Question 1

When a perfectly competitive firm is in long-run equilibrium, the firm is:

Accepted Answer

A) producing at maximum average total cost. 
B) producing at maximum average variable cost. 
C) producing at minimum marginal cost. 
D) producing at minimum long-run average total cost. 
A) producing at maximum average total cost. 
B) producing at maximum average variable cost. 
C) producing at minimum marginal cost. 
D) producing at minimum long-run average total cost.

Question 2

Use the following to answer questions  
-(Exhibit: Total Revenue, Total Costs, and Economic Profit)The firm maximizes economic profit when the _______ of the total revenue and total cost curves are _______ and when _______ and ________ are equal.

Accepted Answer

A) slopes; as far apart as possible; marginal revenue; marginal cost 
B) quantities; equal; marginal product; marginal cost 
C) slopes; equal; marginal revenue; marginal cost 
D) slopes; equal; marginal revenue; marginal product 
A) slopes; as far apart as possible; marginal revenue; marginal cost 
B) quantities; equal; marginal product; marginal cost 
C) slopes; equal; marginal revenue; marginal cost 
D) slopes; equal; marginal revenue; marginal product

Question 3

Which of the following is true?

Accepted Answer

A) The long-run industry supply curve relates the price of a good or service to the quantity produced after all adjustments to a price change have been completed. 
B) Every point on a long-run industry supply curve shows a price and quantity supplied at which firms in the industry are earning positive economic profit. 
C) In establishing the long-run industry supply curve, factor costs and the number of firms are held constant. 
D) In perfectly competitive industries, the long-run supply curve is always horizontal. 
A) The long-run industry supply curve relates the price of a good or service to the quantity produced after all adjustments to a price change have been completed. 
B) Every point on a long-run industry supply curve shows a price and quantity supplied at which firms in the industry are earning positive economic profit. 
C) In establishing the long-run industry supply curve, factor costs and the number of firms are held constant. 
D) In perfectly competitive industries, the long-run supply curve is always horizontal.

Question 4

The firm will continue to produce in the short run if P <ATC and P > AVC.

Accepted Answer

A) True 
 B)False

Question 5

For a firm in a perfectly competitive market:

Accepted Answer

A) marginal revenue equals total revenue. 
B) marginal revenue equals price and average revenue. 
C) net revenue equals price. 
D) net revenue equals marginal revenue. 
A) marginal revenue equals total revenue. 
B) marginal revenue equals price and average revenue. 
C) net revenue equals price. 
D) net revenue equals marginal revenue.

Question 6

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 less than P2, the firm will _______ in the short run.

Accepted Answer

A) produce q1 and break even 
B) produce q1 and incur a loss 
C) shut down 
D) do none of the above 
A) produce q1 and break even 
B) produce q1 and incur a loss 
C) shut down 
D) do none of the above

Question 7

Provided that there are no external benefits or costs, in the long run, perfect competition will result in an efficient allocation of resources because P = MC.

Accepted Answer

A) True 
 B)False

Question 8

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 will produce _______ units of output per day.

Accepted Answer

A) 100 
B) 250 
C) 300 
D) 400 
A) 100 
B) 250 
C) 300 
D) 400

Question 9

Economic profit in long-run equilibrium in perfect competition will be:

Accepted Answer

A) less than accounting profit. 
B) equal to accounting profit. 
C) greater than accounting profit. 
D) negative. 
A) less than accounting profit. 
B) equal to accounting profit. 
C) greater than accounting profit. 
D) negative.

Question 10

Individuals in a market who must take the market price as given are:

Accepted Answer

A) quantity minimizers. 
B) quantity takers. 
C) price takers. 
D) price searchers. 
A) quantity minimizers. 
B) quantity takers. 
C) price takers. 
D) price searchers.

Question 11

An assumption of the model of perfect competition is:

Accepted Answer

A) difficult entry and exit. 
B) few buyers and sellers. 
C) complete information. 
D) different goods. 
A) difficult entry and exit. 
B) few buyers and sellers. 
C) complete information. 
D) different goods.

Question 12

Use the following to answer questions 80-84:  
-(Exhibit: Marginal Decision Rule)If P1 is the market price, and if this firm has decided to produce any output, it should produce:

Accepted Answer

A) where MR > MC. 
B) quantity q2. 
C) quantity q1 where MR > MC. 
D) a quantity greater than q1 but less than q2. 
A) where MR > MC. 
B) quantity q2. 
C) quantity q1 where MR > MC. 
D) a quantity greater than q1 but less than q2.

