Question 1

Use the following to answer questions 55-57:  
-(Exhibit: Total Revenue and Cost)The most profitable level of output occurs at quantity:

Accepted Answer

A) F. 
B) K. 
C) L. 
D) M. 
A) F. 
B) K. 
C) L. 
D) M.

Question 2

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.Assuming no changes in the costs of production, in the long run this firm will produce _______ units of output and sell its output at a price of ________ .

Accepted Answer

A) 100; $1.00 
B) 250; $1.90 
C) 300; $2.00 
D) 400; $3.00 
A) 100; $1.00 
B) 250; $1.90 
C) 300; $2.00 
D) 400; $3.00

Question 3

Use the following to answer questions  
-(Exhibit: Profit Maximizing)The exhibit shows cost curves for a firm operating in a perfectly competitive market.Curve M is the _______ curve.

Accepted Answer

A) ATC 
B) MR 
C) MC 
D) AVC 
A) ATC 
B) MR 
C) MC 
D) AVC

Question 4

Economic profit in long-run equilibrium in perfect competition is zero.

Accepted Answer

A) True 
 B)False

Question 5

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 $4.50, 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 6

Suppose that some firms in a perfectly competitive industry are incurring negative economic profits.The:

Accepted Answer

A) industry supply curve will not shift in the long run. 
B) industry supply curve will shift to the right in the long run. 
C) number of firms in the industry will not change in the long run. 
D) industry is not in long-run equilibrium. 
A) industry supply curve will not shift in the long run. 
B) industry supply curve will shift to the right in the long run. 
C) number of firms in the industry will not change in the long run. 
D) industry is not in long-run equilibrium.

Question 7

Economic profit in the long run in perfect competition is positive.

Accepted Answer

A) True 
 B)False

Question 8

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.Based on the information given, we can conclude that a typical producer of candy canes is experiencing:

Accepted Answer

A) diminishing marginal returns to its variable factors of production. 
B) increasing marginal returns to its variable factors of production. 
C) negative economic profits 
D) It is not possible to answer based on the information given. 
A) diminishing marginal returns to its variable factors of production. 
B) increasing marginal returns to its variable factors of production. 
C) negative economic profits 
D) It is not possible to answer based on the information given.

Question 9

When economic profits in an industry are zero:

Accepted Answer

A) firms are really doing badly. 
B) it means that firms are doing as well as they could do in other markets. 
C) firms should exit, so they can make an economic profit in some other market. 
D) the industry is not in long-run equilibrium. 
A) firms are really doing badly. 
B) it means that firms are doing as well as they could do in other markets. 
C) firms should exit, so they can make an economic profit in some other market. 
D) the industry is not in long-run equilibrium.

Question 10

When a firm's total cost exceeds its total revenue:

Accepted Answer

A) average total cost is less than average revenue. 
B) net revenue is positive. 
C) marginal cost is negative. 
D) total cost rises with increases in output. 
A) average total cost is less than average revenue. 
B) net revenue is positive. 
C) marginal cost is negative. 
D) total cost rises with increases in output.

Question 11

In perfect competition P > MR.

Accepted Answer

A) True 
 B)False

Question 12

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 economic profit per period in the long run will be:

Accepted Answer

A) zero. 
B) $250. 
C) $275. 
D) $300. 
A) zero. 
B) $250. 
C) $275. 
D) $300.

Question 13

The firm's supply curve in perfect competition is the AVC curve.

Accepted Answer

A) True 
 B)False

Question 14

If all firms in a perfectly competitive industry earn zero economic profits, in the long run, the:

Accepted Answer

A) industry supply curve will shift to the left. 
B) industry supply curve will shift to the right. 
C) number of firms in the industry will not change. 
D) number of firms in the industry will increase. 
A) industry supply curve will shift to the left. 
B) industry supply curve will shift to the right. 
C) number of firms in the industry will not change. 
D) number of firms in the industry will increase.

Question 15

If a perfectly competitive industry is characterized by constant costs in the long run, its long-run:

Accepted Answer

A) marginal revenue curve is vertical. 
B) marginal cost curve is vertical. 
C) industry supply curve is horizontal. 
D) average fixed cost curve is horizontal. 
A) marginal revenue curve is vertical. 
B) marginal cost curve is vertical. 
C) industry supply curve is horizontal. 
D) average fixed cost curve is horizontal.

Question 16

The assumptions of perfect competition imply that:

Accepted Answer

A) individuals in the market accept the market price as given. 
B) individuals can influence the market price. 
C) the price will be a fair price. 
D) the price will be low. 
A) individuals in the market accept the market price as given. 
B) individuals can influence the market price. 
C) the price will be a fair price. 
D) the price will be low.

Question 17

An increase in variable costs:

Accepted Answer

A) will result in the firm's marginal, average total, and average variable cost curves shifting upward by less than the cost increase. 
B) will result in the firm's marginal, average total, and average variable cost curves shifting upward by the amount of the cost increase. 
C) will shift the industry supply curve upward (to the left)by a smaller amount. 
D) will shift the industry supply curve upward (to the left)by a larger amount. 
A) will result in the firm's marginal, average total, and average variable cost curves shifting upward by less than the cost increase. 
B) will result in the firm's marginal, average total, and average variable cost curves shifting upward by the amount of the cost increase. 
C) will shift the industry supply curve upward (to the left)by a smaller amount. 
D) will shift the industry supply curve upward (to the left)by a larger amount.

Question 18

In the short run, if P < AVC, a perfectly competitive firm:

Accepted Answer

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

Question 19

Price takers:

Accepted Answer

A) are those individuals in a competitive market who must accept the market price as given. 
B) is a term that implies that whatever the price is, an individual will accept it as fair. 
C) is a term that essentially means that prices have nothing to do with individuals or groups. 
D) is a term that refers to buyers not sellers. 
A) are those individuals in a competitive market who must accept the market price as given. 
B) is a term that implies that whatever the price is, an individual will accept it as fair. 
C) is a term that essentially means that prices have nothing to do with individuals or groups. 
D) is a term that refers to buyers not sellers.

Question 20

Use the following to answer questions 129-135:
  
-(Exhibit: A Perfectly Competitive Firm in the Short Run)The firm will produce in the short run if the price is at least as much as the price indicated by the distance:

Accepted Answer

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

Exam 9: The Nature and Creation of Money

Use the following to answer questions 55-57: -(Exhibit: Total Revenue and Cost)The most profitable level of output occurs at quantity:

Use the following to answer questions -(Exhibit: Profit Maximizing)The exhibit shows cost curves for a firm operating in a perfectly competitive market.Curve M is the _______ curve.

Economic profit in long-run equilibrium in perfect competition is zero.

Suppose that some firms in a perfectly competitive industry are incurring negative economic profits.The:

Economic profit in the long run in perfect competition is positive.

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.Based on the information given, we can conclude that a typical producer of candy canes is experiencing:

When economic profits in an industry are zero:

When a firm's total cost exceeds its total revenue:

In perfect competition P > MR.

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 economic profit per period in the long run will be:

The firm's supply curve in perfect competition is the AVC curve.

If all firms in a perfectly competitive industry earn zero economic profits, in the long run, the:

If a perfectly competitive industry is characterized by constant costs in the long run, its long-run:

The assumptions of perfect competition imply that:

An increase in variable costs:

In the short run, if P < AVC, a perfectly competitive firm:

Price takers:

Use the following to answer questions 129-135: -(Exhibit: A Perfectly Competitive Firm in the Short Run)The firm will produce in the short run if the price is at least as much as the price indicated by the distance:

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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