Deck 12: Perfect Competition

Question 1

A price-taking firm faces a

A)perfectly inelastic demand.
B)downward-sloping marginal revenue curve.
C)downward-sloping supply curve.
D)perfectly elastic demand.
E)downward-sloping demand curve.

Answer 1

D

Question 2

Use the figure below to answer the following questions.
Figure 12.1.1
Refer to Figure 12.1.1.The firm competes in a perfectly competitive market.Curve A is a straight line because the firm

A)is a price taker.
B)faces constant returns to scale.
C)wants to maximize profits.
D)has perfect information.
E)has constant marginal cost.

Answer 2

A

Question 3

Lin's fortune cookies are identical to the fortune cookies made by dozens of other firms,and there is free entry in the fortune cookie market.Buyers and sellers are well informed about prices.Lin's fortune cookies operates in a ________ market.

A)challenging
B)monopolistic
C)perfectly competitive
D)noncompetitive
E)perfectly competent

Answer 3

C

Question 4

Use the table below to answer the following questions.
Table 12.1.1
$$\begin{array}{l}\begin{array} { c c } \hline\text { Quantity} & \text { Price }\\\text { (units) } & \text { (dollars) } \\\hline 5 & 15 \\6 & 15 \\7 & 15\end{array}\end{array}$$

-Refer to Table 12.1.1 which gives the demand schedule for a perfectly competitive firm.If the quantity sold by the firm rises from 5 to 6,marginal revenue is

A)$15.
B)$30.
C)$75.
D)$90.
E)$105.

Question 5

If a firm faces a perfectly elastic demand for its product,then

A)it is not a price taker.
B)it will want to lower its price to increase sales.
C)it will want to raise its price to increase total revenue.
D)its marginal revenue curve is horizontal at the market price.
E)it will always make zero economic profit.

Question 6

Perfect competition occurs in a market where there are many firms,each selling

A)an identical product.
B)a similar product.
C)a unique product.
D)a capital-intensive product.
E)a competitive product.

Question 7

An example of a perfectly competitive industry is the

A)airline industry.
B)beer industry.
C)running shoe industry.
D)fast food industry.
E)wheat industry.

Question 8

Marginal revenue is

A)the change in total quantity that results from a one-unit increase in the price of the good.
B)the change in total revenue that results from a one-unit increase in the quantity sold.
C)economic profit divided by the quantity sold.
D)the change in economic profit that results from a one-unit increase in the quantity sold.
E)total revenue minus total cost.

Question 9

Which one of the following does not occur in perfect competition?

A)No single firm can exert a significant influence on the market price of the good.
B)There are many buyers.
C)There are significant restrictions on entry into the market.
D)Sellers and buyers are well informed about prices.
E)Established firms have no advantage over new ones.

Question 10

Assume that the leather market is a perfectly competitive market.The market demand curve for leather is ________ and each individual leather producer's demand curve is ________.

A)vertical;downward sloping
B)downward sloping;horizontal
C)downward sloping;vertical
D)horizontal;horizontal
E)horizontal;downward sloping

Question 11

For perfect competition to arise,it is necessary that market demand be

A)inelastic.
B)elastic.
C)perfectly elastic.
D)large relative to the minimum efficient scale of a single firm.
E)small relative to the minimum efficient scale of a single firm.

Question 12

A price taker is a firm that

A)must lower its price if it wants to sell more output.
B)sets the market price.
C)cannot influence the market price.
D)is incurring an economic loss.
E)can raise its price if it lowers output.

Question 13

A perfectly competitive market is characterized by

A)firms that are price setters.
B)firms that each face a downward-sloping demand curve.
C)firms that each sell a unique good or service.
D)buyers who are unaware of the price charged by each firm.
E)no restrictions on entry into the market.

