Question 1

-In the above figure, if d4 is the relevant demand curve for this firm, then which level of output will maximize this firm's profits or minimize its losses?

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) A) and B)
F) A) and C)

Question 2

When price and marginal cost are equal for a perfectly competitive firm, the firm is

Accepted Answer

A)   minimizing average total cost.
B)   maximizing total revenue.
C)   maximizing economic profit.
D)   earning negative economic profit.E) C) and D)
F) All of the above

Question 3

-Refer to the above figure. When the price in the market is $4, economic profits will equal

Accepted Answer

A)   $100.
B)   $200.
C)   $300.
D)   $400.E) All of the above
F) None of the above

Question 4

The demand curve for a perfectly competitive industry is

Accepted Answer

A)   perfectly inelastic.
B)   downward sloping.
C)   perfectly elastic.
D)   unit elastic.E) None of the above
F) A) and C)

Question 5

If an industry's long-run supply curve slopes downward, then the industry is

Accepted Answer

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

Question 6

What is the shape of the long-run supply curve in a constant-cost industry?

Accepted Answer

A)   horizontal
B)   vertical
C)   downward sloping
D)   upward slopingE) All of the above
F) None of the above

Question 7

A company finds that at its present level of production, MC = AVC at $15, MC = ATC at $20, and MC = MR at $17. Your advice to the firm regarding its short-run operations is

Accepted Answer

A)   to continue production, as it is earning an economic profit of $2 per unit.
B)   to continue production, as it is earning an economic profit of $3 per unit.
C)   to shut down.
D)   to continue production at a loss.E) None of the above
F) A) and C)

Question 8

An increase in the productivity of labor causes

Accepted Answer

A)   quantity supplied by each firm in a competitive industry to decrease.
B)   supply in a competitive industry to increase.
C)   the market price to increase in a competitive industry.
D)   the firm's supply curve to shift but has no effect on the industry supply curve.E) A) and B)
F) All of the above

Question 9

Market signals

Accepted Answer

A)   are ways of conveying information.
B)   are market noise that confuses buyers and sellers.
C)   are best ignored by investors.
D)   always lead to economic losses.E) A) and B)
F) None of the above

Question 10

Which of the following statements is correct about the demand curve of the perfectly competitive industry?

Accepted Answer

A)   The demand curve of the perfectly competitive industry is horizontal as are the demand curves facing the individual firms.
B)   The market demand curve of perfect competition is vertical because the individual consumers are buying a homogeneous product.
C)   The market demand curve of the perfectly competitive industry is downward sloping while the demand curve facing an individual firm is horizontal.
D)   The market demand curve of the perfectly competitive industry is downward sloping, so the demand curves of the individual firms are also downward sloping.E) B) and C)
F) None of the above

Question 11

If the long-run supply curve slopes downward, we know that this is

Accepted Answer

A)   a decreasing-cost industry.
B)   a constant-cost industry.
C)   an increasing-cost industry.
D)   a situation in which no input prices change as firms enter and exit the industry.E) C) and D)
F) A) and B)

Question 12

Which of the following is TRUE in perfect competition at long-run equilibrium?

Accepted Answer

A)   P = ATC = MC = MR
B)   ATC is minimized.
C)   Economic profit is $0.
D)   all of the aboveE) A) and D)
F) A) and C)

Question 13

In a decreasing-cost industry, an increase in output will lead to

Accepted Answer

A)   an upward shift in the ATC curve.
B)   an upward shift in the MC curve.
C)   a reduction in long-run per-unit costs.
D)   an increase in long-run per-unit costs.E) B) and D)
F) A) and B)

Question 14

-Refer to the above table. This firm operates in a perfectly competitive market in which the market price is $10/unit. What is TRUE when the firm produces 103 units?

Accepted Answer

A)   Total revenue equals $5,060.
B)   Total costs exceed total revenue by $403.
C)   Marginal revenue is less than marginal cost.
D)   Its total profit is $524.E) All of the above
F) B) and C)

Question 15

Perfect competition is characterized by

Accepted Answer

A)   many buyers and sellers.
B)   a small number of firms.
C)   differentiated products of firms in the industry.
D)   high barriers to entry.E) A) and B)
F) A) and C)

Question 16

A farmer has many competitors and exists in a market structure known as perfect competition. This means that price is determined outside of the individual farmer's ability to charge a price higher than the going market for a bushel of wheat, hence the farmer is

Accepted Answer

A)   a price maker and can therefore charge different customers different prices.
B)   always able to price produce above the competition and earn a larger profit.
C)   never able to determine any prices he charges for anything, such as soybeans.
D)   a price taker and cannot affect the market price of wheat.E) B) and D)
F) B) and C)

Question 17

-Refer to the above figure. Profits for this firm are equal to zero

Accepted Answer

A)   only for all points less than B.
B)   only at points B and C.
C)   for points between B and C.
D)   for all points less than B and greater than C.E) None of the above
F) A) and C)

Question 18

Which of the following is always TRUE for a perfectly competitive firm?

Accepted Answer

A)   P = d = MR
B)   P = d = AVC
C)   MC = MR = AVC
D)   AVC = ATC = PE) C) and D)
F) A) and C)

Question 19

The perfectly competitive firm faces

Accepted Answer

A)   a downward sloping demand curve.
B)   a horizontal supply function.
C)   perfectly elastic demand.
D)   constant marginal costs.E) None of the above
F) A) and B)

Question 20

Which of the following is TRUE for the perfectly competitive firm?

Accepted Answer

A)   Price and MR are always equal.
B)   AR is less than price.
C)   AR is more than price.
D)   Price elasticity of demand is equal to 1.E) C) and D)
F) B) and D)

Exam 23: Perfect Competition

Market signals

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-Refer to the above figure. Profits for this firm are equal to zero

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What is the shape of the long-run supply curve in a constant-cost industry?

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-Refer to the above table. This firm operates in a perfectly competitive market in which the market price is $10/unit. What is TRUE when the firm produces 103 units?

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Which of the following statements is correct about the demand curve of the perfectly competitive industry?

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A farmer has many competitors and exists in a market structure known as perfect competition. This means that price is determined outside of the individual farmer's ability to charge a price higher than the going market for a bushel of wheat, hence the farmer is

Correct AnswerverifiedShow Answer

When price and marginal cost are equal for a perfectly competitive firm, the firm is

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The perfectly competitive firm faces

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Which of the following is always TRUE for a perfectly competitive firm?

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The demand curve for a perfectly competitive industry is

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Which of the following is TRUE in perfect competition at long-run equilibrium?

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Which of the following is TRUE for the perfectly competitive firm?

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-Refer to the above figure. When the price in the market is $4, economic profits will equal

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Perfect competition is characterized by

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If an industry's long-run supply curve slopes downward, then the industry is

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-In the above figure, if d4 is the relevant demand curve for this firm, then which level of output will maximize this firm's profits or minimize its losses?

Correct AnswerverifiedShow Answer

If the long-run supply curve slopes downward, we know that this is

Correct AnswerverifiedShow Answer

In a decreasing-cost industry, an increase in output will lead to

Correct AnswerverifiedShow Answer

An increase in the productivity of labor causes

Correct AnswerverifiedShow Answer

A company finds that at its present level of production, MC = AVC at $15, MC = ATC at $20, and MC = MR at $17. Your advice to the firm regarding its short-run operations is

Correct AnswerverifiedShow Answer

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