Question 1

The marginal revenue received by a firm in a perfectly competitive market:

Accepted Answer

A) is greater than the market price. 
B) is less than the market price. 
C) is equal to its average revenue. 
D) increases with the quantity of output sold. 
A) is greater than the market price. 
B) is less than the market price. 
C) is equal to its average revenue. 
D) increases with the quantity of output sold.

Question 2

Use the following to answer questions  
-(Exhibit: Total Revenue, Total Costs, and Economic Profit)Economic profit will be the greatest when approximately _______ pounds are sold.

Accepted Answer

A) 2,000 
B) 4,300 
C) 7,300 
D) 8,300 
A) 2,000 
B) 4,300 
C) 7,300 
D) 8,300

Question 3

A characteristic of perfect competition is that buyers know the prices that sellers are asking but sellers do not necessarily know the prices that buyers are offering.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is not an assumption economists make when using the model of perfect competition?

Accepted Answer

A) Firms seek to maximize profits. 
B) The products of each firm in a particular market are identical. 
C) Each firm sets it price equal to its average total cost. 
D) There is easy entry and exit. 
A) Firms seek to maximize profits. 
B) The products of each firm in a particular market are identical. 
C) Each firm sets it price equal to its average total cost. 
D) There is easy entry and exit.

Question 5

In the short run, if P > ATC, a perfectly competitive firm:

Accepted Answer

A) produces output and earns zero economic profit. 
B) produces output and earns an economic profit. 
C) produces output and incurs an economic loss. 
D) does not produce output and earns economic profit. 
A) produces output and earns zero economic profit. 
B) produces output and earns an economic profit. 
C) produces output and incurs an economic loss. 
D) does not produce output and earns economic profit.

Question 6

Use the following to answer questions 129-135:
  
-(Exhibit: A Perfectly Competitive Firm in the Short Run)The firm will shut down in the short run if the price falls below:

Accepted Answer

A) 0G. 
B) 0F. 
C) 0E. 
D) 0P. 
A) 0G. 
B) 0F. 
C) 0E. 
D) 0P.

Question 7

In the short run, a perfectly competitive firm does not produce output and earns a negative economic profit if:

Accepted Answer

A) P = ATC. B) P P > ATC. D) AVC < P < ATC. A) P = ATC. B) P P > ATC. D) AVC < P < ATC.

Question 8

Perfect competition is a model of the market that assumes a large number of buyers and sellers engaged in the purchase and sale of identical goods.

Accepted Answer

A) True 
 B)False

Question 9

If a perfectly competitive firm is producing a quantity that generates MC < MR, then profit:

Accepted Answer

A) is maximized. 
B) can be increased by increasing production. 
C) can be increased by decreasing production. 
D) can be increased by increasing the price. 
A) is maximized. 
B) can be increased by increasing production. 
C) can be increased by decreasing production. 
D) can be increased by increasing the price.

Question 10

Use the following to answer questions 129-135:
  
-A perfectly competitive firm will earn a profit and will continue producing the profit-maximizing quantity of output in the short run if price is:

Accepted Answer

A) greater than marginal cost. 
B) less than marginal cost. 
C) less than average variable cost. 
D) greater than average total cost. 
A) greater than marginal cost. 
B) less than marginal cost. 
C) less than average variable cost. 
D) greater than average total cost.

Question 11

Suppose that pasta is produced under conditions of perfect competition and that the constant-cost industry is initially in long-run equilibrium.Now suppose there is an increase in the price of wheat, which is a key ingredient in producing pasta.Further assume that the price elasticity of demand for pasta is -1.8.After all long-run adjustments have occurred, we would expect total consumer spending on pasta to have:

Accepted Answer

A) risen. 
B) fallen. 
C) remained the same. 
D) first fallen, then risen, then returned to the original level of expenditures. 
A) risen. 
B) fallen. 
C) remained the same. 
D) first fallen, then risen, then returned to the original level of expenditures.

Question 12

An increase in demand in a perfectly competitive market will cause a permanent increase in economic profit.

Accepted Answer

A) True 
 B)False

Question 13

Use the following to answer questions 142-145:  
-(Exhibit: Short-Run Costs)At the given price, the most profitable level of output occurs at quantity:

Accepted Answer

A) N. 
B) P. 
C) S. 
D) T. 
A) N. 
B) P. 
C) S. 
D) T.

Question 14

If price is greater than average variable cost and less than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

Accepted Answer

A) produce at an economic loss. 
B) produce at an economic profit. 
C) shut down production. 
D) produce more than the profit-maximizing quantity. 
A) produce at an economic loss. 
B) produce at an economic profit. 
C) shut down production. 
D) produce more than the profit-maximizing quantity.