Question 14

Use the table below to answer the following questions.
Table 12.1.1
$$\begin{array}{l}\begin{array} { c c } \hline\text { Quantity} & \text { Price }\\\text { (units) } & \text { (dollars) } \\\hline 5 & 15 \\6 & 15 \\7 & 15\end{array}\end{array}$$

-Refer to Table 12.1.1 which gives the demand schedule for a perfectly competitive firm.If the firm sells 6 units of output,marginal revenue is

A)$15.
B)$30.
C)$75.
D)$90.
E)$105.

Question 15

Economic profit equals

A)total fixed cost plus total variable cost.
B)total revenue minus marginal cost.
C)marginal revenue minus marginal cost.
D)total revenue minus total cost.
E)total revenue minus total variable cost.

Question 16

Use the table below to answer the following questions.
Table 12.1.1
$$\begin{array}{l}\begin{array} { c c } \hline\text { Quantity} & \text { Price }\\\text { (units) } & \text { (dollars) } \\\hline 5 & 15 \\6 & 15 \\7 & 15\end{array}\end{array}$$

-Refer to Table 12.1.1 which gives the demand schedule for a perfectly competitive firm.If the firm sells 5 units of output,total revenue is

A)$15.
B)$30.
C)$75.
D)$90.
E)$105.

Question 17

The slope of a perfectly competitive firm's demand curve is

A)infinity.
B)zero.
C)1.
D)greater than 1.
E)negative.

Question 18

Use the figure below to answer the following questions.
Figure 12.1.1
Refer to Figure 12.1.1.The firm competes in a perfectly competitive market.Curve A represents the firm's

A)total fixed cost curve.
B)average fixed cost curve.
C)average variable cost curve.
D)total revenue curve.
E)marginal revenue curve.

Question 19

In a perfectly competitive market,the market demand curve is illustrated by

A)a downward-sloping curve.
B)a line that is vertical at the market output.
C)an upward-sloping curve.
D)a line that is horizontal at the market price.
E)a curve that is bowed towards the origin.

Question 20

Lin's fortune cookies are identical to the fortune cookies made by dozens of other firms,and there is free entry in the fortune cookie market.Buyers and sellers are well informed about prices.The price of a fortune cookie is determined by ________.The marginal revenue of a fortune cookie equals ________.

A)market demand and market supply;price
B)the ingredients that Lin's uses to produce his fortune cookies;average total cost
C)the number of cookies that Lin's produces;average variable cost
D)the freshness of the fortune cookies;average fixed cost
E)market demand and market supply;the price elasticity of demand

Question 21

Use the table below to answer the following questions.
Table 12.2.2
$$\begin{array} { c c } \hline\begin{array} { c } \text { Output } \\\text { (pizzas per hour) }\end{array} & \begin{array} { c } \text { Total Cost } \\\text { (dollars per hour) }\end{array} \\\hline 0 & 10 \\1 & 12 \\2 & 16 \\3 & 22 \\4 & 30 \\5 & 40 \\6 & 55\end{array}$$

-Refer to Table 12.2.2,which gives the total cost schedule for Chip's Pizza Palace,a perfectly competitive firm.If the price of a pizza is $7,what is Chip's profit-maximizing output per hour?

A)zero pizzas
B)1 pizza
C)2 pizzas
D)3 pizzas
E)4 pizzas

Question 22

Use the table below to answer the following questions.
Table 12.2.2
$$\begin{array} { c c } \hline\begin{array} { c } \text { Output } \\\text { (pizzas per hour) }\end{array} & \begin{array} { c } \text { Total Cost } \\\text { (dollars per hour) }\end{array} \\\hline 0 & 10 \\1 & 12 \\2 & 16 \\3 & 22 \\4 & 30 \\5 & 40 \\6 & 55\end{array}$$

-Refer to Table 12.2.2,which gives the total cost schedule for Chip's Pizza Palace,a perfectly competitive firm.If Chip shuts down in the short run,his total cost is

A)$0.
B)$10 an hour.
C)$12 an hour.
D)$22 an hour.
E)$40 an hour.

