Question 1

If a firm in a perfectly competitive industry lowers its price below the market price, its

Accepted Answer

A)  total revenue will increase. 
B)  profit will decrease. 
C)  sales will drop to zero. 
D)  demand curve will become downward sloping. 
A)  total revenue will increase. 
B)  profit will decrease. 
C)  sales will drop to zero. 
D)  demand curve will become downward sloping.

Question 2

If the average variable cost curve is above the marginal cost curve, then

Accepted Answer

A)  marginal costs must be decreasing. 
B)  average variable costs must be increasing. 
C)  marginal costs must be increasing. 
D)  marginal costs can be either increasing or decreasing. 
A)  marginal costs must be decreasing. 
B)  average variable costs must be increasing. 
C)  marginal costs must be increasing. 
D)  marginal costs can be either increasing or decreasing.

Question 3

Which type of cost does depend on a firm's output?

Accepted Answer

A)  variable cost 
B)  total cost 
C)  marginal cost 
D)  all of the above 
A)  variable cost 
B)  total cost 
C)  marginal cost 
D)  all of the above

Question 4

Marginal revenue (MR) is

Accepted Answer

A)  TR/q. 
B)  ΔTR/Δq. 
C)  P x q. 
D)  P/q. 
A)  TR/q. 
B)  ΔTR/Δq. 
C)  P x q. 
D)  P/q.

Question 5

The law of diminishing marginal returns results in average total cost eventually

Accepted Answer

A)  increasing at a decreasing rate 
B)  decreasing at a decreasing rate. 
C)  decreasing at an increasing rate. 
D)  increasing at an increasing rate. 
A)  increasing at a decreasing rate 
B)  decreasing at a decreasing rate. 
C)  decreasing at an increasing rate. 
D)  increasing at an increasing rate.

Question 6

Which of the following represents an accurate situation for a perfectly competitive firm?

Accepted Answer

A)  P = $12 and MR = $8 
B)  P = $5 and MR = $7 
C)  P = $9 and MR = $9 
D)  P = $16 and MR = $0 
A)  P = $12 and MR = $8 
B)  P = $5 and MR = $7 
C)  P = $9 and MR = $9 
D)  P = $16 and MR = $0

Question 7

In perfectly competitive industries, firms can easily enter and exit the industry in the long run.

Accepted Answer

A) True 
 B)False

Question 8

Refer to the information provided in Table 8.8 below to answer the following question(s).
Table 8.8
 $$\begin{array} { c c c c c } 
\begin{array} { c } 
 \text { Number of } \
\text { FruitBaskets }
\end{array} &\text { TFC } & \text { TVC } & \text { TC } & \text { MC } \
\hline 0 & \$ 100 & \$ 0 & \$ 100 & - - \
\hline 1 & 100 & 20 & 120 & 20 \
\hline 2 & 100 & 30 & 130 & 10 \
\hline 3 & 100 & 42 & 142 & 12 \
\hline 4 & 100 & 62 & 162 & 20 \
\hline 5 & 100 & 92 & 192 & 30 \
\hline 6 & 100 & 136 & 236 & 44 \
\hline
\end{array}$$
-Refer to Table 8.8. Assume that Polynesian Fruit sells fruit baskets in a perfectly competitive market. The market price of a fruit basket is $30. To maximize profits, Polynesian Fruit should sell ________ fruit basket(s) and their profit is ________.

Accepted Answer

A)  zero; $0 
B)  two; -$70 
C)  three; -$52 
D)  five; -$42 
A)  zero; $0 
B)  two; -$70 
C)  three; -$52 
D)  five; -$42

Question 9

Refer to the information provided in Figure 8.9 below to answer the question(s) that follow.   Figure 8.9
-Refer to Figure 8.9. This farmer's profit-maximizing level of output is ________ units of output.

Accepted Answer

A)  100 
B)  350 
C)  500 
D)  700 
A)  100 
B)  350 
C)  500 
D)  700

Question 10

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow
 
Figure 8.5
-Refer to Figure 8.4. If six microwave ovens are produced, Micro Oven's average total costs are

Accepted Answer

A)  $100. 
B)  $150. 
C)  $300. 
D)  indeterminate from this information. 
A)  $100. 
B)  $150. 
C)  $300. 
D)  indeterminate from this information.

Question 11

Assume soybeans are produced in a perfectly competitive market. A soybean farmer is currently maximizing his profits. If the market price of soybeans falls, after the farmer adjusts to the new price, he will be producing ________ bushels of soybeans, and his profit will be ________.

Accepted Answer

A)  fewer; the same 
B)  fewer; lower 
C)  more; the same 
D)  the same number of; the same 
A)  fewer; the same 
B)  fewer; lower 
C)  more; the same 
D)  the same number of; the same

Question 12

Refer to the information provided in Table 8.5 below to answer the question(s) that follow.
Table 8.5
 $$\begin{array} { c c c c c c c c } 
\hline \begin{array} { c } 
\text { Number of } \
\text { Swords }
\end{array} & \text { TVC } & \text { MC } & \text { AVC } & \text { TFC } & \text { TC } & \text { AFC } & \text { ATC } \
\hline 0 & & & & & 50 & \
\hline 1 & & 25 & & & & & \
\hline 2 & & & & & &&47.50 \
\hline 3 & & & 23.33 & & & \
\hline 4 & & & & & 150 & & \
\hline 5 & 135 & & & & & & \
\hline
\end{array}$$
-Refer to Table 8.5. Assume that Phoebe is producing swords in a perfectly competitive market and the market price for swords is $30. To maximize profits Phoebe should produce ________ swords.

