Question 1

When a perfectly competitive firm finds that its market price is below its minimum average variable cost,it will sell

Accepted Answer

A)  the output where marginal revenue equals marginal cost. 
B)  any positive output the entrepreneur decides upon because all of it can be sold. 
C)  nothing at all; the firm shuts down. 
D)  the output where average total cost equals price. 
A)  the output where marginal revenue equals marginal cost. 
B)  any positive output the entrepreneur decides upon because all of it can be sold. 
C)  nothing at all; the firm shuts down. 
D)  the output where average total cost equals price.

Question 2

Which of the following is a characteristic of a firm in a perfectly competitive market?

Accepted Answer

A)  The firm cannot make a profit in the short run because it is too small a part of the total market. 
B)  The firm can make a profit in the long run but not in the short run. 
C)  The firm can sell as much as it wants without having to lower its price. 
D)  The firm must lower its price in order to increase quantity demanded. 
A)  The firm cannot make a profit in the short run because it is too small a part of the total market. 
B)  The firm can make a profit in the long run but not in the short run. 
C)  The firm can sell as much as it wants without having to lower its price. 
D)  The firm must lower its price in order to increase quantity demanded.

Question 3

Figure 7-5   Figure 7-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 7-5.The firm's manager suggests that the firm's goal should be to maximise average profit.If the firm does this,what is the amount of profit that it will earn?

Accepted Answer

A)  $6600 
B)  $6750 
C)  $12 150 
D)  $36 000 
A)  $6600 
B)  $6750 
C)  $12 150 
D)  $36 000

Question 4

Figure 7-14  
-Refer to Figure 7-14.Which panel best represents the perfectly competitive organic produce market in which organic produce is considered a normal good,and the average income level of consumers is increasing?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D

Question 5

A perfectly competitive firm's marginal revenue curve is downward sloping.

Accepted Answer

A) True 
 B)False

Question 6

If the long-run average cost curve is U-shaped,the optimal scale of production from society's viewpoint is

Accepted Answer

A)  the minimum efficient scale. 
B)  where maximum economic profit is earned by producers. 
C)  where firm profit is large enough to finance research and development. 
D)  one that guarantees economic profit. 
A)  the minimum efficient scale. 
B)  where maximum economic profit is earned by producers. 
C)  where firm profit is large enough to finance research and development. 
D)  one that guarantees economic profit.

Question 7

In a graph with output on the horizontal axis and total revenue on the vertical axis,what is the shape of the total revenue curve for a perfectly competitive seller?

Accepted Answer

A)  U-shaped 
B)  Inverted U-shaped 
C)  A horizontal line 
D)  A ray from the origin 
A)  U-shaped 
B)  Inverted U-shaped 
C)  A horizontal line 
D)  A ray from the origin

Question 8

A firm would decide to shut down if its production resulted in

Accepted Answer

A) MR AVC. C) AFC > AVC. D) MR < AVC. A) MR AVC. C) AFC > AVC. D) MR < AVC.

Question 9

The minimum point on the average variable cost curve is called

Accepted Answer

A)  the shutdown point. 
B)  the break-even point. 
C)  the loss minimising point. 
D)  the point of diminishing returns. 
A)  the shutdown point. 
B)  the break-even point. 
C)  the loss minimising point. 
D)  the point of diminishing returns.

Question 10

The marginal revenue curve for a perfectly competitive firm

Accepted Answer

A)  is downward sloping. 
B)  is the same as its demand curve. 
C)  is perfectly inelastic. 
D)  is the same as its marginal cost curve. 
A)  is downward sloping. 
B)  is the same as its demand curve. 
C)  is perfectly inelastic. 
D)  is the same as its marginal cost curve.

Question 11

Figure 7-4   Figure 7-4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market.
-Refer to Figure 7-4.If the market price is $30,the firm's profit-maximising output level is

Accepted Answer

A)  0. 
B)  130. 
C)  180. 
D)  240. 
A)  0. 
B)  130. 
C)  180. 
D)  240.

Question 12

Which of the following is not true for a firm in perfect competition?

Accepted Answer

A)  Profit equals total revenue minus total cost. 
B)  Price equals average revenue. 
C)  Average revenue is greater than marginal revenue. 
D)  Marginal revenue equals the change in total revenue from selling one more unit. 
A)  Profit equals total revenue minus total cost. 
B)  Price equals average revenue. 
C)  Average revenue is greater than marginal revenue. 
D)  Marginal revenue equals the change in total revenue from selling one more unit.

Question 13

Table 7-3
   Table 7-3 shows the short-run cost data of a perfectly competitive firm. Assume that output can only be increased in batches of 20 units.
-Refer to Table 7-3.If the market price is $45,the firm

Accepted Answer

A)  will earn a profit of $3600. 
B)  will suffer a loss of $200. 
C)  will break even. 
D)  will earn profit of $1040. 
A)  will earn a profit of $3600. 
B)  will suffer a loss of $200. 
C)  will break even. 
D)  will earn profit of $1040.

Question 14

For a perfectly competitive firm,at profit maximisation

Accepted Answer

A)  market price exceeds marginal cost. 
B)  total revenue is maximised. 
C)  marginal revenue equals marginal cost. 
D)  production must occur where average cost is minimised. 
A)  market price exceeds marginal cost. 
B)  total revenue is maximised. 
C)  marginal revenue equals marginal cost. 
D)  production must occur where average cost is minimised.

Question 15

Being a price taker,a perfectly competitive firm cannot receive a producer surplus in the short run.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is a characteristic of an oligopolistic market structure?