Question 23

Use the table below to answer the following questions.
Table 12.2.1
$$\begin{array} { c c c } \hline\text { Output } &\text { Total Revenue} & \text { Total Cost } \\\text { (units) }&\text { (dollars) }&\text { (dollars) }\\\hline 0 & 0 & 25 \\1 & 30 & 49 \\2 & 60 & 69 \\3 & 90 & 86 \\4 & 120 & 100 \\5 & 150 & 114 \\6 & 180 & 128 \\7 & 210 & 170 \\\hline\end{array}$$

-Refer to Table 12.2.1,which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.The marginal cost of increasing production from 4 units to 5 units is

A)$14.
B)$128.
C)$100.
D)$25.
E)$30.

Question 24

When a firm is a "price taker," the firm

A)can charge any price that it wants to charge,that is,"take" any price it chooses.
B)pays a fixed price for all of its fixed inputs.
C)will accept ("take")the lowest price that its customers offer.
D)pays a fixed price for all of its variable inputs.
E)cannot influence the market price of the good that it sells.

Question 25

A firm that temporarily shuts down and produces no output incurs a loss equal to its

A)total fixed cost.
B)total variable cost.
C)marginal cost.
D)marginal revenue.
E)average total cost.

Question 26

Suppose a firm is trying to decide whether or not to temporarily shut down to minimize total loss.If price equals average variable cost,then

A)total revenue equals total fixed cost,and the loss equals total variable cost.
B)total revenue equals total variable cost,and the loss equals total fixed cost.
C)total fixed cost is zero.
D)total variable cost equals total fixed cost.
E)total cost equals total variable cost.

Question 27

Use the table below to answer the following questions.
Table 12.2.1
$$\begin{array} { c c c } \hline\text { Output } &\text { Total Revenue} & \text { Total Cost } \\\text { (units) }&\text { (dollars) }&\text { (dollars) }\\\hline 0 & 0 & 25 \\1 & 30 & 49 \\2 & 60 & 69 \\3 & 90 & 86 \\4 & 120 & 100 \\5 & 150 & 114 \\6 & 180 & 128 \\7 & 210 & 170 \\\hline\end{array}$$

-Refer to Table 12.2.1,which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.If the firm produces 3 units of output,it will

A)make an economic profit of $4.
B)make an economic profit of $90.
C)incur an economic loss of $4.
D)break even.
E)incur an economic loss of $86.

Question 28

The shutdown point occurs at the point of minimum

A)marginal cost.
B)average variable cost.
C)average fixed cost.
D)total cost.
E)average total cost.

Question 29

Use the table below to answer the following questions.
Table 12.2.3
$$\begin{array}{l}\begin{array} { c c } \hline\text { Output } & \text { Total Cost }\\\text { (balloons per hour) } & \text { (dollars per hour) } \\\hline 0 & 4.00 \\1 & 7.00 \\2 & 8.00 \\3 & 12.50 \\4 & 17.20 \\5 & 22.00 \\6 & 29.00\end{array}\end{array}$$

-Refer to Table 12.2.3,which gives the total cost schedule for Brenda's Balloon Shop,a perfectly competitive firm.The marginal cost of increasing production from 4 balloons an hour to 5 balloons an hour is

A)$1.
B)$4.50.
C)$4.70.
D)$4.80.
E)$4.40.

Question 30

Use the table below to answer the following questions.
Table 12.2.3
$$\begin{array}{l}\begin{array} { c c } \hline\text { Output } & \text { Total Cost }\\\text { (balloons per hour) } & \text { (dollars per hour) } \\\hline 0 & 4.00 \\1 & 7.00 \\2 & 8.00 \\3 & 12.50 \\4 & 17.20 \\5 & 22.00 \\6 & 29.00\end{array}\end{array}$$

-Refer to Table 12.2.3,which gives the total cost schedule for Brenda's Balloon Shop,a perfectly competitive firm.Brenda's total fixed cost is

A)$3 an hour.
B)$4 an hour.
C)$7 an hour.
D)$29 an hour.
E)zero.

