Question 1

Price takers are individuals in a market who:

Accepted Answer

A) select a price from a wide range of alternatives. 
B) select the lowest price available in a competitive market. 
C) select the average of prices available in a competitive market. 
D) have no ability to affect the price of a good in a market. 
A) select a price from a wide range of alternatives. 
B) select the lowest price available in a competitive market. 
C) select the average of prices available in a competitive market. 
D) have no ability to affect the price of a good in a market.

Question 2

Which of the following is true?

Accepted Answer

A) If price falls below average total cost the firm will shut down in the short run. 
B) Price and marginal revenue are the same in perfect competition. 
C) Economic profit per unit is found by subtracting AVC from price. 
D) Economic profit is always positive in the short run. 
A) If price falls below average total cost the firm will shut down in the short run. 
B) Price and marginal revenue are the same in perfect competition. 
C) Economic profit per unit is found by subtracting AVC from price. 
D) Economic profit is always positive in the short run.

Question 3

A perfectly competitive industry's market supply curve is the sum of the supply curves of all firms in the industry.

Accepted Answer

A) True 
 B)False

Question 4

Profit computed using only explicit costs is called accounting profit.

Accepted Answer

A) True 
 B)False

Question 5

Use the following to answer questions 23-28:  
-(Exhibit: The Market for Carrots)If this is a perfectly competitive market, each firm:

Accepted Answer

A) will be a price setter. 
B) can sell all it wants to sell at the price determined by demand and supply. 
C) has an incentive to sell at a price lower than the market price. 
D) will attempt to maximize its total revenue. 
A) will be a price setter. 
B) can sell all it wants to sell at the price determined by demand and supply. 
C) has an incentive to sell at a price lower than the market price. 
D) will attempt to maximize its total revenue.

Question 6

A perfectly competitive firm will continue producing in the short run as long as it can cover its:

Accepted Answer

A) total cost. 
B) average total cost. 
C) average variable cost. 
D) average fixed cost. 
A) total cost. 
B) average total cost. 
C) average variable cost. 
D) average fixed cost.

Question 7

In long-run equilibrium, economic profits in a perfectly competitive industry are:

Accepted Answer

A) positive. 
B) zero. 
C) negative. 
D) indeterminate. 
A) positive. 
B) zero. 
C) negative. 
D) indeterminate.

Question 8

Suppose that some firms in a perfectly competitive industry are earning positive economic profits.At this time, the:

Accepted Answer

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

Question 9

Use the following to answer questions 23-28:  
-(Exhibit: The Market for Carrots)If this is a perfectly competitive market, when the demand is D1 and the supply is S, any firm could enter and sell carrots for:

Accepted Answer

A) 20 cents a pound. 
B) 25 cents a pound. 
C) 30 cents a pound. 
D) any price above 20 cents a pound. 
A) 20 cents a pound. 
B) 25 cents a pound. 
C) 30 cents a pound. 
D) any price above 20 cents a pound.

Question 10

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 the marginal cost of producing candy canes:

Accepted Answer

A) is less than $0.10. 
B) equals $0.10. 
C) is greater than $0.10. 
D) It is not possible to answer based on the information given. 
A) is less than $0.10. 
B) equals $0.10. 
C) is greater than $0.10. 
D) It is not possible to answer based on the information given.

Question 11

Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium.Subsequently, an increase in population increases the demand for haircuts.In the short run, we expect that the market price will _______ and the output of a typical firm will _______ .

Accepted Answer

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

Question 12

Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium.Subsequently, an increase in population increases the demand for haircuts.In the short run, we expect that the typical firm is likely to begin:

Accepted Answer

A) earning an economic profit. 
B) incurring an economic loss. 
C) experiencing no change in its economic profit. 
D) experiencing neither an economic profit nor an economic loss. 
A) earning an economic profit. 
B) incurring an economic loss. 
C) experiencing no change in its economic profit. 
D) experiencing neither an economic profit nor an economic loss.

Question 13

A perfectly competitive firm will shut down production in the short run if the price is below average total cost.

