Question 1

A perfectly competitive industry characterized by increasing costs has a downward-sloping long-run industry supply curve.

Accepted Answer

A) True 
 B)False

Question 2

Use the following to answer questions 55-57:  
-(Exhibit: Total Revenue and Cost)Total revenue at the most profitable level of output is given by point:

Accepted Answer

A) F. 
B) G. 
C) H. 
D) J. 
A) F. 
B) G. 
C) H. 
D) J.

Question 3

Perfect competition is a model of the market that assumes all of the following EXCEPT:

Accepted Answer

A) a large number of firms. 
B) firms face downward-sloping demand curves. 
C) firms produce identical goods. 
D) many buyers. 
A) a large number of firms. 
B) firms face downward-sloping demand curves. 
C) firms produce identical goods. 
D) many buyers.

Question 4

A perfectly competitive firm's short-run supply curve is its short-run marginal cost curve above the average total cost curve.

Accepted Answer

A) True 
 B)False

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 incurs an economic loss. 
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 incurs an economic loss.

Question 6

A perfectly competitive firm's marginal cost curve above the average variable cost curve is its:

Accepted Answer

A) input demand curve. 
B) short-run supply curve. 
C) marginal revenue curve. 
D) total revenue curve. 
A) input demand curve. 
B) short-run supply curve. 
C) marginal revenue curve. 
D) total revenue curve.

Question 7

If an industry experiences constant costs, the long-run industry supply curve will be downward sloping.

Accepted Answer

A) True 
 B)False

Question 8

A price taker is a market participant who is able to accept or reject the market price but cannot alter it.

Accepted Answer

A) True 
 B)False

Question 9

If economic profits exist in perfect competition, in the long run firms will enter because of easy entry, the _______ curve will shift to the right, and _______ will _______ .

Accepted Answer

A) supply; output; increase 
B) demand; supply; fall 
C) supply; demand; also shift to the right 
D) demand; price; increase 
A) supply; output; increase 
B) demand; supply; fall 
C) supply; demand; also shift to the right 
D) demand; price; increase

Question 10

Economic profits in a perfectly competitive industry induce _______ , and losses induce _______ .

Accepted Answer

A) exit; entry 
B) entry; entry 
C) entry; exit 
D) exit; exit 
A) exit; entry 
B) entry; entry 
C) entry; exit 
D) exit; exit

Question 11

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

Accepted Answer

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

Question 12

A perfectly competitive firm will not produce any output in the short run and will shut down 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 variable cost and less than average total cost. 
A) greater than marginal cost. 
B) less than marginal cost. 
C) less than average variable cost. 
D) greater than average variable cost and less than average total cost.

Question 13

If price falls below the minimum of ATC, the firm will shut down in the short run.

Accepted Answer

A) True 
 B)False

Question 14

Economic profit:

Accepted Answer

A) is the difference between total revenue and total fixed costs. 
B) (per unit)is price minus average total cost. 
C) as a total amount, is (P - AV
C) times quantity. 
D) is correctly described by all of the above. 
A) is the difference between total revenue and total fixed costs. 
B) (per unit)is price minus average total cost. 
C) as a total amount, is (P - AV
C) times quantity. 
D) is correctly described by all of the above.

Question 15

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

Accepted Answer

A) industry supply curve will not shift. 
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 decrease. 
A) industry supply curve will not shift. 
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 decrease.

Question 16

Shutting down:

Accepted Answer

A) is the same thing as going out of business. 
B) means closing the doors but not going out of business. 
C) may be a decision to close overnight. 
D) is properly described by B and C. 
A) is the same thing as going out of business. 
B) means closing the doors but not going out of business. 
C) may be a decision to close overnight. 
D) is properly described by B and C.

Question 17

Use the following to answer questions  
-(Exhibit: Total Revenue, Total Costs, and Economic Profit)As output exceeds approximately ________ pounds, economic profits _______ as long as _______ rise faster than _______ .