Question 31

A firm will shut down temporarily when the price is so low that total revenue is insufficient to cover the

A)total cost of production.
B)total variable cost of production.
C)total fixed cost of production.
D)marginal cost of production.
E)none of the above.

Question 32

Use the table below to answer the following questions.
Table 12.2.1
$$\begin{array} { c c c } \hline\text { Output } &\text { Total Revenue} & \text { Total Cost } \\\text { (units) }&\text { (dollars) }&\text { (dollars) }\\\hline 0 & 0 & 25 \\1 & 30 & 49 \\2 & 60 & 69 \\3 & 90 & 86 \\4 & 120 & 100 \\5 & 150 & 114 \\6 & 180 & 128 \\7 & 210 & 170 \\\hline\end{array}$$

-Refer to Table 12.2.1,which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.Economic profit is maximized when the firm produces ________ units of output.

A)zero
B)7
C)3
D)6
E)5

Question 33

Use the table below to answer the following questions.
Table 12.2.1
$$\begin{array} { c c c } \hline\text { Output } &\text { Total Revenue} & \text { Total Cost } \\\text { (units) }&\text { (dollars) }&\text { (dollars) }\\\hline 0 & 0 & 25 \\1 & 30 & 49 \\2 & 60 & 69 \\3 & 90 & 86 \\4 & 120 & 100 \\5 & 150 & 114 \\6 & 180 & 128 \\7 & 210 & 170 \\\hline\end{array}$$

-Refer to Table 12.2.1,which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.If the firm produces 2 units of output,it

A)makes an economic profit of $9.
B)makes an economic profit of $60.
C)incurs an economic loss of $9.
D)incurs an economic loss of $60.
E)incurs an economic loss of $69.

Question 34

Use the table below to answer the following questions.
Table 12.2.1
$$\begin{array} { c c c } \hline\text { Output } &\text { Total Revenue} & \text { Total Cost } \\\text { (units) }&\text { (dollars) }&\text { (dollars) }\\\hline 0 & 0 & 25 \\1 & 30 & 49 \\2 & 60 & 69 \\3 & 90 & 86 \\4 & 120 & 100 \\5 & 150 & 114 \\6 & 180 & 128 \\7 & 210 & 170 \\\hline\end{array}$$

-Refer to Table 12.2.1,which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.The marginal revenue received from the sale of the 4th unit of output is

A)$3.
B)$15.
C)$10.
D)$120.
E)$30.

Question 35

A firm shuts down if price is

A)above minimum average variable cost.
B)below minimum average variable cost.
C)above minimum average fixed cost.
D)less than marginal cost.
E)below average total cost.

Question 36

Use the table below to answer the following questions.
Table 12.2.3
$$\begin{array}{l}\begin{array} { c c } \hline\text { Output } & \text { Total Cost }\\\text { (balloons per hour) } & \text { (dollars per hour) } \\\hline 0 & 4.00 \\1 & 7.00 \\2 & 8.00 \\3 & 12.50 \\4 & 17.20 \\5 & 22.00 \\6 & 29.00\end{array}\end{array}$$

-Refer to Table 12.2.3 which gives the total cost schedule for Brenda's Balloon Shop,a perfectly competitive firm.The average variable cost of producing the 1st balloon is

A)$1.00
B)$4.00
C)$2.00
D)$4.80.
E)$3.00

Question 37

Use the table below to answer the following questions.
Table 12.2.3
$$\begin{array}{l}\begin{array} { c c } \hline\text { Output } & \text { Total Cost }\\\text { (balloons per hour) } & \text { (dollars per hour) } \\\hline 0 & 4.00 \\1 & 7.00 \\2 & 8.00 \\3 & 12.50 \\4 & 17.20 \\5 & 22.00 \\6 & 29.00\end{array}\end{array}$$

-Refer to Table 12.2.3,which gives the total cost schedule for Brenda's Balloon Shop,a perfectly competitive firm.The average fixed cost of producing the 4th balloon is

A)$4.30.
B)$4.80.
C)$4.70.
D)$4.50.
E)$1.00.