Accepted Answer

A) True 
 B)False

Question 14

Use the following to answer questions 142-145:  
-(Exhibit: Short-Run Costs)If the price declines, the minimum quantity of output supplied in the short run is quantity:

Accepted Answer

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

Question 15

A firm's total revenue in perfect competition is:

Accepted Answer

A) found by multiplying its output by the price at which it sells that output. 
B) a linear, horizontal line. 
C) a linear, downward-sloping line. 
D) perfectly elastic. 
A) found by multiplying its output by the price at which it sells that output. 
B) a linear, horizontal line. 
C) a linear, downward-sloping line. 
D) perfectly elastic.

Question 16

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 the average revenue for candy canes:

Accepted Answer

A) is less than $0.10. 
B) equals $0.10. 
C) is greater than $0.10. 
D) It is not possible to answer based on the information given. 
A) is less than $0.10. 
B) equals $0.10. 
C) is greater than $0.10. 
D) It is not possible to answer based on the information given.

Question 17

Use the following to answer questions 23-28:  
-(Exhibit: The Market for Carrots)Assume that this is a perfectly competitive market and the original price is determined by D1 and S.If the demand shifts to D2, any firm could enter this market and:

Accepted Answer

A) sell all it wants to sell at 40 cents a pound. 
B) sell all it wants to sell at 30 cents a pound. 
C) be a price setter. 
D) would probably set its price just above 30 cents a pound. 
A) sell all it wants to sell at 40 cents a pound. 
B) sell all it wants to sell at 30 cents a pound. 
C) be a price setter. 
D) would probably set its price just above 30 cents a pound.

Question 18

The primary application of the model of perfect competition is to predict how firms will respond to changes in demand and production costs.

Accepted Answer

A) True 
 B)False

Question 19

Use the following to answer questions 
  
-(Exhibit: Supply: Short and Long Run)If industry expansion tends to increase production costs, then the relevant long-run supply curve is:

Accepted Answer

A) the horizontal axis. 
B) S2. 
C) S3. 
D) S4. 
A) the horizontal axis. 
B) S2. 
C) S3. 
D) S4.

Question 20

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)The firm will produce at a profit in the short run if the price is:

Accepted Answer

A) $2.00. 
B) $2.50. 
C) $3.50. 
D) $4.50. 
A) $2.00. 
B) $2.50. 
C) $3.50. 
D) $4.50.

Exam 9: The Nature and Creation of Money

Price takers are individuals in a market who:

Which of the following is true?

A perfectly competitive industry's market supply curve is the sum of the supply curves of all firms in the industry.

Profit computed using only explicit costs is called accounting profit.

Use the following to answer questions 23-28: -(Exhibit: The Market for Carrots)If this is a perfectly competitive market, each firm:

A perfectly competitive firm will continue producing in the short run as long as it can cover its:

In long-run equilibrium, economic profits in a perfectly competitive industry are:

Suppose that some firms in a perfectly competitive industry are earning positive economic profits.At this time, the:

Use the following to answer questions 23-28: -(Exhibit: The Market for Carrots)If this is a perfectly competitive market, when the demand is D1 and the supply is S, any firm could enter and sell carrots for:

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 the marginal cost of producing candy canes:

Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium.Subsequently, an increase in population increases the demand for haircuts.In the short run, we expect that the typical firm is likely to begin:

A perfectly competitive firm will shut down production in the short run if the price is below average total cost.

Use the following to answer questions 142-145: -(Exhibit: Short-Run Costs)If the price declines, the minimum quantity of output supplied in the short run is quantity:

A firm's total revenue in perfect competition is:

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 the average revenue for candy canes:

Use the following to answer questions 23-28: -(Exhibit: The Market for Carrots)Assume that this is a perfectly competitive market and the original price is determined by D1 and S.If the demand shifts to D2, any firm could enter this market and:

The primary application of the model of perfect competition is to predict how firms will respond to changes in demand and production costs.

Use the following to answer questions -(Exhibit: Supply: Short and Long Run)If industry expansion tends to increase production costs, then the relevant long-run supply curve is:

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 23-28: -(Exhibit: The Market for Carrots)If this is a perfectly competitive market, when the demand is D₁ and the supply is S, any firm could enter and sell carrots for:

Use the following to answer questions 23-28: -(Exhibit: The Market for Carrots)Assume that this is a perfectly competitive market and the original price is determined by D₁ and S.If the demand shifts to D₂, any firm could enter this market and: