p × △q. 
D) △q/△p. 
E) (p × q)/△q.

Question 19

Assume the following total cost schedule for a perfectly competitive firm.   TABLE 9-2
-Refer to Table 9-2.What is the marginal cost of producing the 5th unit of output?

Accepted Answer

A) $30 
B) $35 
C) $50 
D) $70 
E) $80 
A) $30 
B) $35 
C) $50 
D) $70 
E) $80

Question 20

Assume the following total cost schedule for a perfectly competitive firm.   TABLE 9-2
-Refer to Table 9-2. If the firm is producing at an output level of 4 units, the ATC is ________ and the AVC is________.

Accepted Answer

A) $280; $180 
B) $25; $45 
C) $70; $45 
D) $70; $35 
E) $180; $100 
A) $280; $180 
B) $25; $45 
C) $70; $45 
D) $70; $35 
E) $180; $100

Exam 9: Competitive Markets

The supply curve for a perfectly competitive industry is the horizontal summation of the individual firmsʹ

The diagram below shows the short-run cost curves for 3 perfectly competitive firms in the same industry. FIGURE 9-6 -Refer to Figure 9-6.Given that Firms A,B and C are in the same industry,is this industry in long -run equilibrium?

Consider the following short-run cost curves for a profit-maximizing firm in a perfectly competitive industry. FIGURE 9-2 -Refer to Figure 9-2.If the market price is $2,the firm will

Suppose your trucking firm in a perfectly competitive industry is making zero economic profits in the short run.The federal government imposes a new safety regulation that affects all firms,thus shifting the marginal cost curve upward.As a result your firmʹs profit maximizing short-run output will

Under perfect competition,the demand curve facing an individual firm is

A perfectly competitive firmʹs demand curve coincides with

Consider the total cost and revenue curves shown below,for two perfectly competitive firms,Firm A and Firm B. FIGURE 9-4 -Refer to Figure 9-4.If both Firms A and B are producing a level of output such that the slope of the TC curve is equal to the slope of the TR curve,

A firm is said to have ʺmarket powerʺ only when

Suppose XYZ Corp.is producing and selling disposable wooden chopsticks in a perfectly competitive market.The market price is $0.05 per unit and the firm is currently producing 600 000 units is ________ per month. The firmʹs marginal revenue is ________.

The short-run supply curve for a perfectly competitive firm is

Suppose XYZ Corp.is producing and selling disposable wooden chopsticks in a perfectly competitive market.The market price is $0.05 per unit and the firm is currently producing 600 000 units per month.What is the firmʹs average revenue?

Farmer Anna is producing tomatoes in a perfectly competitive market.In Year 1 she sells 4000 bushels of tomatoes at a price of $12.00 each.In Year 2 she sells 4800 bushels at $13.00 each.In Year 2,her average revenue is ________ and her marginal revenue is ________.

In a perfectly competitive market,smaller-than-efficient sized firms can exist in

Consider the following total cost schedule for a perfectly competitive firm producing ball-point pens. TABLE 9-3 -Refer to Table 9-3.Suppose the prevailing market price for this firmʹs product is $0.40.The profit -maximizing level of output for this firm is between

Consider a perfectly competitive firm when its industry is in long-run equilibrium.In this case,

Consider the total cost and revenue curves shown below,for two perfectly competitive firms,Firm A and Firm B. FIGURE 9-4 -Refer to Figure 9-4.Given its total cost and revenue curves,Firm B should

When a firm is referred to as a ʺprice taker,ʺ

Average revenue (AR)for an individual firm in a perfectly competitive market equals

Assume the following total cost schedule for a perfectly competitive firm. TABLE 9-2 -Refer to Table 9-2.What is the marginal cost of producing the 5th unit of output?

Assume the following total cost schedule for a perfectly competitive firm. TABLE 9-2 -Refer to Table 9-2. If the firm is producing at an output level of 4 units, the ATC is ________ and the AVC is________.

Economic Issues and Concepts

Economic Theories, data, and Graphs

Demand, supply, and Price

Elasticity

Price Controls and Market Efficiency

Consumer Behaviour

Producers in the Short Run

Producers in the Long Run

Monopoly, cartels, and Price Discrimination

Imperfect Competition and Strategic Behaviour

Economic Efficiency and Public Policy

How Factor Markets Work

Labour Markets and Income Inequality

Market Failures and Government Intervention

The Economics of Environmental Protection

Taxation and Public Expenditure

What Macroeconomics Is All About

The Measurement of National Income

The Simplest Short-Run Macro Model

Adding Government and Trade to the Simple Macro Model

Output and Prices in the Short Run

From the Short Run to the Long Run: the Adjustment of Factor Prices

Long-Run Economic Growth

Money and Banking

Money, interest Rates, and Economic Activity

Monetary Policy in Canada

Inflation and Disinflation

Unemployment Fluctuations and the Nairu

Government Debt and Deficits

The Gains From International Trade

Exchange Rates and the Balance of Payments

Filters

Suppose XYZ Corp.is producing and selling disposable wooden chopsticks in a perfectly competitive market.The market price is $0.05 per unit and the firm is currently producing 600 000 units is per month. The firmʹs marginal revenue is .

Farmer Anna is producing tomatoes in a perfectly competitive market.In Year 1 she sells 4000 bushels of tomatoes at a price of $12.00 each.In Year 2 she sells 4800 bushels at $13.00 each.In Year 2,her average revenue is and her marginal revenue is .

Assume the following total cost schedule for a perfectly competitive firm. TABLE 9-2 -Refer to Table 9-2. If the firm is producing at an output level of 4 units, the ATC is and the AVC is.