Question 38

In a perfectly competitive market,a firm maximizes its profit by producing the quantity of output at which

A)market price equals average fixed cost.
B)market price equals marginal cost.
C)average variable cost equals average fixed cost.
D)market price equals minimum average variable cost.
E)market price equals marginal revenue.

Question 39

Use the table below to answer the following questions.
Table 12.2.1
$$\begin{array} { c c c } \hline\text { Output } &\text { Total Revenue} & \text { Total Cost } \\\text { (units) }&\text { (dollars) }&\text { (dollars) }\\\hline 0 & 0 & 25 \\1 & 30 & 49 \\2 & 60 & 69 \\3 & 90 & 86 \\4 & 120 & 100 \\5 & 150 & 114 \\6 & 180 & 128 \\7 & 210 & 170 \\\hline\end{array}$$

-Refer to Table 12.2.1,which gives the total revenue schedule and total cost schedule of a perfectly competitive firm.The short-run equilibrium price of one unit of the good is

A)$3.
B)$10.
C)$15.
D)$25.
E)$30.

Question 40

A firm maximizes profit by producing the output at which marginal cost equals

A)marginal revenue.
B)average total cost.
C)average variable cost.
D)average fixed cost.
E)total revenue.

Question 41

Use the figure below to answer the following question.
Figure 12.2.1
Refer to Figure 12.2.1,which shows a perfectly competitive firm's total revenue and total cost curves.Which one of the following statements is false?

A)Economic profit is the vertical distance between the total revenue curve and the total cost curve.
B)At an output of Q₁ units a day,the firm makes zero economic profit.
C)At an output greater than Q₃ units a day,the firm incurs an economic loss.
D)At an output of Q₂ units a day,the firm incurs an economic loss.
E)At an output less than Q₁ units a day,the firm incurs an economic loss.

Question 42

Use the figure below to answer the following questions.
Figure 12.2.2
Refer to Figure 12.2.2,which shows a perfectly competitive firm's economic profit and loss.The firm is incurring a loss at

A)point A.
B)point B.
C)point C.
D)point D.
E)both points B and D.

Question 43

In the price range above minimum average variable cost,a perfectly competitive firm's supply curve is

A)horizontal at the market price.
B)vertical at zero output.
C)the same as its marginal cost curve.
D)the same as its average variable cost curve.
E)none of the above.

Question 44

If a perfectly competitive firm's marginal revenue is less than its marginal cost,the firm

A)cannot increase its economic profit.
B)must be making an economic profit.
C)should decrease its output to increase economic profit.
D)should increase its output to increase economic profit.
E)must raise the price.

Question 45

If a perfectly competitive firm's marginal revenue is greater than its marginal cost,the firm

A)cannot increase its economic profit.
B)must be making an economic profit.
C)will decrease its output to increase economic profit.
D)will increase its output to increase economic profit.
E)will lower the price.

Question 46

Use the figure below to answer the following questions.
Figure 12.2.2
Refer to Figure 12.2.2,which shows a perfectly competitive firm's economic profit and loss.The firm is breaking even at points

A)A and C.
B)A and D.
C)B and C.
D)B and D.
E)C and D.

Question 47

The maximum loss a firm will experience in the short run equals

A)zero.
B)its total fixed cost.
C)its total variable cost.
D)its total cost.
E)its marginal cost.

Question 48

A firm is producing the profit-maximizing amount of output when it is producing where its ________ curve intersects its ________ curve.

A)marginal cost;average total cost
B)marginal cost;average variable cost
C)marginal cost;marginal revenue
D)average total cost;average variable cost
E)total cost;total revenue

Question 49

As a firm in a perfectly competitive market increases its output,its marginal revenue ________ and its marginal cost ________.

