Question 1

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

Accepted Answer

A)  increase production. 
B)  do nothing, as it is already maximizing profits. 
C)  decrease production 
D)  shut down. 
A)  increase production. 
B)  do nothing, as it is already maximizing profits. 
C)  decrease production 
D)  shut down.

Question 2

Which of the following statements about Canadian farming is false?

Accepted Answer

A)  In Saskatchewan, farm income represented 20% of total income in 1998 as compared to 50% in 1959. 
B)  Net farm income in Canada has decreased by 50% between 1975 and 2000. 
C)  The number of Canadians who work on farms has decreased by about 74% since the
Second World War. 
D)  Wheat is not used to manufacture wallboard, toothpaste, plastics, and disposable diapers. 
A)  In Saskatchewan, farm income represented 20% of total income in 1998 as compared to 50% in 1959. 
B)  Net farm income in Canada has decreased by 50% between 1975 and 2000. 
C)  The number of Canadians who work on farms has decreased by about 74% since the
Second World War. 
D)  Wheat is not used to manufacture wallboard, toothpaste, plastics, and disposable diapers.

Question 3

The industry demand curve in perfect competition is:

Accepted Answer

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

Question 4

Society treats the situation of perfect competition as ideal because:

Accepted Answer

A)  it operates without any involvement from government. 
B)  there are many small firms creating a great many jobs. 
C)  it is primarily found in agriculture, which is an essential product. 
D)  it allocates resources efficiently by producing a quantity of output where the price is equal to the marginal cost. 
A)  it operates without any involvement from government. 
B)  there are many small firms creating a great many jobs. 
C)  it is primarily found in agriculture, which is an essential product. 
D)  it allocates resources efficiently by producing a quantity of output where the price is equal to the marginal cost.

Question 5

Agriculture is generally associated with which type of competition?

Accepted Answer

A)  monopoly 
B)  many differentiated sellers 
C)  oligopoly 
D)  perfect competition 
A)  monopoly 
B)  many differentiated sellers 
C)  oligopoly 
D)  perfect competition

Question 6

Agricultural prices have not increased as much as other prices in the twentieth century because:

Accepted Answer

A)  consumers are spending more of their disposable income on other products. 
B)  increases in agricultural output have outstripped the increased demand. 
C)  government price controls have kept agricultural prices lower than prices of other products. 
D)  the demand for food has been declining, resulting in lower prices. 
A)  consumers are spending more of their disposable income on other products. 
B)  increases in agricultural output have outstripped the increased demand. 
C)  government price controls have kept agricultural prices lower than prices of other products. 
D)  the demand for food has been declining, resulting in lower prices.

Question 7

All of the following are primary purposes of marketing boards in Canada except:

Accepted Answer

A)  to maintain or increase incomes of the producers of a particular product. 
B)  to stabilize income from the sale of the product. 
C)  to determine size of subsidies to farmers. 
D)  to standardize the terms of the sale of the product. 
A)  to maintain or increase incomes of the producers of a particular product. 
B)  to stabilize income from the sale of the product. 
C)  to determine size of subsidies to farmers. 
D)  to standardize the terms of the sale of the product.

Question 8

Under the deficiency-payment system of agricultural price supports, the cost to the government may be higher than under the offer-to-purchase program if:

Accepted Answer

A)  if foreign governments cease to subsidize agricultural production. 
B)  if production quotas are in place. 
C)  if the demand for the product is elastic. 
D)  if the demand for the product is inelastic. 
A)  if foreign governments cease to subsidize agricultural production. 
B)  if production quotas are in place. 
C)  if the demand for the product is elastic. 
D)  if the demand for the product is inelastic.

Question 9

All of the following are powers and procedure use by marketing boards in Canada except:

Accepted Answer

A)  subsidy allocation. 
B)  seizure and disposal. 
C)  price setting. 
D)  trade regulation. 
A)  subsidy allocation. 
B)  seizure and disposal. 
C)  price setting. 
D)  trade regulation.