Accepted Answer

A) 8,300; fall; revenues; costs 
B) 4,300; increase; revenues; costs 
C) 8,300; rise; costs; revenues 
D) 4,300; decrease; revenues; costs 
A) 8,300; fall; revenues; costs 
B) 4,300; increase; revenues; costs 
C) 8,300; rise; costs; revenues 
D) 4,300; decrease; revenues; costs

Question 18

Which of the following is true?

Accepted Answer

A) Since there are few firms that match the conditions assumed in perfect competition, the model is not very useful. 
B) The model of perfect competition is a good example of the old adage, "That's O.K.in theory, but not in practice." 
C) Although few world markets meet the assumptions of perfect competition, the model is useful in analyzing real world forces that affect prices and outputs. 
D) The model of perfect competition comes very close to describing the real world. 
A) Since there are few firms that match the conditions assumed in perfect competition, the model is not very useful. 
B) The model of perfect competition is a good example of the old adage, "That's O.K.in theory, but not in practice." 
C) Although few world markets meet the assumptions of perfect competition, the model is useful in analyzing real world forces that affect prices and outputs. 
D) The model of perfect competition comes very close to describing the real world.

Question 19

The profit-maximizing level of output for a perfectly competitive firm occurs where there is equality between the slopes of the:

Accepted Answer

A) marginal revenue and demand curves. 
B) marginal revenue and marginal cost curves. 
C) total revenue and total cost curves. 
D) average revenue and average variable cost curves. 
A) marginal revenue and demand curves. 
B) marginal revenue and marginal cost curves. 
C) total revenue and total cost curves. 
D) average revenue and average variable cost curves.

Question 20

An increase in demand in a perfectly competitive industry characterized by constant costs will cause a(n):

Accepted Answer

A) permanent increase in price. 
B) economic loss for firms. 
C) increase in the quantity supplied in the short run and an increase in market supply in the long run. 
D) decrease in firms' marginal revenue. 
A) permanent increase in price. 
B) economic loss for firms. 
C) increase in the quantity supplied in the short run and an increase in market supply in the long run. 
D) decrease in firms' marginal revenue.

Exam 9: The Nature and Creation of Money

A perfectly competitive industry characterized by increasing costs has a downward-sloping long-run industry supply curve.

Use the following to answer questions 55-57: -(Exhibit: Total Revenue and Cost)Total revenue at the most profitable level of output is given by point:

Perfect competition is a model of the market that assumes all of the following EXCEPT:

A perfectly competitive firm's short-run supply curve is its short-run marginal cost curve above the average total cost curve.

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

A perfectly competitive firm's marginal cost curve above the average variable cost curve is its:

If an industry experiences constant costs, the long-run industry supply curve will be downward sloping.

A price taker is a market participant who is able to accept or reject the market price but cannot alter it.

If economic profits exist in perfect competition, in the long run firms will enter because of easy entry, the _______ curve will shift to the right, and _______ will _______ .

Economic profits in a perfectly competitive industry induce _______ , and losses induce _______ .

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

A perfectly competitive firm will not produce any output in the short run and will shut down if price is:

If price falls below the minimum of ATC, the firm will shut down in the short run.

Economic profit:

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

Shutting down:

Use the following to answer questions -(Exhibit: Total Revenue, Total Costs, and Economic Profit)As output exceeds approximately ________ pounds, economic profits _______ as long as _______ rise faster than _______ .

Which of the following is true?

The profit-maximizing level of output for a perfectly competitive firm occurs where there is equality between the slopes of the:

An increase in demand in a perfectly competitive industry characterized by constant costs will cause a(n):

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

If economic profits exist in perfect competition, in the long run firms will enter because of easy entry, the ___ curve will shift to the right, and _ will _____ .

Economic profits in a perfectly competitive industry induce _ , and losses induce _ .

Use the following to answer questions -(Exhibit: Total Revenue, Total Costs, and Economic Profit)As output exceeds approximately ____ pounds, economic profits _ as long as _ rise faster than ___ .