A)increases;increases
B)increases;does not change
C)does not change;decreases
D)decreases;increases
E)does not change;increases

Question 50

Use the table below to answer the following question.
Table 12.2.4
$$\begin{array}{l}\hline\begin{array}{ll}\text {Price }\\\text {(dollars per box) }\end{array}&\begin{array}{ll}\text {Quantity demanded}\\\text { (thousands of boxes}\\\text {per week) }\end{array}\\\hline3.65 & 500 \\5.20 & 450 \\6.80 & 400 \\8.40 & 350 \\10.00 & 300 \\11.60 & 250 \\13.20 & 200\\\hline\end{array}$$ $\begin{array}{cccc}\hline\text {Quantity }&\text {Marginal cost }&\text {Average }&\text {Average }\\\text {(boxesper}&\text { (dollarsper }&\text {variable cost }&\text {total cost }\\\text { week)}&\text { additional }&\text {(dollarsper }&\text {(dollarsper }\\&\text { box) }&\text { box) }&\text { box) }\\\hline 200 & 6.40 & 7.80 & 12.80 \\250 & 7.00 & 7.00 & 11.00 \\300 & 7.65 & 7.10 & 10.43 \\350 & 8.40 & 7.20 & 10.06 \\400 & 10.00 & 7.50 & 10.00 \\450 & 12.40 & 8.00 & 10.22 \\500 & 20.70 & 9.00 & 11.00\\\hline\end{array}$

-Refer to Table 12.2.4.The market is perfectly competitive and there are 1,000 firms that produce paper. The top table sets out the market demand schedule for paper.
Each producer of paper has the costs shown in the bottom table when it uses its least-cost plant size.
The market price is ________ a box,the market output is ________ boxes,and the output produced by each firm is ________ boxes.Each firm ________.

A)$7.00;250,000;250;incurs an economic loss of $1,000 a week
B)$8.40;350,000;350;makes zero economic profit
C)$7.65;300,000;300;incurs an economic loss of $834 a week
D)$8.40;350,000;350;incurs an economic loss of $581 a week
E)$7.65;300,000;300;makes zero economic profit

Question 51

In a perfectly competitive industry,the market price is $5.An individual firm is producing the level of output where marginal cost is $5 and is increasing,and average total cost is $25.What should the firm do to maximize its economic profit in the short run?

A)shut down
B)expand output
C)contract output
D)leave output unchanged
E)insufficient information to answer

Question 52

A perfectly competitive firm's supply curve includes its marginal cost curve at all prices above minimum

A)average total cost.
B)average fixed cost.
C)total cost.
D)average variable cost.
E)total variable cost.

Question 53

If a perfectly competitive firm in the short run is able to pay its variable costs and part,but not all,of its fixed costs,then it is operating in the range on its marginal cost curve that is anywhere

A)above the break-even point.
B)below the break-even point.
C)above the shutdown point.
D)below the shutdown point.
E)between the shutdown and break-even points.

Question 54

If a perfectly competitive firm is producing in the short run at an output where price is less than average total cost,the firm

A)will shut down.
B)is breaking even.
C)is still making a positive economic profit.
D)is incurring an economic loss but will continue to operate as long as price is above minimum average fixed cost.
E)is incurring an economic loss but will continue to operate as long as price is above minimum average variable cost.

Question 55

If price falls below minimum average variable cost,the best a firm can do is

A)increase production and incur a loss equal to total variable cost.
B)increase production and incur a loss equal to total fixed cost.
C)stop production and incur a loss equal to total fixed cost.
D)stop production and incur a loss equal to total variable cost.
E)stay at the same production level and incur a loss equal to the difference between total cost and total revenue.

Question 56

If a perfectly competitive firm in the short run is able to pay its variable costs and all of its fixed costs and more,then it is operating in the range on its marginal cost curve that is

A)above the break-even point.
B)below the break-even point.
C)above the shutdown point.
D)below the shutdown point.
E)between the shutdown and break-even points.

