Question 1

If a firm in perfect competition finds that total revenue is less than the total costs of production, it should:

Accepted Answer

A)  raise the price in order to increase total revenue. 
B)  shut down. 
C)  remain in business as long as the price exceeds average variable cost. 
D)  decrease the price in order to increase sales and increase total revenue. 
A)  raise the price in order to increase total revenue. 
B)  shut down. 
C)  remain in business as long as the price exceeds average variable cost. 
D)  decrease the price in order to increase sales and increase total revenue. C

Question 2

If, for a perfectly competitive firm, the price exceeds average total cost:

Accepted Answer

A)  the market price will decrease as firms enter. 
B)  the market price will increase as firms enter. 
C)  the market price will decrease as firms exit. 
D)  the market price will increase as firms exit. 
A)  the market price will decrease as firms enter. 
B)  the market price will increase as firms enter. 
C)  the market price will decrease as firms exit. 
D)  the market price will increase as firms exit. A

Question 3

A firm is currently maximizing profits by producing at an output level at which marginal revenue is $5 and average variable cost is $5.25, the firm should:

Accepted Answer

A)  shut-down at the current output level 
B)  increase its price to $5.25 
C)  increase its production until average variable cost is $5 
D)  decrease its production until marginal cost is $5 
A)  shut-down at the current output level 
B)  increase its price to $5.25 
C)  increase its production until average variable cost is $5 
D)  decrease its production until marginal cost is $5 A

Question 4

The cobweb theorem explains why the price gets closer and closer to the equilibrium price when:

Accepted Answer

A)  the price elasticity of supply exceeds that of demand. 
B)  the demand and supply elasticities are identical. 
C)  the demand and supply elasticities are not identical. 
D)  the price elasticity of demand exceeds that of supply. 
A)  the price elasticity of supply exceeds that of demand. 
B)  the demand and supply elasticities are identical. 
C)  the demand and supply elasticities are not identical. 
D)  the price elasticity of demand exceeds that of supply.

Question 5

If, for a firm in perfect competition, the price, the marginal cost, and the average total cost are all equal to $9, then:

Accepted Answer

A)  the firm should increase production in order to reduce average total cost. 
B)  the firm should shut down. 
C)  the firm should reduce production in order to raise the price of the product. 
D)  the firm is just breaking even. 
A)  the firm should increase production in order to reduce average total cost. 
B)  the firm should shut down. 
C)  the firm should reduce production in order to raise the price of the product. 
D)  the firm is just breaking even.

Question 6

A firm in perfect competition may produce a higher level of output than is socially optimum Because:

Accepted Answer

A)  it's price does not represent the value that consumers place on a product. 
B)  it produces a level of output that does not please the society. 
C)  it always produces where price is equal to marginal cost. 
D)  it does not take into account third party-effects. 
A)  it's price does not represent the value that consumers place on a product. 
B)  it produces a level of output that does not please the society. 
C)  it always produces where price is equal to marginal cost. 
D)  it does not take into account third party-effects.

Question 7

If a firm in perfect competition were interested in increasing its profit, it would:

Accepted Answer

A)  lower its price in order to increase sales. 
B)  cut back production until the marginal cost of extra output is equal to the price of the product. 
C)  spend more money on advertising. 
D)  increase production until economies of scale have been reached and average total cost is at its lowest level. 
A)  lower its price in order to increase sales. 
B)  cut back production until the marginal cost of extra output is equal to the price of the product. 
C)  spend more money on advertising. 
D)  increase production until economies of scale have been reached and average total cost is at its lowest level.

Question 8

Farms have increased in size for all the following reasons except that:

Accepted Answer

A)  farming has become more labour intensive. 
B)  farming has become more mechanized. 
C)  farming has become more capitalized. 
D)  farming has become more specialized. 
A)  farming has become more labour intensive. 
B)  farming has become more mechanized. 
C)  farming has become more capitalized. 
D)  farming has become more specialized.

Question 9

Farm families compose approximately what percentage of total families in Canada?

Accepted Answer

A)  4 percent 
B)  8 percent 
C)  10 percent 
D)  12 percent 
A)  4 percent 
B)  8 percent 
C)  10 percent 
D)  12 percent

Question 10

The cobweb theorem:

Accepted Answer

A)  tells farmers how much of their crop to plant this year. 
B)  assumes that the supply of farm products is fixed. 
C)  assumes that farmers determine this year's production on the basis of last year's production. 
D)  assumes that farmers determine this year's production on the basis of last year's prices. 
A)  tells farmers how much of their crop to plant this year. 
B)  assumes that the supply of farm products is fixed. 
C)  assumes that farmers determine this year's production on the basis of last year's production. 
D)  assumes that farmers determine this year's production on the basis of last year's prices.

Question 11

The supply curve for a firm in perfect competition is:

Accepted Answer

A)  perfectly horizontal. 
B)  perfectly vertical. 
C)  the MC curve above the ATC curve. 
D)  the MC curve above the AVC curve. 
A)  perfectly horizontal. 
B)  perfectly vertical. 
C)  the MC curve above the ATC curve. 
D)  the MC curve above the AVC curve.

Question 12

A perfectly competitive firm finds itself in the following situation: TR = $5000; TC = $8000; FC = $3000; P = $5; MC = $5; and Q = 100 The firm should:

Accepted Answer

A)  shut down. 
B)  continue to produce as it is now. 
C)  decrease production, but not shut down. 
D)  increase production. 
A)  shut down. 
B)  continue to produce as it is now. 
C)  decrease production, but not shut down. 
D)  increase production.

Question 13

A system of quotas will result in higher incomes for farmers if:

Accepted Answer

A)  the government purchases any excess supply. 
B)  production costs can also be reduced. 
C)  the demand for farm products is inelastic. 
D)  government price supports remain in effect. 
A)  the government purchases any excess supply. 
B)  production costs can also be reduced. 
C)  the demand for farm products is inelastic. 
D)  government price supports remain in effect.

Question 14

A perfectly competitive firm finds itself in the following situation: TR = $10 000; TC = $8000; TFC = $2000; P = $8; and MC = $7. The firm should:

Accepted Answer

A)  do nothing, as it is already maximizing profits. 
B)  increase production. 
C)  shut down. 
D)  decrease production, but not shut down. 
A)  do nothing, as it is already maximizing profits. 
B)  increase production. 
C)  shut down. 
D)  decrease production, but not shut down.

Question 15

A firm is currently producing at an output level at which marginal revenue is $5 and marginal cost is $4, the firm should:

Accepted Answer

A)  increase its production until marginal cost is $5 
B)  increase its price to $5 
C)  decrease its price to $4 
D)  decrease its production until marginal revenue is $4 
A)  increase its production until marginal cost is $5 
B)  increase its price to $5 
C)  decrease its price to $4 
D)  decrease its production until marginal revenue is $4

Question 16

Between 1951 and 2001 the number of farms in Canada declined by approximately:

Accepted Answer

A)  4 percent 
B)  6 percent 
C)  40 percent 
D)  60 percent 
A)  4 percent 
B)  6 percent 
C)  40 percent 
D)  60 percent

Question 17

The demand curve for a firm in perfect competition is:

Accepted Answer

A)  somewhat elastic. 
B)  somewhat inelastic. 
C)  perfectly inelastic. 
D)  perfectly elastic. 
A)  somewhat elastic. 
B)  somewhat inelastic. 
C)  perfectly inelastic. 
D)  perfectly elastic.

Question 18

Firms in perfect competition are unlikely to earn economic profits in the long run because:

Accepted Answer

A)  all resources are variable in the long run, creating uncertainty for the firm. 
B)  the existence of economic profits will attract new firms into the industry and reduce the price. 
C)  in the long run, diseconomies of scale result in increased costs. 
D)  in the long run, the demand curve for the firm will not remain horizontal. 
A)  all resources are variable in the long run, creating uncertainty for the firm. 
B)  the existence of economic profits will attract new firms into the industry and reduce the price. 
C)  in the long run, diseconomies of scale result in increased costs. 
D)  in the long run, the demand curve for the firm will not remain horizontal.

