Question 1

Suppose that short- run SMC = 10 + 2Q for an individual firm in a competitive market. If there are 100 identical firms in this market, then the short- run supply curve can be written as:

Accepted Answer

A)  P = 10 + 200Q.
B)  P = 1000 + 2Q.
C)  P = 1000 - 200Q.
D)  P = 10 + 0.02Q. D

Question 2

In the short run a firm in a competitive market will produce nothing when:

Accepted Answer

A)  price is less than SMC.
B)  its maximum profit is negative.
C)  price is less than the minimum value of SAVC.
D)  STC exceeds total revenue. C

Question 3

There are 100 identical demanders of product y, and the demand function for each individual is y = 10 - p. The production function for any firm is y = min(z1,z2). If the industry were to produce 700 units of y, then aggregate requirements would be:

Accepted Answer

A)  z1 = 350 and z2 = 350.
B)  z1 = 500 and z2 = 500.
C)  z1 = 700 and z2 = 0 if w1 2.
D)  z1 = 700 and z2 = 700. D

Question 4

In the short- run, a competitive firm will produce some output even though its profit is negative if:

Accepted Answer

A)  price exceeds the minimum value of SAVC.
B)  price exceeds the minimum value of SMC.
C)  it expects prices to increase enough to earn positive profits soon.
D)  price exceeds the minimum value of SATC.

Question 5

A competitive firm's short run supply curve is its:

Accepted Answer

A)  owner's preference function.
B)  SAC curve to the right of its SMC curve.
C)  SMC curve above its SAVC curve.
D)  SMC curve above its SAC curve.

Question 6

In short run competitive equilibrium:

Accepted Answer

A)  p = q.
B)  p = SAVC.
C)  p = SMC.
D)  p = SAC.

Question 7

In a constant cost industry:

Accepted Answer

A)  price may be greater than, less than, or equal to Average Cost.
B)  the firm's long run supply curve is horizontal.
C)  price is determined by a Walrasian auctioneer.
D)  the efficient scale of production increases with time.

Question 8

Suppose that TC = 2Q3 - 18Q2 + 100Q + 50. If price, P, equals 100, the firm's maximum profit is:

Accepted Answer

A)  120.
B)  154.
C)  166.
D)  186.

Question 9

Which of the following is not an assumption of the perfectly competitive model?

Accepted Answer

A)  All consumers know all prices.
B)  The consumers of any given good or service are identical.
C)  In any given market, the products of all firms are identical.
D)  Individuals consume or produce small parts of output.

Question 10

The aggregate demand curve is the:

Accepted Answer

A)  horizontal sum of consumers' demand functions.
B)  demand side of the market for sand and gravel.
C)  horizontal sum of suppliers' demand functions.
D)  vertical sum of consumers' demand functions.

Question 11

There are 100 identical demanders of product y, and the demand function for each individual is y =
10 - p. The production function for any firm is y = min(z1,z2). The market demand function is:

Accepted Answer

A)  y = 1000- 100min(z1,z2) .
B)  y = 100(10 - p) .
C)  y = 100 - 100p.
D)  y = 10 - p.

Question 12

Suppose that TC = 2Q3 - 18Q2 + 100Q + 50. If the market price is 32, how much output will the firm produce to maximize profit?

Accepted Answer

A)  10
B)  6
C)  8
D)  0

Question 13

Since a perfectly competitive firm is assumed to be a price- taker:

Accepted Answer

A)  its profit function is linear.
B)  marginal revenue is less than price.
C)  its total- revenue function is linear.
D)  its average revenue is less than price.

Question 14

A firm has total cost given by TC = q³- 20q²+ 200q + 576. Suppose the firm faces a marginal revenue curve given by P = 200. i)What is the optimal quantity for this firm to produce? ii)Calculate the firm's profit, fixed cost, and variable cost if it produces 12 units of output? iii)What effect would each of the following have on MC? a)The price of the variable input decreases. b)The price of the fixed input increases. c)A technological improvement increases the returns to scale of the production process.

Accepted Answer

The answer of A firm has total cost given by...

Question 15

Andrew's demand for fish is: QA=12- 3P. Betty's demand for fish is: QB=16- 4P and Cathy's demand for fish is: QC=20- 5P. Q is the number of pounds of fish and P is the price of fish per pound. If Andrew, Betty and Cathy are the only people living in their village, what is the total market demand for fish in the village?

Accepted Answer

A)  Q=48- 4P
B)  Q=48- 12P
C)  Q=48- 3P
D)  Q=48- 5P

Question 16

The long- run supply curve for a competitive industry shows:

Accepted Answer

A)  the vertical summation of all MC curves.
B)  the horizontal summation of all firms' LMC curves.
C)  the quantity demanded at different prices with fixed input- prices.
D)  a upward slope under decreasing returns to scale.

