Question 1

In perfect competition:

Accepted Answer

A) price and marginal cost are the same. 
B) price and marginal revenue are the same. 
C) price and total revenue are the same. 
D) total revenue and total variable cost are the same. 
A) price and marginal cost are the same. 
B) price and marginal revenue are the same. 
C) price and total revenue are the same. 
D) total revenue and total variable cost are the same.

Question 2

In the long run, provided that there are no external benefits or costs, perfect competition will result in an efficient allocation of resources because:

Accepted Answer

A) P > MR. 
B) P = MC. 
C) P = MR 
D) economic profits are greater than zero. 
A) P > MR. 
B) P = MC. 
C) P = MR 
D) economic profits are greater than zero.

Question 3

If some firms in a perfectly competitive industry earn less than a zero economic profit, the industry's market supply curve will decrease in the long run.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer questions  
-(Exhibit: Profit Maximizing)The exhibit shows cost curves for a firm operating in a perfectly competitive market.If the market price is P4:

Accepted Answer

A) marginal revenue and price are the same. 
B) marginal revenue is less than P4. 
C) marginal revenue is greater than P4. 
D) none of the above is true. 
A) marginal revenue and price are the same. 
B) marginal revenue is less than P4. 
C) marginal revenue is greater than P4. 
D) none of the above is true.

Question 5

An increase in demand in a perfectly competitive market will cause a(n):

Accepted Answer

A) temporary increase in price in a constant-cost industry. 
B) economic loss for firms. 
C) decrease in supply. 
D) decrease in firms' marginal revenue. 
A) temporary increase in price in a constant-cost industry. 
B) economic loss for firms. 
C) decrease in supply. 
D) decrease in firms' marginal revenue.

Question 6

Which of the following is true?

Accepted Answer

A) Price and average revenue are never equal. 
B) Price and marginal revenue are seldom equal under conditions of perfect competition. 
C) When a firm is operating under perfectly competitive market conditions, price and marginal cost will always be equal if the firm is maximizing profits. 
D) Average revenue equals price times quantity. 
A) Price and average revenue are never equal. 
B) Price and marginal revenue are seldom equal under conditions of perfect competition. 
C) When a firm is operating under perfectly competitive market conditions, price and marginal cost will always be equal if the firm is maximizing profits. 
D) Average revenue equals price times quantity.

Question 7

A reduction in variable production costs shifts the firm's _______ and _______ curves _______ in the short run.

Accepted Answer

A) ATC; MC; upward 
B) ATC; MC; downward 
C) MR; AR; upward 
D) total cost curve; total revenue; upward 
A) ATC; MC; upward 
B) ATC; MC; downward 
C) MR; AR; upward 
D) total cost curve; total revenue; upward

Question 8

Costs included in the economic concept of cost but that are not an explicit cost are:

Accepted Answer

A) outlay costs. 
B) accounting profits. 
C) implicit costs. 
D) economic profits. 
A) outlay costs. 
B) accounting profits. 
C) implicit costs. 
D) economic profits.

Question 9

Suppose life is discovered on Mars and that it turns out to be quite sophisticated.In fact, perfect competition prevails everywhere on the planet.Which of the following characteristics of Martian firms are we likely to observe?

Accepted Answer

A) None of them ever experiences diminishing marginal returns. 
B) They all try to operate where price equals average variable cost. 
C) They all try to operate where price equals total cost. 
D) The are all price takers. 
A) None of them ever experiences diminishing marginal returns. 
B) They all try to operate where price equals average variable cost. 
C) They all try to operate where price equals total cost. 
D) The are all price takers.

Question 10

If firms are experiencing economic losses in the short run, firms will leave the industry and industry output will _______ and economic losses will _______ in the long run.

Accepted Answer

A) fall; fall 
B) rise; fall 
C) rise; rise 
D) fall; rise 
A) fall; fall 
B) rise; fall 
C) rise; rise 
D) fall; rise

Question 11

Use the following to answer questions 142-145:  
-(Exhibit: Short-Run Costs)If the price declines, production will continue in the short run, even though the firm incurs a loss, between quantities:

Accepted Answer

A) O and Q. 
B) Q and R. 
C) R and S. 
D) S and T. 
A) O and Q. 
B) Q and R. 
C) R and S. 
D) S and T.

Question 12

Suppose that some firms in a perfectly competitive industry are earning positive economic profits.In the long run, the:

Accepted Answer

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

Question 13

Use the following to answer questions 80-84:  
-(Exhibit: Marginal Decision Rule)Economic profit:

Accepted Answer

A) exists between q1 and q2. 
B) exists between the origin and q1. 
C) exists as a maximum at q1. 
D) cannot be determined based on information provided. 
A) exists between q1 and q2. 
B) exists between the origin and q1. 
C) exists as a maximum at q1. 
D) cannot be determined based on information provided.