Question 10

Under the offer-to-purchase price support:

Accepted Answer

A)  the government purchases all agricultural output and sells it in the marketplace. 
B)  the government guarantees farmers a certain price for their crop, regardless of the market price. 
C)  surpluses are created. 
D)  the government will correct shortages by offering incentives to farmers. 
A)  the government purchases all agricultural output and sells it in the marketplace. 
B)  the government guarantees farmers a certain price for their crop, regardless of the market price. 
C)  surpluses are created. 
D)  the government will correct shortages by offering incentives to farmers.

Question 11

One major advantage of the deficiency-payment system of agricultural price supports compared to the Offer-to- Purchase Program Is:

Accepted Answer

A)  the offer-to-purchase program solves storage problems. 
B)  the deficiency-payment system is always less costly. 
C)  the offer-to-purchase program is always more costly. 
D)  the deficiency-payment system solves storage problems. 
A)  the offer-to-purchase program solves storage problems. 
B)  the deficiency-payment system is always less costly. 
C)  the offer-to-purchase program is always more costly. 
D)  the deficiency-payment system solves storage problems.

Question 12

The cobweb theorem explains why farms prices:

Accepted Answer

A)  may never reach an equilibrium level if the demand and supply elasticities are not identical. 
B)  may never reach an equilibrium level if the demand and supply elasticities are identical. 
C)  always reach an equilibrium level when price elasticity of demand exceeds that of supply. 
D)  always reach an equilibrium level when price elasticity of supply exceeds that of demand. 
A)  may never reach an equilibrium level if the demand and supply elasticities are not identical. 
B)  may never reach an equilibrium level if the demand and supply elasticities are identical. 
C)  always reach an equilibrium level when price elasticity of demand exceeds that of supply. 
D)  always reach an equilibrium level when price elasticity of supply exceeds that of demand.

Question 13

In years of high agricultural production, farm incomes tend to go down because:

Accepted Answer

A)  the demand for most farm products is inelastic. 
B)  prices are lower. 
C)  costs increase in order to provide high levels of output. 
D)  government price supports are removed. 
A)  the demand for most farm products is inelastic. 
B)  prices are lower. 
C)  costs increase in order to provide high levels of output. 
D)  government price supports are removed.

Question 14

Under the deficiency-payment system of agricultural price supports, the cost to government and the taxpayer will be greater:

Accepted Answer

A)  if production quotas are in place. 
B)  if the demand for the product is inelastic. 
C)  if the demand for the product is elastic. 
D)  if foreign governments cease to subsidize agricultural production. 
A)  if production quotas are in place. 
B)  if the demand for the product is inelastic. 
C)  if the demand for the product is elastic. 
D)  if foreign governments cease to subsidize agricultural production.

Question 15

In order to maximize profits, a firm in perfect competition will produce a level of output:

Accepted Answer

A)  consistent with the lowest point on the average total cost curve. 
B)  where the difference between price and average cost is the greatest. 
C)  where the marginal cost and average total cost curves intersect. 
D)  where the price equals the extra cost of producing one more unit. 
A)  consistent with the lowest point on the average total cost curve. 
B)  where the difference between price and average cost is the greatest. 
C)  where the marginal cost and average total cost curves intersect. 
D)  where the price equals the extra cost of producing one more unit.

Question 16

A firm in perfect competition is referred to as a price-taker because:

Accepted Answer

A)  it could not alter the market price by adjusting its output. 
B)  competition is carried on primarily through non-price competition. 
C)  it is uncertain what the price for its product should be. 
D)  being a small firm, it has to accept the price dictated by the larger firms. 
A)  it could not alter the market price by adjusting its output. 
B)  competition is carried on primarily through non-price competition. 
C)  it is uncertain what the price for its product should be. 
D)  being a small firm, it has to accept the price dictated by the larger firms.

Question 17

Which of the following statements about Canadian farming is false?

Accepted Answer

A)  The number of Canadians who work on farms has decreased by about 50% since the Second World War. 
B)  Wheat is not used to manufacture wallboard, toothpaste, plastics, and disposable diapers. 
C)  Net farm income in Canada has decreased by 50% between 1975 and 2000. 
D)  In Saskatchewan, farm income represented 2% of total income in 1998 as compared to 50% in 1959. 
A)  The number of Canadians who work on farms has decreased by about 50% since the Second World War. 
B)  Wheat is not used to manufacture wallboard, toothpaste, plastics, and disposable diapers. 
C)  Net farm income in Canada has decreased by 50% between 1975 and 2000. 
D)  In Saskatchewan, farm income represented 2% of total income in 1998 as compared to 50% in 1959.