Question 17

Suppose the total cost to produce quantity q is TC(q)= 250 + q2/10. If this firm is a price- taker and the market price is p = 10, then the firm's total cost will be:

Accepted Answer

A)  equal to the marginal revenue.
B)  zero.
C)  equal to the total revenue.
D)  equal to the price.

Question 18

. Suppose the market demand for fish is: Q=1- P, and the supply of fish is Q=- 2+P, where P is the price per pound of fish. The quantity traded in this market is:

Accepted Answer

A)  2.
B)  1.
C)  3.
D)  0.

Question 19

A competitive firm:

Accepted Answer

A)  does not have a supply curve.
B)  has a supply curve only if it earns a profit.
C)  has a supply curve equal to its marginal cost curve above the minimum AVC point.
D)  has a supply curve equal to its marginal cost curve.

Question 20

In long run equilibrium:

Accepted Answer

A)  no firms enter or leave the market.
B)  price and quantity are predictable for long periods of time.
C)  firms enter and leave the market.
D)  price and quantity are fixed by a Walrasian auctioneer.

Exam 8: The Theory of Perfect Competition

Suppose that short- run SMC = 10 + 2Q for an individual firm in a competitive market. If there are 100 identical firms in this market, then the short- run supply curve can be written as:

In the short run a firm in a competitive market will produce nothing when:

There are 100 identical demanders of product y, and the demand function for each individual is y = 10 - p. The production function for any firm is y = min(z₁,z₂) . If the industry were to produce 700 units of y, then aggregate requirements would be:

In the short- run, a competitive firm will produce some output even though its profit is negative if:

A competitive firm's short run supply curve is its:

In short run competitive equilibrium:

In a constant cost industry:

Suppose that TC = 2Q³- 18Q²+ 100Q + 50. If price, P, equals 100, the firm's maximum profit is:

Which of the following is not an assumption of the perfectly competitive model?

The aggregate demand curve is the:

There are 100 identical demanders of product y, and the demand function for each individual is y = 10 - p. The production function for any firm is y = min(z₁,z₂) . The market demand function is:

Suppose that TC = 2Q³- 18Q²+ 100Q + 50. If the market price is 32, how much output will the firm produce to maximize profit?

Since a perfectly competitive firm is assumed to be a price- taker:

The long- run supply curve for a competitive industry shows:

Suppose the total cost to produce quantity q is TC(q) = 250 + q²/10. If this firm is a price- taker and the market price is p = 10, then the firm's total cost will be:

. Suppose the market demand for fish is: Q=1- P, and the supply of fish is Q=- 2+P, where P is the price per pound of fish. The quantity traded in this market is:

A competitive firm:

In long run equilibrium:

Exam 8: The Theory of Perfect Competition

Suppose that short- run SMC = 10 + 2Q for an individual firm in a competitive market. If there are 100 identical firms in this market, then the short- run supply curve can be written as:

In the short run a firm in a competitive market will produce nothing when:

There are 100 identical demanders of product y, and the demand function for each individual is y = 10 - p. The production function for any firm is y = min(z1,z2) . If the industry were to produce 700 units of y, then aggregate requirements would be:

In the short- run, a competitive firm will produce some output even though its profit is negative if:

A competitive firm's short run supply curve is its:

In short run competitive equilibrium:

In a constant cost industry:

Suppose that TC = 2Q3 - 18Q2 + 100Q + 50. If price, P, equals 100, the firm's maximum profit is:

Which of the following is not an assumption of the perfectly competitive model?

The aggregate demand curve is the:

There are 100 identical demanders of product y, and the demand function for each individual is y = 10 - p. The production function for any firm is y = min(z1,z2) . The market demand function is:

Suppose that TC = 2Q3 - 18Q2 + 100Q + 50. If the market price is 32, how much output will the firm produce to maximize profit?

Since a perfectly competitive firm is assumed to be a price- taker:

The long- run supply curve for a competitive industry shows:

Suppose the total cost to produce quantity q is TC(q) = 250 + q2/10. If this firm is a price- taker and the market price is p = 10, then the firm's total cost will be:

. Suppose the market demand for fish is: Q=1- P, and the supply of fish is Q=- 2+P, where P is the price per pound of fish. The quantity traded in this market is:

A competitive firm:

In long run equilibrium:

There are 100 identical demanders of product y, and the demand function for each individual is y = 10 - p. The production function for any firm is y = min(z₁,z₂) . If the industry were to produce 700 units of y, then aggregate requirements would be:

Suppose that TC = 2Q³- 18Q²+ 100Q + 50. If price, P, equals 100, the firm's maximum profit is:

There are 100 identical demanders of product y, and the demand function for each individual is y = 10 - p. The production function for any firm is y = min(z₁,z₂) . The market demand function is:

Suppose that TC = 2Q³- 18Q²+ 100Q + 50. If the market price is 32, how much output will the firm produce to maximize profit?

Suppose the total cost to produce quantity q is TC(q) = 250 + q²/10. If this firm is a price- taker and the market price is p = 10, then the firm's total cost will be: