Question 1

If a perfectly competitive firm facing a market price of $3 per unit decides to produce 30,000 units, the market price will likely:

Accepted Answer

A)  increase.
B)  decrease.
C)  stay the same.
D)  increase initially and then decrease.E) B) and C)
F) A) and D)

Question 2

If a firm is earning a positive economic profit, it:

Accepted Answer

A)  is using its resources in the most profitable way.
B)  should invest its resources in other business opportunities.
C)  has an opportunity cost that is larger than what the firm is currently earning.
D)  is operating in the long run in a perfectly competitive market.E) B) and D)
F) All of the above

Question 3

In the short run, when a firm stops producing it:

Accepted Answer

A)  avoids paying fixed costs.
B)  avoids paying variable costs.
C)  can avoid earning profits less than zero.
D)  must have an average total cost that is lower than the market price.E) A) and B)
F) B) and D)

Question 4

In the short run, the fixed costs of a firm:

Accepted Answer

A)  must be paid regardless of the level of output produced.
B)  should be strongly considered when deciding whether to shut down production.
C)  are zero when the quantity produced is zero.
D)  must be higher than the firm's variable costs.E) B) and D)
F) A) and D)

Question 5

If a firm in a perfectly competitive market is producing at a level of output where marginal costs are less than marginal revenue, it:

Accepted Answer

A)  should cut back production to increase profits.
B)  should increase production to increase profits.
C)  is producing a profit-maximizing quantity.
D)  should invest more in advertising in order to raise revenues.E) None of the above
F) C) and D)

Question 6

The graph shown displays the marginal cost and marginal revenue curves for a perfectly competitive firm.  According to the graph shown, the firm earns _______ profits at point C than at point B, so the firm should _______ production.

Accepted Answer

A)  higher; increase
B)  lower; increase
C)  lower; decrease
D)  higher; decreaseE) C) and D)
F) B) and C)

Question 7

As long as average revenue remains above average total cost:

Accepted Answer

A)  total revenue will be higher than total cost.
B)  the firm will be making profits.
C)  price will be greater than average total cost.
D)  All are correct.E) B) and C)
F) B) and D)

Question 8

The graph shown displays the cost curves for a firm in a perfectly competitive market. Assume that all firms in this market have identical cost structures. If the market price is initially $5, which of the following statements is true?  In the long run, the market demand curve will decrease.This firm should produce in the short run but exit in the long run.In the long run, the market price will be $7.

Accepted Answer

A)  I only
B)  II and III only
C)  I and II only
D)  III onlyE) C) and D)
F) A) and C)

Question 9

If a firm is earning a profit, then:

Accepted Answer

A)  the average total cost must be higher than the market price.
B)  total revenue must be higher than total cost.
C)  the average total cost must be higher than average revenue.
D)  marginal revenue is equal to marginal cost.E) B) and C)
F) All of the above

Question 10

For firms that sell one product in a perfectly competitive market, average revenue is:

Accepted Answer

A)  calculated by total output divided by total revenue.
B)  equal to marginal cost.
C)  equal to the market price.
D)  greater than the market price.E) A) and C)
F) A) and B)

Question 11

If a firm in a perfectly competitive market faces the cost curves in the graph shown and observes a market price of $10, the firm:  A) can earn positive profits by producing more than 43 units. B) can earn positive profits by producing where marginal revenue equals marginal cost. C) cannot make positive profits and should shut down in the short run. D) should continue to operate in the short run, but plan to exit in the long run." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  can earn positive profits by producing more than 43 units.
B)  can earn positive profits by producing where marginal revenue equals marginal cost.
C)  cannot make positive profits and should shut down in the short run.
D)  should continue to operate in the short run, but plan to exit in the long run.E) A) and D)
F) C) and D)

Question 12

The table shown displays the total costs for various levels of output for a firm operating in a perfectly competitive market.

What are the firm's fixed costs?

Accepted Answer

A)  $10
B)  $200
C)  $60
D)  Fixed costs cannot be determined by the information in the table.E) B) and C)
F) C) and D)

Question 13

If demand increases in a perfectly competitive market, which of the following will likely occur?

Accepted Answer

A)  Firms will temporarily make a profit due to a higher price.
B)  Firms will enter the market in hopes of capturing some profits.
C)  The short run supply curve will shift to the right, eventually causing price to fall.
D)  All of these are correct.E) A) and C)
F) None of the above

Question 14

The table shown displays the price and quantity produced of a good for a single firm in a perfectly competitive market.

What is the firm's marginal revenue when 25 units are produced?

Accepted Answer

A)  $250
B)  $25
C)  $10
D)  $20E) B) and D)
F) A) and C)

Question 15

Firms that have market power:

Accepted Answer

A)  are price takers.
B)  can noticeably affect the market price.
C)  can not affect the market quantity offered for sale.
D)  can earn as much profit as they want.E) A) and B)
F) C) and D)

Question 16

As the equilibrium price falls in a perfectly competitive market, firms' ______ fall(s) and their profits _______.

Accepted Answer

A)  revenue; fall
B)  average costs; fall
C)  revenue; rise
D)  total costs; riseE) A) and D)
F) B) and C)

Question 17

Which of the following is an essential characteristic of a perfectly competitive market?

