Question 1

Exhibit 8-10 Price and cost data for a firm

In Exhibit 8-10, MR is the same as which column?

Accepted Answer

A)   Q.
B)   P.
C)   AVC.
D)   ATC.
E)   MC.F) B) and E)
G) A) and E)

Question 2

Which of the following correctly explains why sellers in a perfectly competitive market are price takers?

Accepted Answer

A)   There are few sellers, and so they have the power to take whatever price they want.
B)   There are many sellers, and so the market process generates an equilibrium price that cannot be influenced by any one seller. Thus they have no choice but to take the price generated by the market process.
C)   Sellers in a competitive market have the power to influence price by colluding with one another and using quotas to limit overall market output and thus raise price.
D)   Individual buyers in a competitive market have the power to influence price, and thus can impose prices and other conditions on powerless sellers.E) A) and B)
F) None of the above

Question 3

The short-run supply curve for a perfectly competitive firm is the marginal cost curve
​

Accepted Answer

A)   at all price levels because the firm chooses the profit-maximizing quantity of output where marginal revenue equals marginal cost.
B)   above the minimum point of the average variable cost (AV
C)   curve because as the price falls, the firm maximizes profit by producing more output to account for a smaller profit margin on each unit.
C)   above the minimum point of the average variable cost (AV
C)   curve because the firm maximizes profit by choosing the quantity at which marginal revenue equals marginal cost and below the minimum point of AVC the firm will shut down to minimize its losses.
D)   above the minimum point of the average total cost (AT
C)   curve because the firm maximizes profit by choosing the quantity at which marginal revenue equals marginal cost and below the minimum point of ATC the firm will shut down to minimize its losses.E) None of the above
F) B) and D)

Question 4

Which of the following best explains why a firm in a perfectly competitive market must take the price determined in the market?

Accepted Answer

A)   The short-run average total costs of firms that are price takers will be constant.
B)   If a price taker increased its price, consumers would buy from other suppliers.
C)   Firms in a price-taker market will have to advertise to increase sales.
D)   There are no good substitutes for the product supplied by a firm that is a price taker.E) B) and C)
F) C) and D)

Question 5

Pedro goes to the local farmer's market and is just as happy buying corn from the first vendor as he is from the second vendor. This example describes which of the following characteristics of perfect competition?

Accepted Answer

A)   large number of small firms
B)   homogeneous product
C)   very easy entry and exit
D)   differentiated productE) A) and C)
F) None of the above

Question 6

If a firm increases output when MR > MC, then:

Accepted Answer

A)   profit will equal zero.
B)   profit will increase.
C)   profit will decrease.
D)   profit will remain the same.E) B) and C)
F) A) and B)

Question 7

Exhibit 8-18 A typical firm in a perfectly competitive market

As shown in Exhibit 8-18, the perfectly competitive firm is in long-run equilibrium at a price of:

Accepted Answer

A)   $100.
B)   $200.
C)   $300.
D)   $400.E) C) and D)
F) All of the above

Question 8

What is the largest possible loss that is consistent with a firm producing in a perfectly competitive market in long-run competitive equilibrium?

Accepted Answer

A)   an amount equal to price minus average variable cost
B)   an amount equal to total variable
C)   zero
D)   an amount equal to total fixed costE) C) and D)
F) A) and B)

Question 9

Suppose the marginal revenue curve for a perfectly competitive firm intersects the average total cost curve at its minimum point. As the marginal revenue curve moves upward from that point along the marginal cost curve,

Accepted Answer

A)   the profit-maximizing quantity decreases.
B)   the profit-maximizing quantity increases.
C)   the firm will choose not to produce to minimize its loss.
D)   the average fixed cost curve will shift upward.E) A) and B)
F) B) and C)

Question 10

In the short run, a firm should shut down its business if price is less than:

Accepted Answer

A)   ATC.
B)   AR.
C)   MC.
D)   AVC.E) B) and C)
F) All of the above

Question 11

If a firm in a competitive industry is making zero economic profit but still producing, it must be the case that:

Accepted Answer

A)   MC = MR > ATC.
B)   MC = MR
C)   MC = ATC > MR.
D)   MC = MR = ATC.E) B) and C)
F) A) and D)

Question 12

Exhibit 8-12 Marginal revenue and cost per unit curves

As shown in Exhibit 8-12, if the firm's price is OD, the firm will supply

Accepted Answer

A)   zero units of output because it is unprofitable.
B)   X units and incur a loss.
C)   Y units and break even.
D)   Z units and make an economic profit.E) A) and D)
F) None of the above

Question 13

Exhibit 8-17 Marginal revenue and cost per unit curves

As shown in Exhibit 8-17, the short-run supply curve for the firm corresponds to which segment of its marginal cost curve?

