Question 1

Profit is the difference between

Accepted Answer

A)  marginal revenue and marginal cost.
B)  total revenue and variable cost.
C)  total revenue and total explicit cost.
D)  total revenue and total cost.

Question 2

Figure 12-9
  
Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9.At price P₄, the firm would

Accepted Answer

A)  lose an amount equal to its fixed cost.
B)  make a profit.
C)  lose an amount less than fixed cost.
D)  shut down.

Question 3

The perfectly competitive market structure benefits consumers because

Accepted Answer

A)  firms do not produce goods at the lowest possible price in the long run.
B)  firms are forced by competitive pressure to be as efficient as possible.
C)  firms add a much smaller markup over average cost than firms in any other type of market structure.
D)  firms produce high-quality goods at low prices.

Question 4

Firms in perfect competition produce the allocatively efficient output in the short run and in the long run.

Accepted Answer

A) True 
 B)False

Question 5

Maximizing average profit is equivalent to maximizing total profit.

Accepted Answer

A) True 
 B)False

Question 6

Figure 12-17
  
The graphs in Figure 12-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry.
-Refer to Figure 12-17.Which of the following statements is true?

Accepted Answer

A)  The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit. New firms will enter the market and shift the market supply curve to the left.
B)  The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit, but it would earn a greater profit if it produced at the lowest point on the ATC curve.
C)  The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit. New firms will enter the industry; as a result, the firm will be forced to exit the industry in the long run.
D)  The firm will produce 30 thousand pounds of apples in the short run and earn an economic profit. In the long run the firm will break even.

Question 7

An increase in a firm's fixed cost will not change the firm's profit-maximizing output in the short run.

Accepted Answer

A) True 
 B)False

Question 8

Figure 12-9
  
Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9.At price P₁, the firm would produce

Accepted Answer

A)  Q₁ units
B)  Q₃ units.
C)  Q₅ units.
D)  zero units.

Question 9

What is a long-run supply curve? What does a long-run supply curve look like on a perfectly competitive market graph?

Accepted Answer

A long-run supply curve shows the relati...

Question 10

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102, then the firm is probably producing more than its profit-maximizing quantity.

Accepted Answer

A) True 
 B)False

Question 11

Figure 12-5
  
Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 12-5.What is the amount of the firm's fixed cost of production?

Accepted Answer

A)  $5,400
B)  $6,750
C)  $8,100
D)  It cannot be determined.

Question 12

A firm will make a profit when

Accepted Answer

A)  P > AVC.
B)  P > ATC.
C)  P = ATC.
D)  P = MC.

Question 13

A perfectly competitive firm's horizontal demand curve implies that the firm does not have to lower its price to sell more output.

Accepted Answer

A) True 
 B)False

Question 14

Table 12-4
  
Table 12-4 shows the short-run cost data of a perfectly competitive firm. Assume that output can only be increased in batches of 20 units.
-Refer to Table 12-4.If the market price is $45, the firm

Accepted Answer

A)  will earn a profit of $3,600.
B)  will suffer a loss of $200.
C)  will break even.
D)  will earn profit of $1,040.

Question 15

If a perfectly competitive firm raises the price it charges to consumers, which of the following is the most likely outcome?

Accepted Answer

A)  The firm's revenue will not change because some consumers will refuse to pay the higher price.
B)  The firm will not sell any output.
C)  The firm's total revenue will increase only if the demand for its product is inelastic.
D)  The firm's total revenue will increase only if the demand for its product is elastic.

Question 16

A firm would decide to shut down if its production resulted in

Accepted Answer

A)  MR 
B)  ATC > AVC.
C)  AFC > AVC.
D)  MR < AVC.

Question 17

Figure 12-9
  
Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9.If the firm chose to produce at price P₁, the firm would

Accepted Answer

A)  lose an amount equal to its fixed cost.
B)  lose an amount more than fixed cost.
C)  lose an amount less than fixed cost.
D)  break even.