Accepted Answer

A)  Buyers and sellers share market power.
B)  Sellers are price makers.
C)  Goods are standardized.
D)  Goods are unique.E) C) and D)
F) A) and B)

Question 18

If a firm in a perfectly competitive market faces the cost curves in the graph shown and produces at the profit-maximizing level of output, which of the following is true?  A) The firm will lose money and shut down in the short run if the price falls below $15. B) The firm will lose money, but will continue to operate in the short run if the price is at least $15. C) The firm will make positive profits any time the price is greater than $15. D) All of these are correct." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  The firm will lose money and shut down in the short run if the price falls below $15.
B)  The firm will lose money, but will continue to operate in the short run if the price is at least $15.
C)  The firm will make positive profits any time the price is greater than $15.
D)  All of these are correct.E) A) and D)
F) B) and C)

Question 19

If firms are producing at a profit-maximizing level of output where the price is less than the average total cost:

Accepted Answer

A)  economic profits may be positive.
B)  accounting profits will be zero.
C)  economic profits are negative.
D)  accounting profits must be positive.E) A) and B)
F) None of the above

Question 20

The graph shown displays the cost curves for a firm in a perfectly competitive market. If the market price is $12, which of the following statements is true?  The firm will earn negative profits if it produces 140 units.The profit-maximizing quantity is 120.The firm should consider how to minimize its losses.

Accepted Answer

A)  I and II only
B)  I and III
C)  II only
D)  I onlyE) B) and C)
F) A) and D)

Exam 13: Perfect Competition

Which of the following is an essential characteristic of a perfectly competitive market?

Correct Answer
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Firms that have market power:

Correct Answer
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Correct Answer
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As the equilibrium price falls in a perfectly competitive market, firms' fall(s) and their profits _.

Correct Answer
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If a perfectly competitive firm facing a market price of $3 per unit decides to produce 30,000 units, the market price will likely:

Correct Answer
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If a firm in a perfectly competitive market is producing at a level of output where marginal costs are less than marginal revenue, it:

Correct Answer
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In the short run, when a firm stops producing it:

Correct Answer
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If a firm is earning a positive economic profit, it:

Correct Answer
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Correct Answer
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The table shown displays the price and quantity produced of a good for a single firm in a perfectly competitive market. What is the firm's marginal revenue when 25 units are produced?

Correct Answer
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In the short run, the fixed costs of a firm:

Correct Answer
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The table shown displays the total costs for various levels of output for a firm operating in a perfectly competitive market. What are the firm's fixed costs?

Correct Answer
verified

If demand increases in a perfectly competitive market, which of the following will likely occur?

Correct Answer
verified

As long as average revenue remains above average total cost:

Correct Answer
verified

If a firm in a perfectly competitive market faces the cost curves in the graph shown and observes a market price of $10, the firm:

Correct Answer
verified

For firms that sell one product in a perfectly competitive market, average revenue is:

Correct Answer
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If a firm is earning a profit, then:

Correct Answer
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If firms are producing at a profit-maximizing level of output where the price is less than the average total cost:

Correct Answer
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The graph shown displays the marginal cost and marginal revenue curves for a perfectly competitive firm. According to the graph shown, the firm earns _ profits at point C than at point B, so the firm should _ production.

Correct Answer
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If a firm in a perfectly competitive market faces the cost curves in the graph shown and produces at the profit-maximizing level of output, which of the following is true?

Correct Answer
verified

Exam 13: Perfect Competition

Which of the following is an essential characteristic of a perfectly competitive market?

Correct AnswerverifiedShow Answer

Firms that have market power:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

As the equilibrium price falls in a perfectly competitive market, firms' ______ fall(s) and their profits _______.

Correct AnswerverifiedShow Answer

If a perfectly competitive firm facing a market price of $3 per unit decides to produce 30,000 units, the market price will likely:

Correct AnswerverifiedShow Answer

If a firm in a perfectly competitive market is producing at a level of output where marginal costs are less than marginal revenue, it:

Correct AnswerverifiedShow Answer

In the short run, when a firm stops producing it:

Correct AnswerverifiedShow Answer

If a firm is earning a positive economic profit, it:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The table shown displays the price and quantity produced of a good for a single firm in a perfectly competitive market. What is the firm's marginal revenue when 25 units are produced?

Correct AnswerverifiedShow Answer

In the short run, the fixed costs of a firm:

Correct AnswerverifiedShow Answer

The table shown displays the total costs for various levels of output for a firm operating in a perfectly competitive market. What are the firm's fixed costs?

Correct AnswerverifiedShow Answer

If demand increases in a perfectly competitive market, which of the following will likely occur?

Correct AnswerverifiedShow Answer

As long as average revenue remains above average total cost:

Correct AnswerverifiedShow Answer

If a firm in a perfectly competitive market faces the cost curves in the graph shown and observes a market price of $10, the firm:

Correct AnswerverifiedShow Answer

For firms that sell one product in a perfectly competitive market, average revenue is:

Correct AnswerverifiedShow Answer

If a firm is earning a profit, then:

Correct AnswerverifiedShow Answer

If firms are producing at a profit-maximizing level of output where the price is less than the average total cost:

Correct AnswerverifiedShow Answer

The graph shown displays the marginal cost and marginal revenue curves for a perfectly competitive firm. According to the graph shown, the firm earns _______ profits at point C than at point B, so the firm should _______ production.

Correct AnswerverifiedShow Answer

If a firm in a perfectly competitive market faces the cost curves in the graph shown and produces at the profit-maximizing level of output, which of the following is true?

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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As the equilibrium price falls in a perfectly competitive market, firms' fall(s) and their profits _.

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The graph shown displays the marginal cost and marginal revenue curves for a perfectly competitive firm. According to the graph shown, the firm earns _ profits at point C than at point B, so the firm should _ production.

Correct Answer
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Correct Answer
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