Question 1

In the short run,the fixed costs of running a farm should play no role in determining the level of production.

Accepted Answer

A) True 
 B)False  True

Question 2

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,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 A

Question 3

When perfect competition prevails,which characteristic of firms are we likely to observe?

Accepted Answer

A)  They erect and maintain barriers to new firms. 
B)  There are not many of them. 
C)  They all try to highlight the substantial product differentiation between producers. 
D)  They are all price-takers. 
A)  They erect and maintain barriers to new firms. 
B)  There are not many of them. 
C)  They all try to highlight the substantial product differentiation between producers. 
D)  They are all price-takers. D

Question 4

Use the following to answer questions :  
-(Figure: Game-Day Shirts)Use Figure: Game-Day Shirts.Rick is one of the 10 vendors who sell Game-Day T-shirts at football games in a perfectly competitive market.His costs are identical to the costs of the other nine vendors.If the price of a shirt is $9,the short-run industry supply will be _____ shirts.

Accepted Answer

A)  140 
B)  200 
C)  220 
D)  240 
A)  140 
B)  200 
C)  220 
D)  240

Question 5

Use the following to answer questions :
Figure: A Perfectly Competitive Firm in the Short Run  
-(Figure: A Perfectly Competitive Firm in the Short Run)Use Figure: A Perfectly Competitive Firm in the Short Run.The minimum price that the firm must receive to produce in the short run is:

Accepted Answer

A)  F. 
B)  E. 
C)  N. 
D)  P. 
A)  F. 
B)  E. 
C)  N. 
D)  P.

Question 6

The short-run industry supply curve is more elastic than the long-run industry supply curve.

Accepted Answer

A) True 
 B)False

Question 7

Use the following to answer questions :
Figure: The Profit Maximizing Firm in the Short Run  
-(Figure: The Profit-Maximizing Firm in the Short Run)Use Figure: The Profit-Maximizing Firm in the Short Run.If the market price is less than P2,the firm will _____ in the short run.

Accepted Answer

A)  produce q1 and break even 
B)  produce q1 and incur a loss smaller than total fixed cost 
C)  shut down 
D)  produce q3 and make a profit 
A)  produce q1 and break even 
B)  produce q1 and incur a loss smaller than total fixed cost 
C)  shut down 
D)  produce q3 and make a profit

Question 8

Use the following to answer questions :
Figure: Short-Run Costs  
-(Figure: Short-Run Costs)Use Figure: Short-Run Costs.At the given price,the MOST profitable level of output occurs at quantity:

Accepted Answer

A)  N. 
B)  P. 
C)  S. 
D)  T. 
A)  N. 
B)  P. 
C)  S. 
D)  T.

Question 9

Use the following to answer questions : $$\begin{array}{l}
\text { Table: Variable Costs for Lots }\
\begin{array} { c c } 
\hline \begin{array} { l } 
\text { Quantity } \
\text { of Lots }
\end{array} & \text { Variable Costs } \
\hline 0 & \$ 0 \
10 & 200 \
20 & 300 \
30 & 500 \
40 & 750 \
50 & 1,100 \
60 & 2,100 \
\hline
\end{array}
\end{array}$$
-(Table: Variable Costs for Lots)Use Table: Variable Costs for Lots.During the winter,Alexa runs a snow-clearing service in a perfectly competitive industry.Assume that costs are constant in each interval;so,for example,the marginal cost of clearing each of the lots from 1 through 10 is $20.Also assume that she can only plow the quantities of the lots given in the table (and not numbers in between).Her only fixed cost is $1 000 for a snowplow.Her variable costs include fuel,her time,and hot coffee.If the price to clear a lot is $60,what is Alexa's profit per unit at the optimal output?