Exam 12: Firms in Perfectly Competitive Markets

What is a long-run supply curve? What does a long-run supply curve look like on a perfectly competitive market graph?

Correct Answer
verified
A long-run supply curve shows the relati...
View Answer

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.If the firm chose to produce at price P₁, the firm would

Correct Answer
verified

Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 12-5.What is the amount of the firm's fixed cost of production?

Correct Answer
verified

A firm will make a profit when

Correct Answer
verified

The perfectly competitive market structure benefits consumers because

Correct Answer
verified

Firms in perfect competition produce the allocatively efficient output in the short run and in the long run.

Correct Answer
verified

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₄, the firm would

Correct Answer
verified

Profit is the difference between

Correct Answer
verified

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₁, the firm would produce

Correct Answer
verified

Figure 12-17 The graphs in Figure 12-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry. -Refer to Figure 12-17.Which of the following statements is true?

Correct Answer
verified

Maximizing average profit is equivalent to maximizing total profit.

Correct Answer
verified

If a perfectly competitive firm raises the price it charges to consumers, which of the following is the most likely outcome?

Correct Answer
verified

An increase in a firm's fixed cost will not change the firm's profit-maximizing output in the short run.

Correct Answer
verified

A perfectly competitive firm's horizontal demand curve implies that the firm does not have to lower its price to sell more output.

Correct Answer
verified

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102, then the firm is probably producing more than its profit-maximizing quantity.

Correct Answer
verified

A firm would decide to shut down if its production resulted in

Correct Answer
verified

Table 12-4 Table 12-4 shows the short-run cost data of a perfectly competitive firm. Assume that output can only be increased in batches of 20 units. -Refer to Table 12-4.If the market price is $45, the firm

Correct Answer
verified

Exam 12: Firms in Perfectly Competitive Markets

What is a long-run supply curve? What does a long-run supply curve look like on a perfectly competitive market graph?

Correct AnswerverifiedA long-run supply curve shows the relati...View AnswerShow Answer

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.If the firm chose to produce at price P₁, the firm would

Correct AnswerverifiedShow Answer

Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 12-5.What is the amount of the firm's fixed cost of production?

Correct AnswerverifiedShow Answer

A firm will make a profit when

Correct AnswerverifiedShow Answer

The perfectly competitive market structure benefits consumers because

Correct AnswerverifiedShow Answer

Firms in perfect competition produce the allocatively efficient output in the short run and in the long run.

Correct AnswerverifiedShow Answer

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₄, the firm would

Correct AnswerverifiedShow Answer

Profit is the difference between

Correct AnswerverifiedShow Answer

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₁, the firm would produce

Correct AnswerverifiedShow Answer

Figure 12-17 The graphs in Figure 12-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry. -Refer to Figure 12-17.Which of the following statements is true?

Correct AnswerverifiedShow Answer

Maximizing average profit is equivalent to maximizing total profit.

Correct AnswerverifiedShow Answer

If a perfectly competitive firm raises the price it charges to consumers, which of the following is the most likely outcome?

Correct AnswerverifiedShow Answer

An increase in a firm's fixed cost will not change the firm's profit-maximizing output in the short run.

Correct AnswerverifiedShow Answer

A perfectly competitive firm's horizontal demand curve implies that the firm does not have to lower its price to sell more output.

Correct AnswerverifiedShow Answer

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102, then the firm is probably producing more than its profit-maximizing quantity.

Correct AnswerverifiedShow Answer

A firm would decide to shut down if its production resulted in

Correct AnswerverifiedShow Answer

Table 12-4 Table 12-4 shows the short-run cost data of a perfectly competitive firm. Assume that output can only be increased in batches of 20 units. -Refer to Table 12-4.If the market price is $45, the firm

Correct AnswerverifiedShow Answer

Correct Answer
verified
A long-run supply curve shows the relati...
View Answer

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