Question 1

The supply curve of a perfectly competitive firm in the short run is

Accepted Answer

A)  the firm's average variable cost curve. 
B)  the portion of the firm's marginal cost curve below the minimum point of the average variable cost curve. 
C)  the portion of the firm's marginal cost curve above the minimum point of the average variable cost curve. 
D)  the portion of the firm's marginal cost curve above the minimum point of the average total cost curve. 
A)  the firm's average variable cost curve. 
B)  the portion of the firm's marginal cost curve below the minimum point of the average variable cost curve. 
C)  the portion of the firm's marginal cost curve above the minimum point of the average variable cost curve. 
D)  the portion of the firm's marginal cost curve above the minimum point of the average total cost curve.

Question 2

Figure 7-7   Figure 7-7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm.
-Refer to Figure 7-7.At price P1,the firm would

Accepted Answer

A)  lose an amount equal to its fixed cost. 
B)  lose an amount more than fixed cost. 
C)  lose an amount less than fixed cost. 
D)  break even. 
A)  lose an amount equal to its fixed cost. 
B)  lose an amount more than fixed cost. 
C)  lose an amount less than fixed cost. 
D)  break even.

Question 3

What is allocative efficiency?

Accepted Answer

A)  It refers to a situation in which resources are allocated to their highest-profit use. 
B)  It refers to a situation in which resources are allocated such that goods can be produced at their lowest possible average cost. 
C)  It refers to a situation in which resources are allocated such that the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it. 
D)  It refers to a situation in which resources are allocated fairly to all consumers in a society. 
A)  It refers to a situation in which resources are allocated to their highest-profit use. 
B)  It refers to a situation in which resources are allocated such that goods can be produced at their lowest possible average cost. 
C)  It refers to a situation in which resources are allocated such that the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it. 
D)  It refers to a situation in which resources are allocated fairly to all consumers in a society.

Question 4

Assume that a perfectly competitive market is in long-run equilibrium.Suppose as a result of a health hazard associated with the industry's product,demand decreases drastically.What is the immediate result of this event?

Accepted Answer

A)  The market price falls and the typical firm suffers an economic loss. 
B)  The market supply increases to offset the fall in demand. 
C)  The typical firm's average total cost curve shifts downward. 
D)  The typical firm's marginal cost curve shifts to the left. 
A)  The market price falls and the typical firm suffers an economic loss. 
B)  The market supply increases to offset the fall in demand. 
C)  The typical firm's average total cost curve shifts downward. 
D)  The typical firm's marginal cost curve shifts to the left.

Question 5

How are market price,average revenue,and marginal revenue related for a perfectly competitive firm and why?

Accepted Answer

They are all equal to each other.The mar

Question 6

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 will produce

Accepted Answer

A)  60 units. 
B)  80 units. 
C)  100 units 
D)  120 units 
A)  60 units. 
B)  80 units. 
C)  100 units 
D)  120 units

Question 7

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

Accepted Answer

A)  Restaurants do not sell identical products. 
B)  Restaurants compete in small market areas-neighbourhoods and cities-rather than in regional or national markets. Therefore, restaurants are not small relative to their market size. 
C)  Restaurants usually have entry barriers in the form of zoning restrictions and health regulations. 
D)  Restaurants have significant liability costs that perfectly competitive firms do not have; for example, customers may sue if they suffer from food poisoning. 
A)  Restaurants do not sell identical products. 
B)  Restaurants compete in small market areas-neighbourhoods and cities-rather than in regional or national markets. Therefore, restaurants are not small relative to their market size. 
C)  Restaurants usually have entry barriers in the form of zoning restrictions and health regulations. 
D)  Restaurants have significant liability costs that perfectly competitive firms do not have; for example, customers may sue if they suffer from food poisoning.

Question 8

A very large number of small sellers who sell identical products implies

Accepted Answer

A)  a multitude of vastly different selling prices. 
B)  a downward-sloping demand curve for each seller's product. 
C)  the inability of one seller to influence price. 
D)  chaos in the market. 
A)  a multitude of vastly different selling prices. 
B)  a downward-sloping demand curve for each seller's product. 
C)  the inability of one seller to influence price. 
D)  chaos in the market.

Question 9

If a typical firm in a perfectly competitive industry is earning profits,then

Accepted Answer

A)  all firms will continue to earn profits. 
B)  new firms will enter in the long run causing market supply to decrease, market price to rise and profits to increase. 
C)  new firms will enter in the long run causing market supply to increase, market price to fall and profits to decrease. 
D)  the number of firms in the industry will remain constant in the long run. 
A)  all firms will continue to earn profits. 
B)  new firms will enter in the long run causing market supply to decrease, market price to rise and profits to increase. 
C)  new firms will enter in the long run causing market supply to increase, market price to fall and profits to decrease. 
D)  the number of firms in the industry will remain constant in the long run.

Question 10

In a perfectly competitive market,the term 'price taker' applies to

Accepted Answer

A)  sellers and buyers. 
B)  firms but not buyers. 
C)  buyers but not sellers. 
D)  only the smallest sellers and buyers. 
A)  sellers and buyers. 
B)  firms but not buyers. 
C)  buyers but not sellers. 
D)  only the smallest sellers and buyers.

Question 11

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.If the market price is $20,what is the average profit at the profit-maximising quantity?