Accepted Answer

A)   C and all points above.
B)   B and all points above.
C)   A and all points above.
D)   A to C only.E) B) and D)
F) C) and D)

Question 14

If the market price is $5 and you are currently producing at a level where average total cost is $3 and falling, you should:

Accepted Answer

A)   produce until the average total cost and average revenue are equal.
B)   shut down.
C)   produce only enough to cover variable costs.
D)   produce where MR = MC.E) B) and D)
F) B) and C)

Question 15

What is a firm's short run supply curve?

Accepted Answer

A firm's short run supply curv...

Question 16

Exhibit 8-13 Price and cost per unit curves
3, total economic profit is maximized or economic loss minimized at the output: A)  Q1. B)  Q2. C)  Q3. D)  Q4." class="answers-bank-image d-inline" rel="preload" >
In Exhibit 8-13, if the price is P3, total economic profit is maximized or economic loss minimized at the output:

Accepted Answer

A)   Q1.
B)   Q2.
C)   Q3.
D)   Q4.E) A) and B)
F) None of the above

Question 17

Exhibit 8-13 Price and cost per unit curves
3, the firm will A)  produce Q3 and earn an economic profit. B)  produce Q3 and incur a loss in the short run. C)  produce Q3 and earn zero economic profit. D)  decide not to produce any output to minimize the loss." class="answers-bank-image d-inline" rel="preload" >
In Exhibit 8-13, if the price is P3, the firm will

Accepted Answer

A)   produce Q3 and earn an economic profit.
B)   produce Q3 and incur a loss in the short run.
C)   produce Q3 and earn zero economic profit.
D)   decide not to produce any output to minimize the loss.E) All of the above
F) A) and D)

Question 18

Exhibit 8-10 Price and cost data for a firm

In Exhibit 8-10, the maximum possible total profit is:

Accepted Answer

A)   $36.
B)   $24.
C)   $12.
D)   $8.E) All of the above
F) B) and D)

Question 19

Suppose that in a perfectly competitive market, firms are making economic profits. In the long run, we can expect to see:

Accepted Answer

A)   some firms leave.
B)   the market price rise.
C)   market supply shift to the left.
D)   economic profits become zero.E) None of the above
F) B) and D)

Question 20

Maximizing profit means finding the maximum difference between:

Accepted Answer

A)   TR and TC.
B)   MR and MC.
C)   price and ATC.
D)   ATC and MC.E) None of the above
F) A) and D)

Exam 8: Perfect Competition

If a firm increases output when MR > MC, then:

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Exhibit 8-13 Price and cost per unit curves In Exhibit 8-13, if the price is P3, total economic profit is maximized or economic loss minimized at the output:

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The short-run supply curve for a perfectly competitive firm is the marginal cost curve ​

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In the short run, a firm should shut down its business if price is less than:

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If the market price is $5 and you are currently producing at a level where average total cost is $3 and falling, you should:

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If a firm in a competitive industry is making zero economic profit but still producing, it must be the case that:

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Exhibit 8-13 Price and cost per unit curves In Exhibit 8-13, if the price is P3, the firm will

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Exhibit 8-18 A typical firm in a perfectly competitive market As shown in Exhibit 8-18, the perfectly competitive firm is in long-run equilibrium at a price of:

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Pedro goes to the local farmer's market and is just as happy buying corn from the first vendor as he is from the second vendor. This example describes which of the following characteristics of perfect competition?

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Exhibit 8-10 Price and cost data for a firm In Exhibit 8-10, the maximum possible total profit is:

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Exhibit 8-10 Price and cost data for a firm In Exhibit 8-10, MR is the same as which column?

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Exhibit 8-17 Marginal revenue and cost per unit curves As shown in Exhibit 8-17, the short-run supply curve for the firm corresponds to which segment of its marginal cost curve?

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Suppose that in a perfectly competitive market, firms are making economic profits. In the long run, we can expect to see:

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Which of the following correctly explains why sellers in a perfectly competitive market are price takers?

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Maximizing profit means finding the maximum difference between:

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Which of the following best explains why a firm in a perfectly competitive market must take the price determined in the market?

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What is a firm's short run supply curve?

Correct AnswerverifiedA firm's short run supply curv...View AnswerShow Answer

What is the largest possible loss that is consistent with a firm producing in a perfectly competitive market in long-run competitive equilibrium?

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Exhibit 8-12 Marginal revenue and cost per unit curves As shown in Exhibit 8-12, if the firm's price is OD, the firm will supply

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Suppose the marginal revenue curve for a perfectly competitive firm intersects the average total cost curve at its minimum point. As the marginal revenue curve moves upward from that point along the marginal cost curve,

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Exhibit 8-13 Price and cost per unit curves In Exhibit 8-13, if the price is P₃, total economic profit is maximized or economic loss minimized at the output:

Correct Answer
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The short-run supply curve for a perfectly competitive firm is the marginal cost curve

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Exhibit 8-13 Price and cost per unit curves In Exhibit 8-13, if the price is P₃, the firm will

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A firm's short run supply curv...
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