Question 1

Accountants use only _______ costs in their computations of short-run total cost.

Accepted Answer

A) opportunity 
B) implicit 
C) explicit costs 
D) variable 
A) opportunity 
B) implicit 
C) explicit costs 
D) variable

Question 2

The slope of the total revenue curve is:

Accepted Answer

A) net revenue. 
B) marginal profit. 
C) net profit. 
D) marginal revenue. 
A) net revenue. 
B) marginal profit. 
C) net profit. 
D) marginal revenue.

Question 3

In perfect competition, P = MR = MC because that is where firms maximize profits.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is false?

Accepted Answer

A) Economists believe that they can understand most markets by applying the model of demand and supply. 
B) When economists apply the model of demand and supply, they are using the model of perfect competition. 
C) Many changes in the past 20 years have made markets more competitive by increasing ease of entry. 
D) Price-taking firms produce differentiated goods. 
A) Economists believe that they can understand most markets by applying the model of demand and supply. 
B) When economists apply the model of demand and supply, they are using the model of perfect competition. 
C) Many changes in the past 20 years have made markets more competitive by increasing ease of entry. 
D) Price-taking firms produce differentiated goods.

Question 5

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

Accepted Answer

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

Question 6

In a perfectly competitive industry, a change in fixed cost will have no effect on price in the long run.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following is true?

Accepted Answer

A) Profit per unit is price minus AVC. 
B) Total economic profit is per unit profit times quantity. 
C) If price is less than ATC, the firm will shut down in the short run. 
D) If price is less than marginal cost, the perfectly competitive firm should raise the price and increase output. 
A) Profit per unit is price minus AVC. 
B) Total economic profit is per unit profit times quantity. 
C) If price is less than ATC, the firm will shut down in the short run. 
D) If price is less than marginal cost, the perfectly competitive firm should raise the price and increase output.

Question 8

Use the following to answer questions  
-(Exhibit: Total Revenue, Total Costs, and Economic Profit)Which of the following is (are)true?

Accepted Answer

A) Total revenue and total cost are equal at approximately 8,300 pounds of output. 
B) Marginal cost and marginal revenue are equal at approximately 8,300 pounds of output. 
C) At approximately 4,500 pounds of output, marginal cost is zero and increasing returns sets in. 
D) All of the above are true. 
A) Total revenue and total cost are equal at approximately 8,300 pounds of output. 
B) Marginal cost and marginal revenue are equal at approximately 8,300 pounds of output. 
C) At approximately 4,500 pounds of output, marginal cost is zero and increasing returns sets in. 
D) All of the above are true.

Question 9

Use the following to answer questions  
-(Exhibit: Profit Maximizing)The exhibit shows cost curves for a firm operating in a perfectly competitive market.Which of the following statements is true?

Accepted Answer

A) AFC is represented in this exhibit by the vertical distance between Curve M and Curve N at any level of output. 
B) AFC is represented in this exhibit by the vertical distance between Curve N and Curve O at any level of output. 
C) This exhibit illustrates the long run because all costs are variable. 
D) Quantity q2 is to the left of the shutdown point. 
A) AFC is represented in this exhibit by the vertical distance between Curve M and Curve N at any level of output. 
B) AFC is represented in this exhibit by the vertical distance between Curve N and Curve O at any level of output. 
C) This exhibit illustrates the long run because all costs are variable. 
D) Quantity q2 is to the left of the shutdown point.

Question 10

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, the firm will produce _______ in the short run.

Accepted Answer

A) q2 and break even 
B) q2 and make an economic profit 
C) q3 and make an economic profit per unit equal to the vertical distance between P4 and Curve N at that quantity 
D) q2 and make an economic profit per unit equal to the vertical distance between P4 and Curve O at that quantity 
A) q2 and break even 
B) q2 and make an economic profit 
C) q3 and make an economic profit per unit equal to the vertical distance between P4 and Curve N at that quantity 
D) q2 and make an economic profit per unit equal to the vertical distance between P4 and Curve O at that quantity

Question 11

A perfectly competitive firm is a:

Accepted Answer

A) price taker. 
B) price searcher. 
C) cost maximizer. 
D) quantity taker. 
A) price taker. 
B) price searcher. 
C) cost maximizer. 
D) quantity taker.