Question 14

The shutdown point is P = minimum ATC.

Accepted Answer

A) True 
 B)False

Question 15

A perfectly competitive firm's total revenue:

Accepted Answer

A) curve is a straight, downward sloping line 
B) curve has a slope equal to marginal cost. 
C) is found by multiplying price by quantity sold by the firm. 
D) is always above its total cost. 
A) curve is a straight, downward sloping line 
B) curve has a slope equal to marginal cost. 
C) is found by multiplying price by quantity sold by the firm. 
D) is always above its total cost.

Question 16

Use the following to answer questions 129-135:
  
-(Exhibit: A Perfectly Competitive Firm in the Short Run)The firm's total economic profit at its most profitable level of output is:

Accepted Answer

A) 0GHB. 
B) EFJS. 
C) EGHS. 
D) FGLK. 
A) 0GHB. 
B) EFJS. 
C) EGHS. 
D) FGLK.

Question 17

Which of the following is (are)true?

Accepted Answer

A) In perfect competition, price will be less than marginal cost. 
B) In perfect competition, price will seldom adjust to reflect changes in production costs in the long run. 
C) In perfect competition, to maximize profits, a firm will operate where P = MR = MC. 
D) All of the above are true. 
A) In perfect competition, price will be less than marginal cost. 
B) In perfect competition, price will seldom adjust to reflect changes in production costs in the long run. 
C) In perfect competition, to maximize profits, a firm will operate where P = MR = MC. 
D) All of the above are true.

Question 18

The profit-maximizing level of output for a perfectly competitive firm occurs at the quantity at which the slopes of the marginal cost and marginal revenue curves are equal.

Accepted Answer

A) True 
 B)False

Question 19

Total revenue is a firm's:

Accepted Answer

A) change in revenue resulting from a unit change in output. 
B) ratio of revenue to quantity. 
C) difference between revenue and cost. 
D) total output times the price at which it sells that output. 
A) change in revenue resulting from a unit change in output. 
B) ratio of revenue to quantity. 
C) difference between revenue and cost. 
D) total output times the price at which it sells that output.

Question 20

The profit-maximizing level of output for a perfectly competitive firm occurs where:

Accepted Answer

A) marginal revenue equals price. 
B) marginal revenue equals marginal cost. 
C) total revenue equals total cost. 
D) average revenue equals average variable cost. 
A) marginal revenue equals price. 
B) marginal revenue equals marginal cost. 
C) total revenue equals total cost. 
D) average revenue equals average variable cost.

Exam 9: The Nature and Creation of Money

In perfect competition:

In the long run, provided that there are no external benefits or costs, perfect competition will result in an efficient allocation of resources because:

If some firms in a perfectly competitive industry earn less than a zero economic profit, the industry's market supply curve will decrease in the long run.

Use the following to answer questions -(Exhibit: Profit Maximizing)The exhibit shows cost curves for a firm operating in a perfectly competitive market.If the market price is P4:

An increase in demand in a perfectly competitive market will cause a(n):

Which of the following is true?

A reduction in variable production costs shifts the firm's _______ and _______ curves _______ in the short run.

Costs included in the economic concept of cost but that are not an explicit cost are:

Suppose life is discovered on Mars and that it turns out to be quite sophisticated.In fact, perfect competition prevails everywhere on the planet.Which of the following characteristics of Martian firms are we likely to observe?

If firms are experiencing economic losses in the short run, firms will leave the industry and industry output will _______ and economic losses will _______ in the long run.

Use the following to answer questions 142-145: -(Exhibit: Short-Run Costs)If the price declines, production will continue in the short run, even though the firm incurs a loss, between quantities:

Suppose that some firms in a perfectly competitive industry are earning positive economic profits.In the long run, the:

Use the following to answer questions 80-84: -(Exhibit: Marginal Decision Rule)Economic profit:

The shutdown point is P = minimum ATC.

A perfectly competitive firm's total revenue:

Use the following to answer questions 129-135: -(Exhibit: A Perfectly Competitive Firm in the Short Run)The firm's total economic profit at its most profitable level of output is:

Which of the following is (are)true?

The profit-maximizing level of output for a perfectly competitive firm occurs at the quantity at which the slopes of the marginal cost and marginal revenue curves are equal.

Total revenue is a firm's:

The profit-maximizing level of output for a perfectly competitive firm occurs where:

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

Filters

Use the following to answer questions -(Exhibit: Profit Maximizing)The exhibit shows cost curves for a firm operating in a perfectly competitive market.If the market price is P₄:

A reduction in variable production costs shifts the firm's ___ and _ curves _____ in the short run.

If firms are experiencing economic losses in the short run, firms will leave the industry and industry output will _ and economic losses will _ in the long run.