Question 18

The market price for a perfectly competitive product is $10. If, at its current level of production, marginal cost is equal to $10.50, the firm should:

Accepted Answer

A)  increase production until marginal cost declines to $10. 
B)  go out of business, as it is impossible to earn a profit when marginal cost exceeds price. 
C)  cut back on production until marginal cost declines to $10. 
D)  increase production until average total cost declines to $10. 
A)  increase production until marginal cost declines to $10. 
B)  go out of business, as it is impossible to earn a profit when marginal cost exceeds price. 
C)  cut back on production until marginal cost declines to $10. 
D)  increase production until average total cost declines to $10.

Question 19

The supply of agricultural output is inelastic because:

Accepted Answer

A)  farmers are easily able to swap crops from one type to another. 
B)  of changes in government farm-support programs. 
C)  of fluctuations in weather conditions. 
D)  the presence of large fixed costs do not increase savings from output adjustments. 
A)  farmers are easily able to swap crops from one type to another. 
B)  of changes in government farm-support programs. 
C)  of fluctuations in weather conditions. 
D)  the presence of large fixed costs do not increase savings from output adjustments.

Question 20

Fluctuations in agricultural prices, according to the cobweb theorem, occur because of:

Accepted Answer

A)  the inelastic nature of the demand curve for food. 
B)  changes in government price supports. 
C)  changes in the consumer demand for food in other nations. 
D)  fluctuations in the supply of the product. 
A)  the inelastic nature of the demand curve for food. 
B)  changes in government price supports. 
C)  changes in the consumer demand for food in other nations. 
D)  fluctuations in the supply of the product.

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

Which of the following statements about Canadian farming is false?

The industry demand curve in perfect competition is:

Society treats the situation of perfect competition as ideal because:

Agriculture is generally associated with which type of competition?

Agricultural prices have not increased as much as other prices in the twentieth century because:

All of the following are primary purposes of marketing boards in Canada except:

Under the deficiency-payment system of agricultural price supports, the cost to the government may be higher than under the offer-to-purchase program if:

All of the following are powers and procedure use by marketing boards in Canada except:

Under the offer-to-purchase price support:

One major advantage of the deficiency-payment system of agricultural price supports compared to the Offer-to- Purchase Program Is:

The cobweb theorem explains why farms prices:

In years of high agricultural production, farm incomes tend to go down because:

Under the deficiency-payment system of agricultural price supports, the cost to government and the taxpayer will be greater:

In order to maximize profits, a firm in perfect competition will produce a level of output:

A firm in perfect competition is referred to as a price-taker because:

Which of the following statements about Canadian farming is false?

The market price for a perfectly competitive product is $10. If, at its current level of production, marginal cost is equal to $10.50, the firm should:

The supply of agricultural output is inelastic because:

Fluctuations in agricultural prices, according to the cobweb theorem, occur because of:

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

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

Which of the following statements about Canadian farming is false?

The industry demand curve in perfect competition is:

Society treats the situation of perfect competition as ideal because:

Agriculture is generally associated with which type of competition?

Agricultural prices have not increased as much as other prices in the twentieth century because:

All of the following are primary purposes of marketing boards in Canada except:

Under the deficiency-payment system of agricultural price supports, the cost to the government may be higher than under the offer-to-purchase program if:

All of the following are powers and procedure use by marketing boards in Canada except:

Under the offer-to-purchase price support:

One major advantage of the deficiency-payment system of agricultural price supports compared to the Offer-to- Purchase Program Is:

The cobweb theorem explains why farms prices:

In years of high agricultural production, farm incomes tend to go down because:

Under the deficiency-payment system of agricultural price supports, the cost to government and the taxpayer will be greater:

In order to maximize profits, a firm in perfect competition will produce a level of output:

A firm in perfect competition is referred to as a price-taker because:

Which of the following statements about Canadian farming is false?

The market price for a perfectly competitive product is $10. If, at its current level of production, marginal cost is equal to $10.50, the firm should:

The supply of agricultural output is inelastic because:

Fluctuations in agricultural prices, according to the cobweb theorem, occur because of:

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