Accepted Answer

A)  $60 
B)  $42 
C)  $35 
D)  $18 
A)  $60 
B)  $42 
C)  $35 
D)  $18

Question 10

A perfectly competitive industry with constant costs initially operates in long-run equilibrium.When demand increases:

Accepted Answer

A)  in the short run,prices and profits will be higher,but in the long run,price will fall back to its original level and firms will again earn zero economic profit. 
B)  prices and profits will be higher than before the demand increase in both the long run and the short run. 
C)  in the short run,prices and profits will fall,but in the long run,price will rise back to its initial level,as will profits. 
D)  prices and profits will be lower than before the demand increase in both the long run and the short run. 
A)  in the short run,prices and profits will be higher,but in the long run,price will fall back to its original level and firms will again earn zero economic profit. 
B)  prices and profits will be higher than before the demand increase in both the long run and the short run. 
C)  in the short run,prices and profits will fall,but in the long run,price will rise back to its initial level,as will profits. 
D)  prices and profits will be lower than before the demand increase in both the long run and the short run.

Question 11

Use the following to answer questions : $$\begin{array}{l}
\text { Table: Soybean Cost }\
\begin{array} { l c } 
\hline \begin{array} { l } 
\text { Quantity } \
\text { of Soybeans } \
\text { (bushels) }
\end{array} & \begin{array} { c } 
\text { Total Cost } \
( T C )
\end{array} \
\hline 0 & 12 \
1 & 26 \
2 & 33 \
3 & 42 \
4 & 54 \
5 & 69 \
6 & 84 \
7 & 104 \
\hline
\end{array}
\end{array}$$
-(Table: Soybean Cost)Use Table: Soybean Cost.What is the shutdown price for this farmer?

Accepted Answer

A)  $10 
B)  $11 
C)  $12 
D)  $13 
A)  $10 
B)  $11 
C)  $12 
D)  $13

Question 12

Use the following to answer questions :
Figure: Costs and Profits for Tomato Producers  
-(Figure: Costs and Profits for Tomato Producers)Use Figure: Costs and Profits for Tomato Producers.The market for tomatoes is perfectly competitive.The market price of a kilogram of tomatoes is $18.If the market price falls to $16,the farmer's marginal revenue _____ and the profit-maximizing output _____.

Accepted Answer

A)  increases;decreases 
B)  increases;increases 
C)  decreases;increases 
D)  decreases;decreases 
A)  increases;decreases 
B)  increases;increases 
C)  decreases;increases 
D)  decreases;decreases

Question 13

Use the following to answer questions :
Figure: The Marginal Decision Rule  
-(Figure: The Marginal Decision Rule)Use Figure: The Marginal Decision Rule.Given the market price P1,B is the _____ curve.

Accepted Answer

A)  marginal revenue 
B)  marginal cost 
C)  marginal product 
D)  average fixed cost 
A)  marginal revenue 
B)  marginal cost 
C)  marginal product 
D)  average fixed cost

Question 14

Use the following to answer questions :
Figure: The Profit Maximizing Firm in the Short Run  
-(Figure: The Profit-Maximizing Firm in the Short Run)Use Figure: The Profit-Maximizing Firm in the Short Run.Which curve is the AVC curve?

Accepted Answer

A)  curve M 
B)  none of the curves 
C)  curve N 
D)  curve O 
A)  curve M 
B)  none of the curves 
C)  curve N 
D)  curve O

Question 15

Use the following to answer questions :  
-(Figure: Game-Day Shirts)Use Figure: Game-Day Shirts.Rick is one of the 10 vendors who sell Game-Day T-shirts at football games in a perfectly competitive market.His costs are identical to the costs of the other nine vendors.If the price of a shirt is $14,the short-run industry supply will be _____ shirts.

Accepted Answer

A)  140 
B)  200 
C)  220 
D)  240 
A)  140 
B)  200 
C)  220 
D)  240

Question 16

A firm produces at the output level at which its average total costs are minimized.At this output level,its average total costs are NOT equal to:

Accepted Answer

A)  price. 
B)  MC. 
C)  MR. 
D)  AVC. 
A)  price. 
B)  MC. 
C)  MR. 
D)  AVC.