Accepted Answer

A)  two 
B)  three 
C)  four 
D)  five 
A)  two 
B)  three 
C)  four 
D)  five

Question 13

Refer to the information provided in Table 8.5 below to answer the question(s) that follow.
Table 8.5
 $$\begin{array} { c c c c c c c c } 
\hline \begin{array} { c } 
\text { Number of } \
\text { Swords }
\end{array} & \text { TVC } & \text { MC } & \text { AVC } & \text { TFC } & \text { TC } & \text { AFC } & \text { ATC } \
\hline 0 & & & & & 50 & \
\hline 1 & & 25 & & & & & \
\hline 2 & & & & & &&47.50 \
\hline 3 & & & 23.33 & & & \
\hline 4 & & & & & 150 & & \
\hline 5 & 135 & & & & & & \
\hline
\end{array}$$
-Refer to Table 8.5. If Phoebe produces three Swords, her total variable costs are

Accepted Answer

A)  $13.33. 
B)  $70. 
C)  $87.50. 
D)  $112.25. 
A)  $13.33. 
B)  $70. 
C)  $87.50. 
D)  $112.25.

Question 14

Twenty‐five students in a class take a test for which the average grade is 75. Then a twenty‐sixth student enters the class, takes the test, and scores 80. The test average calculated with 26 students will

Accepted Answer

A)  rise above 75. 
B)  fall below 75. 
C)  change from 75 but the direction is unclear. 
D)  still equal 75. 
A)  rise above 75. 
B)  fall below 75. 
C)  change from 75 but the direction is unclear. 
D)  still equal 75.

Question 15

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow
 
Figure 8.5
-Refer to Figure 8.4. Micro Oven's average fixed costs of producing 10 units of output are

Accepted Answer

A)  $30. 
B)  $40. 
C)  $50. 
D)  indeterminate from this information. 
A)  $30. 
B)  $40. 
C)  $50. 
D)  indeterminate from this information.

Question 16

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow
 
Figure 8.5
-Refer to Figure 8.4. If three microwave ovens are produced, average variable costs are

Accepted Answer

A)  $50. 
B)  $66.67. 
C)  $100. 
D)  indeterminate from this information. 
A)  $50. 
B)  $66.67. 
C)  $100. 
D)  indeterminate from this information.

Question 17

Refer to the information provided in Table 8.1 below to answer the question(s) that follow.
Table 8.1 $$\begin{array} { l c c c } 
\text { Produce } & \begin{array} { c } 
\text { Using } \
\text { Techniques }
\end{array} & \begin{array} { c } 
\text { Units of Variable } \
\text { K }
\end{array} & \begin{array} { c } 
\text { Inputs } \
\text { L }
\end{array} \
\hline \text { 1 unit of output } & & & \
& \text { A } & 8 & 8 \
& \text { B } & 4 & 12 \
\text { 2 units of output } & & & \
& \text { A } & 14 & 12 \
& \text { B } & 8 & 20 \
3 \text { units of output } & & & \
& \text { A } & 16 & 12 \
& \text { B } & 12 & 22 \
\hline
\end{array}$$
-Refer to Table 8.1. Assume the price of labor (L) is $5 per unit, the price of capital (K) is $10 per unit, and that firms attempt to minimize costs. The total variable cost of producing one unit of output is

Accepted Answer

A)  $16. 
B)  $100. 
C)  $120. 
D)  $220. 
A)  $16. 
B)  $100. 
C)  $120. 
D)  $220.

Question 18

Perfectly competitive industries are characterized by a homogeneous product.

Accepted Answer

A) True 
 B)False

Question 19

Refer to the information provided in Figure 8.9 below to answer the question(s) that follow.   Figure 8.9
-Refer to Figure 8.9. If this farmer produces the profit-maximizing quantity when the market price is ________, her profit is $0.

Accepted Answer

A)  $24 
B)  $20 
C)  $18 
D)  $4 
A)  $24 
B)  $20 
C)  $18 
D)  $4

Question 20

The law of diminishing marginal returns

Accepted Answer

A)  results in average variable cost (AV
C) , average total cost (AT
C) , and marginal cost (M
C)  curves eventually increasing at an increasing rate. 
B)  results in MC but not ATC curves eventually increasing at an increasing rate. 
C)  causes average fixed costs to decline continuously as output increases. 
D)  causes the difference between average total cost and average variable cost to shrink as output increases. 
A)  results in average variable cost (AV
C) , average total cost (AT
C) , and marginal cost (M
C)  curves eventually increasing at an increasing rate. 
B)  results in MC but not ATC curves eventually increasing at an increasing rate. 
C)  causes average fixed costs to decline continuously as output increases. 
D)  causes the difference between average total cost and average variable cost to shrink as output increases.