Question 57

A perfectly competitive firm is maximizing profit if

A)marginal cost equals price and price is not below minimum average variable cost.
B)marginal cost equals price and price is not below minimum average fixed cost.
C)total revenue is at a maximum.
D)average variable cost is at a minimum.
E)average total cost is at a minimum.

Question 58

If a perfectly competitive firm is producing an output at which price is equal to average total cost,the firm

A)should shut down.
B)is breaking even.
C)is making an economic profit.
D)is incurring an economic loss.
E)is not producing its profit-maximizing quantity.

Question 59

In the price range below minimum average variable cost,a perfectly competitive firm's supply curve is

A)horizontal at the market price.
B)vertical at zero output.
C)the same as its marginal cost curve.
D)the same as its average variable cost curve.
E)none of the above.

Question 60

In a perfectly competitive market,the market price is $8.An individual firm is producing the output at which MC = $8.AVC at that output is $10.What should the firm do to maximize its economic profit in the short run?

A)shut down
B)expand output
C)contract output
D)leave output unchanged
E)raise the price

Question 61

Use the figure below to answer the following questions.
Figure 12.3.4
Refer to Figure 12.3.4 which shows cost curves of Paul's Picture Frames Inc.The picture frame market is perfectly competitive and the market price is $30 a frame.Paul produces ________ frames each week,makes ________ of total revenue,and makes zero ________ profit

A)200;$4,000;economic
B)300;$9,000;normal
C)200;$4,000;normal
D)300;$9,000;economic
E)300;$3,000;economic

Question 62

Use the information below to answer the following questions.
Fact 12.4.1
Franklin is a fiddlehead farmer.He sold 10 bags of fiddleheads last month,with total fixed cost of $100 and total variable cost of $50.
Refer to Fact 12.4.1.Suppose the price of fiddleheads is expected to stay at $10 per bag for the foreseeable future,and Franklin's production and cost figures are expected to stay the same.His total fixed cost consists entirely of rent on land,and his five-year lease on the land runs out at the end of the month.Should Franklin renew the lease?

A)Yes,because total revenue will still cover total fixed cost.
B)Yes,because total revenue will still cover total variable cost and a portion of total fixed cost.
C)No,because total revenue must cover all costs for factors of production to remain in fiddlehead farming in the long run.
D)No,because in the long run,zero economic profit is a signal to move factors of production out of fiddlehead farming.
E)Insufficient information to answer.

Question 63

Use the information below to answer the following questions.
Fact 12.4.1
Franklin is a fiddlehead farmer.He sold 10 bags of fiddleheads last month,with total fixed cost of $100 and total variable cost of $50.
Refer to Fact 12.4.1.If the price of fiddleheads last month was $15 per bag,Franklin

A)should have shut down because total revenue did not cover total variable cost.
B)incurred an economic loss of $135.
C)made zero economic profit.
D)made an economic profit of $50.
E)made an economic profit of $100.

Question 64

Use the figure below to answer the following questions.
Figure 12.4.2
Refer to Figure 12.4.2 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

A)demand will increase.
B)demand will decrease.
C)supply will increase.
D)supply will decrease.
E)supply and market demand will decrease.

Question 65

Use the figure below to answer the following questions.
Figure 12.3.5
Refer to Figure 12.3.5,which shows the cost curves and the marginal revenue curve for a perfectly competitive firm.To maximize its profit,the firm produces ________ units of output and the price is ________ a unit.

A)30;$40
B)30;$30
C)20;$40
D)20;$30
E)30;$32.50

Question 66

Use the figure below to answer the following questions.
Figure 12.3.1
Refer to Figure 12.3.1 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry.In the short run,the firm will

A)exit from the industry.
B)break even.
C)make an economic profit.
D)incur an economic loss.
E)close down.