Accepted Answer

A)  There are few dominant sellers. 
B)  Each firm sells a unique product. 
C)  It is easy for new firms to enter the industry. 
D)  Each firm need not react to the actions of rivals. 
A)  There are few dominant sellers. 
B)  Each firm sells a unique product. 
C)  It is easy for new firms to enter the industry. 
D)  Each firm need not react to the actions of rivals.

Question 17

Figure 7-5   Figure 7-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 7-5.The firm's manager suggests that the firm's goal should be to maximise average profit.In that case,what is the output level and what is the average profit that will achieve the manager's goal?

Accepted Answer

A)  Q = 1350 units; average profit = $5 
B)  Q = 1100 units; average profit = $6 
C)  Q = 1350 units; average profit = $9 
D)  Q = 1800 units; average profit = $20 
A)  Q = 1350 units; average profit = $5 
B)  Q = 1100 units; average profit = $6 
C)  Q = 1350 units; average profit = $9 
D)  Q = 1800 units; average profit = $20

Question 18

Both buyers and sellers are price takers in a perfectly competitive market because

Accepted Answer

A)  the price is determined by government intervention and dictated to buyers and sellers. 
B)  each buyer and seller knows it is illegal to conspire to affect price. 
C)  both buyers and sellers in a perfectly competitive market are concerned for the welfare of others. 
D)  each buyer and seller is too small relative to others to independently affect the market price. 
A)  the price is determined by government intervention and dictated to buyers and sellers. 
B)  each buyer and seller knows it is illegal to conspire to affect price. 
C)  both buyers and sellers in a perfectly competitive market are concerned for the welfare of others. 
D)  each buyer and seller is too small relative to others to independently affect the market price.

Question 19

Assume that the personal computer industry is perfectly competitive.The fact that the price of personal computers over the last decade has fallen despite increases in demand signifies that the industry is a decreasing-cost industry.

Accepted Answer

A) True 
 B)False

Question 20

Figure 7-16  
-Refer to Figure 7-16.If the market price is P1,what is the allocatively efficient output level?

Accepted Answer

A)  Q0 
B)  Q1 
C)  Q2 
D)  There is no allocatively efficient output level because the firm is incurring a loss. 
A)  Q0 
B)  Q1 
C)  Q2 
D)  There is no allocatively efficient output level because the firm is incurring a loss.

When a perfectly competitive firm finds that its market price is below its minimum average variable cost,it will sell

Which of the following is a characteristic of a firm in a perfectly competitive market?

Figure 7-14 -Refer to Figure 7-14.Which panel best represents the perfectly competitive organic produce market in which organic produce is considered a normal good,and the average income level of consumers is increasing?

A perfectly competitive firm's marginal revenue curve is downward sloping.

If the long-run average cost curve is U-shaped,the optimal scale of production from society's viewpoint is

In a graph with output on the horizontal axis and total revenue on the vertical axis,what is the shape of the total revenue curve for a perfectly competitive seller?

A firm would decide to shut down if its production resulted in

The minimum point on the average variable cost curve is called

The marginal revenue curve for a perfectly competitive firm

Figure 7-4 Figure 7-4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market. -Refer to Figure 7-4.If the market price is $30,the firm's profit-maximising output level is

Which of the following is not true for a firm in perfect competition?

Table 7-3 Table 7-3 shows the short-run cost data of a perfectly competitive firm. Assume that output can only be increased in batches of 20 units. -Refer to Table 7-3.If the market price is $45,the firm

For a perfectly competitive firm,at profit maximisation

Being a price taker,a perfectly competitive firm cannot receive a producer surplus in the short run.

Which of the following is a characteristic of an oligopolistic market structure?

Both buyers and sellers are price takers in a perfectly competitive market because

Assume that the personal computer industry is perfectly competitive.The fact that the price of personal computers over the last decade has fallen despite increases in demand signifies that the industry is a decreasing-cost industry.

Figure 7-16 -Refer to Figure 7-16.If the market price is P₁,what is the allocatively efficient output level?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 7: Consumer Choice and Elasticity

When a perfectly competitive firm finds that its market price is below its minimum average variable cost,it will sell

Which of the following is a characteristic of a firm in a perfectly competitive market?

Figure 7-14 -Refer to Figure 7-14.Which panel best represents the perfectly competitive organic produce market in which organic produce is considered a normal good,and the average income level of consumers is increasing?

A perfectly competitive firm's marginal revenue curve is downward sloping.

If the long-run average cost curve is U-shaped,the optimal scale of production from society's viewpoint is

In a graph with output on the horizontal axis and total revenue on the vertical axis,what is the shape of the total revenue curve for a perfectly competitive seller?

A firm would decide to shut down if its production resulted in

The minimum point on the average variable cost curve is called

The marginal revenue curve for a perfectly competitive firm

Figure 7-4 Figure 7-4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market. -Refer to Figure 7-4.If the market price is $30,the firm's profit-maximising output level is

Which of the following is not true for a firm in perfect competition?

Table 7-3 Table 7-3 shows the short-run cost data of a perfectly competitive firm. Assume that output can only be increased in batches of 20 units. -Refer to Table 7-3.If the market price is $45,the firm

For a perfectly competitive firm,at profit maximisation

Being a price taker,a perfectly competitive firm cannot receive a producer surplus in the short run.

Which of the following is a characteristic of an oligopolistic market structure?

Both buyers and sellers are price takers in a perfectly competitive market because

Assume that the personal computer industry is perfectly competitive.The fact that the price of personal computers over the last decade has fallen despite increases in demand signifies that the industry is a decreasing-cost industry.

Figure 7-16 -Refer to Figure 7-16.If the market price is P1,what is the allocatively efficient output level?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Technology, production, and Costs

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Figure 7-16 -Refer to Figure 7-16.If the market price is P₁,what is the allocatively efficient output level?