Accepted Answer

A)  $5 
B)  $6 
C)  $9 
D)  $20 
A)  $5 
B)  $6 
C)  $9 
D)  $20

Question 12

If,as a perfectly competitive industry expands,it can supply larger quantities only at a higher long-run equilibrium price,it is

Accepted Answer

A)  a constant-cost industry. 
B)  an increasing-cost industry. 
C)  a decreasing-cost industry. 
D)  a fixed-cost industry. 
A)  a constant-cost industry. 
B)  an increasing-cost industry. 
C)  a decreasing-cost industry. 
D)  a fixed-cost industry.

Question 13

Figure 7-2  
-Refer to Figure 7-2.The firm breaks even at an output level of

Accepted Answer

A)  Q1 units. 
B)  Q2 units. 
C)  Q3 units. 
D)  Q4 units. 
A)  Q1 units. 
B)  Q2 units. 
C)  Q3 units. 
D)  Q4 units.

Question 14

For a perfectly competitive firm,at the profit-maximising output,average revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 15

To maximise profit,a perfectly competitive firm

Accepted Answer

A)  should sell the quantity of output determined by the interaction between industry demand and supply. 
B)  should sell the quantity of output that results in a value for total revenue that is equal to total cost. 
C)  should produce the quantity of output that results in the greatest difference between total revenue and total cost. 
D)  should produce the quantity of output that results in the greatest difference between marginal revenue and marginal cost. 
A)  should sell the quantity of output determined by the interaction between industry demand and supply. 
B)  should sell the quantity of output that results in a value for total revenue that is equal to total cost. 
C)  should produce the quantity of output that results in the greatest difference between total revenue and total cost. 
D)  should produce the quantity of output that results in the greatest difference between marginal revenue and marginal cost.

Question 16

Letters are used to represent the terms used to answer this question: price (P),quantity of output (Q),total cost (TC)and average total cost (ATC).Which of the following equations is equal to a firm's profit?

Accepted Answer

A)  P - ATC 
B)  (P × Q) - TC 
C)  (P × Q) - (P × AT
C)  
D)  P - TC 
A)  P - ATC 
B)  (P × Q) - TC 
C)  (P × Q) - (P × AT
C)  
D)  P - TC

Question 17

What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency?

Accepted Answer

Productive efficiency refers to a situat

Question 18

After an increase in demand in a constant-cost industry,firms will find themselves with higher average cost curves.

Accepted Answer

A) True 
 B)False

Question 19

In long-run perfectly competitive equilibrium,which of the following is false?

Accepted Answer

A)  There is efficient, low-cost production at the minimum efficient scale. 
B)  Economic surplus is maximised. 
C)  Firms earn economic profit. 
D)  Economies of scale are exhausted. 
A)  There is efficient, low-cost production at the minimum efficient scale. 
B)  Economic surplus is maximised. 
C)  Firms earn economic profit. 
D)  Economies of scale are exhausted.

Question 20

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Accepted Answer

A) True 
 B)False

The supply curve of a perfectly competitive firm in the short run is

Figure 7-7 Figure 7-7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 7-7.At price P₁,the firm would

What is allocative efficiency?

Assume that a perfectly competitive market is in long-run equilibrium.Suppose as a result of a health hazard associated with the industry's product,demand decreases drastically.What is the immediate result of this event?

How are market price,average revenue,and marginal revenue related for a perfectly competitive firm and why?

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 will produce

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

A very large number of small sellers who sell identical products implies

If a typical firm in a perfectly competitive industry is earning profits,then

In a perfectly competitive market,the term 'price taker' applies to

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.If the market price is $20,what is the average profit at the profit-maximising quantity?

If,as a perfectly competitive industry expands,it can supply larger quantities only at a higher long-run equilibrium price,it is

Figure 7-2 -Refer to Figure 7-2.The firm breaks even at an output level of

For a perfectly competitive firm,at the profit-maximising output,average revenue equals marginal cost.

To maximise profit,a perfectly competitive firm

Letters are used to represent the terms used to answer this question: price (P),quantity of output (Q),total cost (TC)and average total cost (ATC).Which of the following equations is equal to a firm's profit?

What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency?

After an increase in demand in a constant-cost industry,firms will find themselves with higher average cost curves.

In long-run perfectly competitive equilibrium,which of the following is false?

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

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

The supply curve of a perfectly competitive firm in the short run is

Figure 7-7 Figure 7-7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 7-7.At price P1,the firm would

What is allocative efficiency?

Assume that a perfectly competitive market is in long-run equilibrium.Suppose as a result of a health hazard associated with the industry's product,demand decreases drastically.What is the immediate result of this event?

How are market price,average revenue,and marginal revenue related for a perfectly competitive firm and why?

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 will produce

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

A very large number of small sellers who sell identical products implies

If a typical firm in a perfectly competitive industry is earning profits,then

In a perfectly competitive market,the term 'price taker' applies to

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.If the market price is $20,what is the average profit at the profit-maximising quantity?

If,as a perfectly competitive industry expands,it can supply larger quantities only at a higher long-run equilibrium price,it is

Figure 7-2 -Refer to Figure 7-2.The firm breaks even at an output level of

For a perfectly competitive firm,at the profit-maximising output,average revenue equals marginal cost.

To maximise profit,a perfectly competitive firm

Letters are used to represent the terms used to answer this question: price (P),quantity of output (Q),total cost (TC)and average total cost (ATC).Which of the following equations is equal to a firm's profit?

What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency?

After an increase in demand in a constant-cost industry,firms will find themselves with higher average cost curves.

In long-run perfectly competitive equilibrium,which of the following is false?

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

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 7-7 Figure 7-7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 7-7.At price P₁,the firm would