Question 17

The short-run supply curve for a perfectly competitive firm is the ____ cost curve above the _____ price.

Accepted Answer

A)  average total;break-even 
B)  average variable;shutdown 
C)  marginal;break-even 
D)  marginal;shutdown 
A)  average total;break-even 
B)  average variable;shutdown 
C)  marginal;break-even 
D)  marginal;shutdown

Question 18

Use the following to answer questions :
Figure: The Perfectly Competitive Firm  
-(Figure: The Perfectly Competitive Firm)Use Figure: The Perfectly Competitive Firm.The figure shows a perfectly competitive firm that faces demand curve d and maximizes profit.Given the market price,the firm's total cost per day is:

Accepted Answer

A)  $475. 
B)  $600. 
C)  $900. 
D)  $1 200. 
A)  $475. 
B)  $600. 
C)  $900. 
D)  $1 200.

Question 19

Use the following to answer questions : $$\begin{array}{l}
\text { Table: Variable Costs for Lawns }\
\begin{array} { c c } 
\hline \begin{array} { c } 
\text { Quantity } \
\text { of Lawns }
\end{array} & \text { Variable Costs } \
\hline 0 & \$ 0 \
10 & 100 \
20 & 300 \
30 & 500 \
40 & 1,100 \
50 & 1,800 \
60 & 2,900 \
\hline
\end{array}
\end{array}$$
-(Table: Variable Costs for Lawns)Use Table: Variable Costs for Lawns.During the summer,Alex runs a lawn-mowing service,and lawn-mowing is a perfectly competitive industry.Assume that costs are constant in each interval;so,for example,the marginal cost of mowing each of the lawns from 1 through 10 is $10.Also assume that he can only mow the quantities of lawn given in the table (and not numbers in between).His only fixed cost is $1 000 for the mower.His variable costs include fuel,his time,and mower parts.If the price for mowing a lawn is $60,how much is Alex's profit at the profit-maximizing output?

Accepted Answer

A)  $10 
B)  $2 400 
C)  $300 
D)  $2 100 
A)  $10 
B)  $2 400 
C)  $300 
D)  $2 100

Question 20

In the long run,firms will leave an industry if the market price is consistently less than their break-even price.

Accepted Answer

A) True 
 B)False

In the short run,the fixed costs of running a farm should play no role in determining the level of production.

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,the market price will _ and the output of a typical firm will _.

When perfect competition prevails,which characteristic of firms are we likely to observe?

Use the following to answer questions : Figure: A Perfectly Competitive Firm in the Short Run -(Figure: A Perfectly Competitive Firm in the Short Run)Use Figure: A Perfectly Competitive Firm in the Short Run.The minimum price that the firm must receive to produce in the short run is:

The short-run industry supply curve is more elastic than the long-run industry supply curve.

Use the following to answer questions : Figure: The Profit Maximizing Firm in the Short Run -(Figure: The Profit-Maximizing Firm in the Short Run)Use Figure: The Profit-Maximizing Firm in the Short Run.If the market price is less than P₂,the firm will _____ in the short run.

Use the following to answer questions : Figure: Short-Run Costs -(Figure: Short-Run Costs)Use Figure: Short-Run Costs.At the given price,the MOST profitable level of output occurs at quantity:

A perfectly competitive industry with constant costs initially operates in long-run equilibrium.When demand increases:

Use the following to answer questions : Table: Soybean Cost Quantity of Soybeans (bushels) Total Cost (TC) 0 12 1 26 2 33 3 42 4 54 5 69 6 84 7 104 -(Table: Soybean Cost)Use Table: Soybean Cost.What is the shutdown price for this farmer?

Use the following to answer questions : Figure: The Marginal Decision Rule -(Figure: The Marginal Decision Rule)Use Figure: The Marginal Decision Rule.Given the market price P₁,B is the _____ curve.