Question 19

A firm in perfect competition faces a demand curve that is:

Accepted Answer

A)  downward sloping to the right. 
B)  vertical. 
C)  horizontal. 
D)  upward sloping to the right. 
A)  downward sloping to the right. 
B)  vertical. 
C)  horizontal. 
D)  upward sloping to the right.

Question 20

The demand for most agricultural products is:

Accepted Answer

A)  inelastic. 
B)  perfectly inelastic. 
C)  perfectly elastic. 
D)  elastic. 
A)  inelastic. 
B)  perfectly inelastic. 
C)  perfectly elastic. 
D)  elastic.

If a firm in perfect competition finds that total revenue is less than the total costs of production, it should:

If, for a perfectly competitive firm, the price exceeds average total cost:

A firm is currently maximizing profits by producing at an output level at which marginal revenue is $5 and average variable cost is $5.25, the firm should:

The cobweb theorem explains why the price gets closer and closer to the equilibrium price when:

If, for a firm in perfect competition, the price, the marginal cost, and the average total cost are all equal to $9, then:

A firm in perfect competition may produce a higher level of output than is socially optimum Because:

If a firm in perfect competition were interested in increasing its profit, it would:

Farms have increased in size for all the following reasons except that:

Farm families compose approximately what percentage of total families in Canada?

The cobweb theorem:

The supply curve for a firm in perfect competition is:

A perfectly competitive firm finds itself in the following situation: TR = $5000; TC = $8000; FC = $3000; P = $5; MC = $5; and Q = 100 The firm should:

A system of quotas will result in higher incomes for farmers if:

A perfectly competitive firm finds itself in the following situation: TR = $10 000; TC = $8000; TFC = $2000; P = $8; and MC = $7. The firm should:

A firm is currently producing at an output level at which marginal revenue is $5 and marginal cost is $4, the firm should:

Between 1951 and 2001 the number of farms in Canada declined by approximately:

The demand curve for a firm in perfect competition is:

Firms in perfect competition are unlikely to earn economic profits in the long run because:

A firm in perfect competition faces a demand curve that is:

The demand for most agricultural products is:

Introductory Concepts

The Operation of a Market

The Role of Government in a Market Economy

Government in Canada

Economic Indicators

Determination of National Income

Money and the Canadian Banking System

Stabilization Policy

International Economics

Industrial Organization in Canada

Production Costs

How Imperfect Competition Functions

The Labour Market

Filters

Exam 12: Perfect Competition : Theory and Practice

If a firm in perfect competition finds that total revenue is less than the total costs of production, it should:

If, for a perfectly competitive firm, the price exceeds average total cost:

A firm is currently maximizing profits by producing at an output level at which marginal revenue is $5 and average variable cost is $5.25, the firm should:

The cobweb theorem explains why the price gets closer and closer to the equilibrium price when:

If, for a firm in perfect competition, the price, the marginal cost, and the average total cost are all equal to $9, then:

A firm in perfect competition may produce a higher level of output than is socially optimum Because:

If a firm in perfect competition were interested in increasing its profit, it would:

Farms have increased in size for all the following reasons except that:

Farm families compose approximately what percentage of total families in Canada?

The cobweb theorem:

The supply curve for a firm in perfect competition is:

A perfectly competitive firm finds itself in the following situation: TR = $5000; TC = $8000; FC = $3000; P = $5; MC = $5; and Q = 100 The firm should:

A system of quotas will result in higher incomes for farmers if:

A perfectly competitive firm finds itself in the following situation: TR = $10 000; TC = $8000; TFC = $2000; P = $8; and MC = $7. The firm should:

A firm is currently producing at an output level at which marginal revenue is $5 and marginal cost is $4, the firm should:

Between 1951 and 2001 the number of farms in Canada declined by approximately:

The demand curve for a firm in perfect competition is:

Firms in perfect competition are unlikely to earn economic profits in the long run because:

A firm in perfect competition faces a demand curve that is:

The demand for most agricultural products is:

Introductory Concepts

The Operation of a Market

The Role of Government in a Market Economy

Government in Canada

Economic Indicators

Determination of National Income

Money and the Canadian Banking System

Stabilization Policy

International Economics

Industrial Organization in Canada

Production Costs

How Imperfect Competition Functions

The Labour Market

Filters