Question 12

Which of the following is true in a perfectly competitive market?

Accepted Answer

A) One unit of a good or service cannot be differentiated from any other on any basis. 
B) Brand preferences exist but are very slight. 
C) Barriers to entry are relatively strong. 
D) Information is costly. 
A) One unit of a good or service cannot be differentiated from any other on any basis. 
B) Brand preferences exist but are very slight. 
C) Barriers to entry are relatively strong. 
D) Information is costly.

Question 13

The shutdown point is:

Accepted Answer

A) the point at which economic profit is zero. 
B) the minimum level of AVC. 
C) the intersection of the MC and ATC curves. 
D) the minimum level of AFC. 
A) the point at which economic profit is zero. 
B) the minimum level of AVC. 
C) the intersection of the MC and ATC curves. 
D) the minimum level of AFC.

Question 14

Economic profit cannot exist under perfect competition.

Accepted Answer

A) True 
 B)False

Question 15

A firm's total revenue curve in perfect competition is an upward-sloping straight line.

Accepted Answer

A) True 
 B)False

Question 16

Use the following to answer questions 
  
-(Exhibit: Supply: Short and Long Run)S3 would be the _______-run supply curve if _______.

Accepted Answer

A) long; expanded production leaves production costs unchanged 
B) short; expanded production changes production costs 
C) long; there is no entry into or exit from the industry 
D) medium; costs are changed if there is easy entry 
A) long; expanded production leaves production costs unchanged 
B) short; expanded production changes production costs 
C) long; there is no entry into or exit from the industry 
D) medium; costs are changed if there is easy entry

Question 17

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, profit at the profit-maximizing quantity of output is:

Accepted Answer

A) $2.00. 
B) $4.50. 
C) $5.00. 
D) $34.00. 
A) $2.00. 
B) $4.50. 
C) $5.00. 
D) $34.00.

Question 18

Suppose that automobile buyers in the southern part of a town have no idea what prices are being paid in the northern part of town.This situation violates the perfect competition assumption of:

Accepted Answer

A) many buyers and sellers. 
B) identical goods. 
C) complete information. 
D) no discrimination. 
A) many buyers and sellers. 
B) identical goods. 
C) complete information. 
D) no discrimination.

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 loss for firms. 
C) decrease in demand. 
D) rightward shift in the market supply curve in the long run. 
A) permanent increase in price. 
B) economic loss for firms. 
C) decrease in demand. 
D) rightward shift in the market supply curve in the long run.

Question 20

At any level of output less than the most profitable one, an increase in output adds more to a firm's total cost than to its total revenue.

Accepted Answer

A) True 
 B)False

Exam 9: The Nature and Creation of Money

Accountants use only _______ costs in their computations of short-run total cost.

The slope of the total revenue curve is:

In perfect competition, P = MR = MC because that is where firms maximize profits.

Which of the following is false?

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

In a perfectly competitive industry, a change in fixed cost will have no effect on price in the long run.

Which of the following is true?

Use the following to answer questions -(Exhibit: Total Revenue, Total Costs, and Economic Profit)Which of the following is (are)true?

Use the following to answer questions -(Exhibit: Profit Maximizing)The exhibit shows cost curves for a firm operating in a perfectly competitive market.Which of the following statements is true?

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, the firm will produce _______ in the short run.

A perfectly competitive firm is a:

Which of the following is true in a perfectly competitive market?

The shutdown point is:

Economic profit cannot exist under perfect competition.

A firm's total revenue curve in perfect competition is an upward-sloping straight line.

Use the following to answer questions -(Exhibit: Supply: Short and Long Run)S3 would be the _______-run supply curve if _______.

Suppose that automobile buyers in the southern part of a town have no idea what prices are being paid in the northern part of town.This situation violates the perfect competition assumption of:

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

At any level of output less than the most profitable one, an increase in output adds more to a firm's total cost than to its total revenue.

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, the firm will produce _______ in the short run.

Use the following to answer questions -(Exhibit: Supply: Short and Long Run)S₃ would be the _-run supply curve if _.