Question 13

A reduction in _______ leads to a _______ , shifting each firm's _______ curve _______ .

Accepted Answer

A) demand; fall in price; marginal revenue; downward 
B) supply; fall in price; marginal revenue; upward 
C) demand; fall in price; average revenue; upward 
D) price; decrease in demand; marginal revenue; upward 
A) demand; fall in price; marginal revenue; downward 
B) supply; fall in price; marginal revenue; upward 
C) demand; fall in price; average revenue; upward 
D) price; decrease in demand; marginal revenue; upward

Question 14

A firm's total output times the price at which it sells that output is:

Accepted Answer

A) net revenue. 
B) total revenue. 
C) average revenue. 
D) marginal revenue. 
A) net revenue. 
B) total revenue. 
C) average revenue. 
D) marginal revenue.

Question 15

Use the following to answer questions  
-(Exhibit: Total Revenue, Total Costs, and Economic Profit)At zero level of output, total costs are ________ and total revenue is _______ .

Accepted Answer

A) 0; 0 
B) 300; 0 
C) 800; 300 
D) 0; 300 
A) 0; 0 
B) 300; 0 
C) 800; 300 
D) 0; 300

Question 16

Charges that are paid for factors of production are called:

Accepted Answer

A) implicit costs. 
B) opportunity costs. 
C) fixed costs. 
D) explicit costs. 
A) implicit costs. 
B) opportunity costs. 
C) fixed costs. 
D) explicit costs.

Question 17

If a firm in perfect competition sells 10 units of output at a market price of $5 per unit, its marginal revenue is:

Accepted Answer

A) $5. 
B) more than $5 but less than $50. 
C) $50. 
D) $250. 
A) $5. 
B) more than $5 but less than $50. 
C) $50. 
D) $250.

Question 18

If price is greater 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 a loss. 
B) produce at a profit. 
C) shut down production. 
D) produce more than the profit-maximizing quantity. 
A) produce at a loss. 
B) produce at a profit. 
C) shut down production. 
D) produce more than the profit-maximizing quantity.

Question 19

The slope of the total revenue curve is:

Accepted Answer

A) marginal cost. 
B) net revenue. 
C) constant under perfect competition. 
D) varying under perfect competition. 
A) marginal cost. 
B) net revenue. 
C) constant under perfect competition. 
D) varying under perfect competition.

Question 20

The profit-maximizing level of output for a perfectly competitive firm in the short run occurs where:

Accepted Answer

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

Exam 9: The Nature and Creation of Money

When a perfectly competitive firm is in long-run equilibrium, the firm is:

Use the following to answer questions -(Exhibit: Total Revenue, Total Costs, and Economic Profit)The firm maximizes economic profit when the _______ of the total revenue and total cost curves are _______ and when _______ and ________ are equal.

Which of the following is true?

The firm will continue to produce in the short run if P <ATC and P > AVC.

For a firm in a perfectly competitive market:

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 less than P2, the firm will _______ in the short run.

Provided that there are no external benefits or costs, in the long run, perfect competition will result in an efficient allocation of resources because P = MC.

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 will produce _______ units of output per day.

Economic profit in long-run equilibrium in perfect competition will be:

Individuals in a market who must take the market price as given are:

An assumption of the model of perfect competition is:

Use the following to answer questions 80-84: -(Exhibit: Marginal Decision Rule)If P1 is the market price, and if this firm has decided to produce any output, it should produce:

A reduction in _______ leads to a _______ , shifting each firm's _______ curve _______ .

A firm's total output times the price at which it sells that output is:

Use the following to answer questions -(Exhibit: Total Revenue, Total Costs, and Economic Profit)At zero level of output, total costs are ________ and total revenue is _______ .

Charges that are paid for factors of production are called:

If a firm in perfect competition sells 10 units of output at a market price of $5 per unit, its marginal revenue is:

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

The slope of the total revenue curve is:

The profit-maximizing level of output for a perfectly competitive firm in the short run 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: Total Revenue, Total Costs, and Economic Profit)The firm maximizes economic profit when the ___ of the total revenue and total cost curves are _ and when _ and ____ are equal.

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 less than P₂, the firm will _______ in the short run.

Use the following to answer questions 80-84: -(Exhibit: Marginal Decision Rule)If P₁ is the market price, and if this firm has decided to produce any output, it should produce:

A reduction in ___ leads to a _ , shifting each firm's _ curve ___ .

Use the following to answer questions -(Exhibit: Total Revenue, Total Costs, and Economic Profit)At zero level of output, total costs are __ and total revenue is _ .