Question 15

Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10.Now suppose that the price of sugar rises, increasing the marginal and average total costs of producing candy canes by $0.05; there are no other changes in production costs.Based on the information given, we can conclude that in the long we will observe:

Accepted Answer

A) firms leaving the industry. 
B) firms entering the industry. 
C) some firms entering and some firms leaving. 
D) neither entry nor exit from the industry. 
A) firms leaving the industry. 
B) firms entering the industry. 
C) some firms entering and some firms leaving. 
D) neither entry nor exit from the industry.

Question 16

Economic profits in a system of perfectly competitive markets will be positive in all industries.

Accepted Answer

A) True 
 B)False

Question 17

The model of perfect competition assumes that all goods produced in an industry are physically identical, even though they are viewed by the buyers as being different.

Accepted Answer

A) True 
 B)False

Question 18

Use the following to answer questions $$\begin{array}{l}
\text { Total Cost for a Perfectly Competitive Firm }\\
\begin{array} { c c } 
\begin{array} { cc } 
\text { Quantity } \
\text { per } &
\end{array} & \text { Total }    \
\text { period }&\text { Cost } \
0 & \$ 10 \
1 & \$ 16 \
2 & \$ 20 \
3 & \$ 22 \
4 & \$ 24 \
5 & \$ 25 \
6 & \$ 27 \
7 & \$ 30 \
8 & \$ 34 \
9 & \$ 39 \
10 & \$ 45
\end{array}
\end{array}$$
-(Exhibit: Total Cost for a Perfectly Competitive Firm)If the market price is $3.50, the profit-maximizing quantity of output is _______ units.

Accepted Answer

A) 5 
B) 7 
C) 8 
D) 9 
A) 5 
B) 7 
C) 8 
D) 9

Question 19

A decrease in production costs for firms in a perfectly competitive market will cause a(n):

Accepted Answer

A) permanent increase in price. 
B) economic profit for firms in the short run. 
C) increase in demand. 
D) increase in firms' marginal revenue. 
A) permanent increase in price. 
B) economic profit for firms in the short run. 
C) increase in demand. 
D) increase in firms' marginal revenue.

Question 20

Use the following to answer questions 122-128:  
-(Exhibit: Perfectly Competitive Firm)The exhibit shows a perfectly competitive firm that faces demand curve d, has the cost curves shown, and maximizes profit.The firm's total revenue per day is:

Accepted Answer

A) $475. 
B) $600. 
C) $900. 
D) $1,200. 
A) $475. 
B) $600. 
C) $900. 
D) $1,200.

Exam 9: The Nature and Creation of Money

The marginal revenue received by a firm in a perfectly competitive market:

Use the following to answer questions -(Exhibit: Total Revenue, Total Costs, and Economic Profit)Economic profit will be the greatest when approximately _______ pounds are sold.

A characteristic of perfect competition is that buyers know the prices that sellers are asking but sellers do not necessarily know the prices that buyers are offering.

Which of the following is not an assumption economists make when using the model of perfect competition?

In the short run, if P > ATC, a perfectly competitive firm:

Use the following to answer questions 129-135: -(Exhibit: A Perfectly Competitive Firm in the Short Run)The firm will shut down in the short run if the price falls below:

In the short run, a perfectly competitive firm does not produce output and earns a negative economic profit if:

Perfect competition is a model of the market that assumes a large number of buyers and sellers engaged in the purchase and sale of identical goods.

If a perfectly competitive firm is producing a quantity that generates MC < MR, then profit:

Use the following to answer questions 129-135: -A perfectly competitive firm will earn a profit and will continue producing the profit-maximizing quantity of output in the short run if price is:

An increase in demand in a perfectly competitive market will cause a permanent increase in economic profit.

Use the following to answer questions 142-145: -(Exhibit: Short-Run Costs)At the given price, the most profitable level of output occurs at quantity:

If price is greater than average variable cost and less than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

Economic profits in a system of perfectly competitive markets will be positive in all industries.

The model of perfect competition assumes that all goods produced in an industry are physically identical, even though they are viewed by the buyers as being different.

A decrease in production costs for firms in a perfectly competitive market will cause a(n):

Use the following to answer questions 122-128: -(Exhibit: Perfectly Competitive Firm)The exhibit shows a perfectly competitive firm that faces demand curve d, has the cost curves shown, and maximizes profit.The firm's total revenue per day is:

Economics: the Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Demand and Supply

Macroeconomics: the Big Picture

Measuring Total Output and Income

Aggregate Demand and Aggregate Supply

Economic Growth

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Inflation and Unemployment

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Macroeconomics: the Big Picture

Measuring Total Income and Output

Aggregate Demand and Aggregate Supply

Economic Growth

The Nature and Creation of Money

Financial Markets and the Economy

Monetary Policy and the Fed

Government and Fiscal Policy

Consumption and the Aggregate Expenditures Model

Investment and Economic Activity

Net Exports and International Finance

Macro Inflation and Unemployment

Macro a Brief History of Macroeconomic Thought and Policy

Economic Development

Socialist Economies in Transition

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