If a firm in a perfectly competitive industry lowers its price below the market price, its

If the average variable cost curve is above the marginal cost curve, then

Which type of cost does depend on a firm's output?

Marginal revenue (MR) is

The law of diminishing marginal returns results in average total cost eventually

Which of the following represents an accurate situation for a perfectly competitive firm?

In perfectly competitive industries, firms can easily enter and exit the industry in the long run.

Refer to the information provided in Figure 8.9 below to answer the question(s) that follow. Figure 8.9 -Refer to Figure 8.9. This farmer's profit-maximizing level of output is ________ units of output.

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow Figure 8.5 -Refer to Figure 8.4. If six microwave ovens are produced, Micro Oven's average total costs are

Assume soybeans are produced in a perfectly competitive market. A soybean farmer is currently maximizing his profits. If the market price of soybeans falls, after the farmer adjusts to the new price, he will be producing bushels of soybeans, and his profit will be .

Refer to the information provided in Table 8.5 below to answer the question(s) that follow. Table 8.5 Number of Swords TVC MC AVC TFC TC AFC ATC 0 50 1 25 2 47.50 3 23.33 4 150 5 135 -Refer to Table 8.5. If Phoebe produces three Swords, her total variable costs are

Twenty‐five students in a class take a test for which the average grade is 75. Then a twenty‐sixth student enters the class, takes the test, and scores 80. The test average calculated with 26 students will

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow Figure 8.5 -Refer to Figure 8.4. Micro Oven's average fixed costs of producing 10 units of output are

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow Figure 8.5 -Refer to Figure 8.4. If three microwave ovens are produced, average variable costs are

Perfectly competitive industries are characterized by a homogeneous product.

Refer to the information provided in Figure 8.9 below to answer the question(s) that follow. Figure 8.9 -Refer to Figure 8.9. If this farmer produces the profit-maximizing quantity when the market price is ________, her profit is $0.

The law of diminishing marginal returns

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Exam 8: Short-Run Costs and Output Decisions

If a firm in a perfectly competitive industry lowers its price below the market price, its

If the average variable cost curve is above the marginal cost curve, then

Which type of cost does depend on a firm's output?

Marginal revenue (MR) is

The law of diminishing marginal returns results in average total cost eventually

Which of the following represents an accurate situation for a perfectly competitive firm?

In perfectly competitive industries, firms can easily enter and exit the industry in the long run.

Refer to the information provided in Figure 8.9 below to answer the question(s) that follow. Figure 8.9 -Refer to Figure 8.9. This farmer's profit-maximizing level of output is ________ units of output.

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow Figure 8.5 -Refer to Figure 8.4. If six microwave ovens are produced, Micro Oven's average total costs are

Assume soybeans are produced in a perfectly competitive market. A soybean farmer is currently maximizing his profits. If the market price of soybeans falls, after the farmer adjusts to the new price, he will be producing ________ bushels of soybeans, and his profit will be ________.

Refer to the information provided in Table 8.5 below to answer the question(s) that follow. Table 8.5 Number of Swords TVC MC AVC TFC TC AFC ATC 0 50 1 25 2 47.50 3 23.33 4 150 5 135 -Refer to Table 8.5. If Phoebe produces three Swords, her total variable costs are

Twenty‐five students in a class take a test for which the average grade is 75. Then a twenty‐sixth student enters the class, takes the test, and scores 80. The test average calculated with 26 students will

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow Figure 8.5 -Refer to Figure 8.4. Micro Oven's average fixed costs of producing 10 units of output are

Refer to the short-run information provided in Figure 8.5 below to answer the question(s) that follow Figure 8.5 -Refer to Figure 8.4. If three microwave ovens are produced, average variable costs are

Perfectly competitive industries are characterized by a homogeneous product.

Refer to the information provided in Figure 8.9 below to answer the question(s) that follow. Figure 8.9 -Refer to Figure 8.9. If this farmer produces the profit-maximizing quantity when the market price is ________, her profit is $0.

The law of diminishing marginal returns

The Scope and Method of Economics

The Economic Problem: Scarcity and Choice

Demand, Supply, and Market Equilibrium

Demand and Supply Applications

Elasticity

Household Behavior and Consumer Choice

The Production Process: the Behavior of Profit-Maximizing Firms

Long-Run Costs and Output Decisions

Input Demand: the Labor and Land Markets

Input Demand: the Capital Market and the Investment Decision

General Equilibrium and the Efficiency of Perfect Competition

Monopoly and Antitrust Policy

Oligopoly

Monopolistic Competition

Externalities, Public Goods, and Common Resources

Uncertainty and Asymmetric Information

Income Distribution and Poverty

Public Finance: the Economics of Taxation

International Trade, Comparative Advantage, and Protectionism

Economic Growth in Developing Economies

Critical Thinking About Research

Filters

Assume soybeans are produced in a perfectly competitive market. A soybean farmer is currently maximizing his profits. If the market price of soybeans falls, after the farmer adjusts to the new price, he will be producing bushels of soybeans, and his profit will be .