Use the following to answer questions : Figure: The Profit Maximizing Firm in the Short Run -(Figure: The Profit-Maximizing Firm in the Short Run)Use Figure: The Profit-Maximizing Firm in the Short Run.Which curve is the AVC curve?

A firm produces at the output level at which its average total costs are minimized.At this output level,its average total costs are NOT equal to:

The short-run supply curve for a perfectly competitive firm is the cost curve above the _ price.

In the long run,firms will leave an industry if the market price is consistently less than their break-even price.

First Principles

Economic Models

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve- Inputs and Costs

Monopoly

Oligopoly

Monopolistic Competition

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, risk, and Private Information

Graphs in Economics

Consumer Preferences

Indifference Curve Analysis

Filters

Exam 12: Perfect Competition and the Supply Curve

In the short run,the fixed costs of running a farm should play no role in determining the level of production.

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,the market price will _____ and the output of a typical firm will _____.

When perfect competition prevails,which characteristic of firms are we likely to observe?

Use the following to answer questions : Figure: A Perfectly Competitive Firm in the Short Run -(Figure: A Perfectly Competitive Firm in the Short Run)Use Figure: A Perfectly Competitive Firm in the Short Run.The minimum price that the firm must receive to produce in the short run is:

The short-run industry supply curve is more elastic than the long-run industry supply curve.

Use the following to answer questions : Figure: The Profit Maximizing Firm in the Short Run -(Figure: The Profit-Maximizing Firm in the Short Run)Use Figure: The Profit-Maximizing Firm in the Short Run.If the market price is less than P2,the firm will _____ in the short run.

Use the following to answer questions : Figure: Short-Run Costs -(Figure: Short-Run Costs)Use Figure: Short-Run Costs.At the given price,the MOST profitable level of output occurs at quantity:

A perfectly competitive industry with constant costs initially operates in long-run equilibrium.When demand increases:

Use the following to answer questions : Table: Soybean Cost Quantity of Soybeans (bushels) Total Cost (TC) 0 12 1 26 2 33 3 42 4 54 5 69 6 84 7 104 -(Table: Soybean Cost)Use Table: Soybean Cost.What is the shutdown price for this farmer?

Use the following to answer questions : Figure: The Marginal Decision Rule -(Figure: The Marginal Decision Rule)Use Figure: The Marginal Decision Rule.Given the market price P1,B is the _____ curve.

Use the following to answer questions : Figure: The Profit Maximizing Firm in the Short Run -(Figure: The Profit-Maximizing Firm in the Short Run)Use Figure: The Profit-Maximizing Firm in the Short Run.Which curve is the AVC curve?

A firm produces at the output level at which its average total costs are minimized.At this output level,its average total costs are NOT equal to:

The short-run supply curve for a perfectly competitive firm is the ____ cost curve above the _____ price.

In the long run,firms will leave an industry if the market price is consistently less than their break-even price.

First Principles

Economic Models

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas

Elasticity

Taxes

International Trade

Decision Making by Individuals and Firms

The Rational Consumer

Behind the Supply Curve- Inputs and Costs

Monopoly

Oligopoly

Monopolistic Competition

Externalities

Public Goods and Common Resources

The Economics of the Welfare State

Factor Markets and the Distribution of Income

Uncertainty, risk, and Private Information

Graphs in Economics

Consumer Preferences

Indifference Curve Analysis

Filters

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,the market price will _ and the output of a typical firm will _.

Use the following to answer questions : Figure: The Profit Maximizing Firm in the Short Run -(Figure: The Profit-Maximizing Firm in the Short Run)Use Figure: The Profit-Maximizing Firm in the Short Run.If the market price is less than P₂,the firm will _____ in the short run.

Use the following to answer questions : Figure: The Marginal Decision Rule -(Figure: The Marginal Decision Rule)Use Figure: The Marginal Decision Rule.Given the market price P₁,B is the _____ curve.

The short-run supply curve for a perfectly competitive firm is the cost curve above the _ price.