Question 67

In a perfectly competitive market,the short-run market supply curve is

A)the horizontal sum of the supply curves of all the individual firms.
B)the vertical sum of the supply curves of all the individual firms.
C)vertical at the total level of output being produced by all firms.
D)horizontal at the current market price.
E)none of the above.

Question 68

Use the figure below to answer the following questions.
Figure 12.4.2
Refer to Figure 12.4.2 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,

A)firms that remain in the market will expand production.
B)market demand will increase.
C)market supply will decrease.
D)firms will exit the market.
E)firms that remain in the market will decrease production.

Question 69

A firm in a perfectly competitive industry is maximizing its economic profit by producing 500 units of output.At 500 units of output,which one of the following must be false?

A)MC < AVC
B)MC < ATC
C)MC > ATC
D)MR < ATC
E)MR > AVC

Question 70

Use the figure below to answer the following questions.
Figure 12.4.1
Refer to Figure 12.4.1 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,

A)firms that remain in the market will expand production.
B)market demand will increase.
C)market supply will increase.
D)firms will enter the market.
E)firms that remain in the market will reduce production.

Question 71

If a profit-maximizing firm in a perfectly competitive market is incurring an economic loss,then it must be producing a level of output where

A)price is greater than marginal cost.
B)price is greater than marginal revenue.
C)marginal cost is greater than marginal revenue.
D)average total cost is greater than marginal cost.
E)average total cost is less than marginal cost.

Question 72

Use the figure below to answer the following questions.
Figure 12.3.3
Refer to Figure 12.3.3 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry.The firm is

A)making an economic profit.
B)incurring an economic loss.
C)breaking even.
D)at its shutdown point.
E)none of the above.

Question 73

In which one of the following situations will a perfectly competitive firm make an economic profit?

A)MR > AVC
B)MR > ATC
C)ATC > MC
D)ATC > MR
E)MC > AVC

Question 74

Use the figure below to answer the following questions.
Figure 12.4.3
Refer to Figure 12.4.3.which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

A)demand will increase.
B)demand will decrease.
C)supply will increase.
D)supply will decrease.
E)demand and market supply will both increase.

Question 75

Use the figure below to answer the following questions.
Figure 12.4.1
Refer to Figure 12.4.1,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,market

A)demand will increase.
B)demand will decrease.
C)supply will increase.
D)supply will decrease.
E)supply and market demand will decrease.

Question 76

Use the figure below to answer the following question.
Figure 12.3.2
Refer to Figure 12.3.2 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry,The firm is

A)making an economic profit.
B)incurring an economic loss.
C)breaking even.
D)not maximizing economic profit.
E)going to close down temporarily.

Question 77

If a profit-maximizing firm in a perfectly competitive market is making an economic profit,then it must be producing a level of output where

A)price is greater than marginal cost.
B)price is greater than marginal revenue.
C)marginal cost is greater than marginal revenue.
D)marginal cost is greater than average total cost.
E)average total cost is greater than marginal cost.

Question 78

Use the figure below to answer the following questions.
Figure 12.3.1
Refer to Figure 12.3.1,which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry.In the short run,if the market price of the good is $10,the firm produces ________ units of output and ________.

A)10;incurs an economic loss of $20
B)10;incurs an economic loss of $40
C)less than 10;incurs an economic loss of $20
D)10;makes an economic profit of $20
E)less than 10;incurs an economic loss of less than $20

Question 79

In which one of the following situations will a perfectly competitive firm incur an economic loss?

A)MR > AVC
B)MR > ATC
C)ATC < MC
D)ATC > MR
E)MC > AVC

Question 80

Use the figure below to answer the following questions.
Figure 12.4.3
Refer to Figure 12.4.3 which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market.In the long run,

A)firms that remain in the market will expand production.
B)market demand will increase.
C)firms will adopt labour-saving technology.
D)industry output will remain constant.
E)firms will enter the market.