Question 1

Use a graph to show the demand,AVC,ATC,MC,and MR curves of a firm that should temporarily shut down in the short run.Identify the shutdown point on the graph.
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Accepted Answer

The answer of Use a graph to show the demand,AVC,ATC,MC,and...

Question 2

In the long run,a perfectly competitive market will

Accepted Answer

A)   produce only the quantity of output that yields a long-run profit for the typical firm.
B)   supply whatever amount consumers will buy at a price which earns the market an economic profit.
C)   supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve.
D)   generate a long-run equilibrium where the typical firm operates at a loss.

Question 3

If the market price is $25,what is the average revenue of selling five units?

Accepted Answer

A)   $5.
B)   $12.50.
C)   $25.
D)   $125.

Question 4

Which of the following is not a characteristic of a perfectly competitive market structure?

Accepted Answer

A)   There are a very large number of firms that are small compared to the market.
B)   All firms sell identical products.
C)   There are no restrictions to entry by new firms.
D)   There are restrictions on exit of firms.

Question 5

A perfectly competitive firm in a constant-cost industry produces 1000 units of a good at a total cost of $50 000.The prevailing market price is $48.Assuming that this firm continues to produce in the long run,what happens to output level in the long run?

Accepted Answer

A)   The firm's output falls.
B)   The firm's output increases.
C)   The firm produces the same output level.
D)   There is insufficient information to answer the question.

Question 6

Marginal revenue is

Accepted Answer

A)   total revenue divided by the total quantity of output.
B)   the change in profit divided by the change in the quantity of output.
C)   the change in total revenue divided by the change in total cost.
D)   the change in total revenue divided by the change in the quantity of output.

Question 7

Why is the demand curve for each seller's product in perfect competition horizontal at the market price?

Accepted Answer

A)   Because each seller is too small to affect market price
B)   Because the price is set by the government
C)   Because all the sellers get together and set the price
D)   Because all the demanders get together and set the price

Question 8

Figure 7.8 
-Refer to Figure 7.8.What is total revenue at the profit-maximising level of output?

Accepted Answer

A)   $1200
B)   $2500
C)   $4800
D)   $6000

Question 9

If firms do not earn economic profits in a competitive equilibrium,why would the firms choose to stay in business?
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Accepted Answer

When firms earn no economic profit but e...

Question 10

For a perfectly competitive firm,which of the following is not true at profit maximisation?

Accepted Answer

A)   Market price is greater than marginal cost.
B)   Marginal revenue equals marginal cost.
C)   Total revenue minus total cost is maximised.
D)   Price equals marginal cost.

Question 11

A perfectly competitive apple farm produces 1000 bushels of apples at a total cost of $36 000.The price of each bushel is $50.The firm's short-run profit or loss is

Accepted Answer

A)   loss of $14 000.
B)   profit of $14 000.
C)   profit of $50 000.
D)   There is insufficient information to answer the question.

Question 12

If a perfectly competitive apple farm's marginal revenue exceeds the marginal cost of the last bushel of apples sold,to maximise its profit,the farm should

Accepted Answer

A)   determine what the total revenue and total cost of production are.
B)   increase output.
C)   decrease output.
D)   lower its price to sell more.

Question 13

What is allocative efficiency?

Accepted Answer

A)   It refers to a situation in which resources are allocated to their highest profit use.
B)   It refers to a situation in which resources are allocated such that goods can be produced at their lowest possible average cost.
C)   It refers to a situation in which resources are allocated such that the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it.
D)   It refers to a situation in which resources are allocated fairly to all consumers in a society.

Question 14

Jason,a high-school student,mows lawns for families in his neighbourhood.The going rate is $12 for each lawn-mowing service.Jason would like to charge $20 because he believes he has more experience mowing lawns than the many other teenagers who also offer the same service.If the market for lawn mowing services were perfectly competitive,what would happen if Jason raised his price?

Accepted Answer

A)   He would lose some but not all his customers.
B)   Initially, his customers might complain but over time they will come to accept the new rate.
C)   If Jason raises his price, he would lose all his customers.
D)   If Jason raises his price, then all others supplying the same service will also raise their prices.

Question 15

For a perfectly competitive firm,to what is average revenue equal?

Accepted Answer

A)   Marginal cost
B)   The market price
C)   Total revenue
D)   Average fixed cost

Question 16

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 17

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

Accepted Answer

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

Question 18

Figure 7.7  Figure 7.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm.
-Refer to Figure 7.7.Identify the short-run shut down point for the firm.

Accepted Answer

A)   a
B)   b
C)   c
D)   d

Question 19

For a firm in a perfectly competitive market,price is

Accepted Answer

A)   equal to both average revenue and marginal revenue.
B)   equal to average revenue but greater than marginal revenue.
C)   greater than marginal revenue but less than average revenue.
D)   less than both average revenue and marginal revenue.

Question 20

What does an industry's long-run supply curve show?

Accepted Answer

A)   The relationship in the long run between market price and quantity supplied.
B)   How the government determines the price of the product.
C)   How average productivity is changing.
D)   Greater than normal profit.

Exam 7: Firms in Perfectly Competitive Markets

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

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A perfectly competitive firm in a constant-cost industry produces 1000 units of a good at a total cost of $50 000.The prevailing market price is $48.Assuming that this firm continues to produce in the long run,what happens to output level in the long run?

Correct Answer
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For a firm in a perfectly competitive market,price is

Correct Answer
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Correct Answer
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When firms earn no economic profit but e...
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Marginal revenue is

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For a perfectly competitive firm,to what is average revenue equal?

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In the long run,a perfectly competitive market will

Correct Answer
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What does an industry's long-run supply curve show?

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Why is the demand curve for each seller's product in perfect competition horizontal at the market price?

Correct Answer
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Correct Answer
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What is allocative efficiency?

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If a perfectly competitive apple farm's marginal revenue exceeds the marginal cost of the last bushel of apples sold,to maximise its profit,the farm should

Correct Answer
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If the market price is $25,what is the average revenue of selling five units?

Correct Answer
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Figure 7.7 Figure 7.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 7.7.Identify the short-run shut down point for the firm.

Correct Answer
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A perfectly competitive apple farm produces 1000 bushels of apples at a total cost of $36 000.The price of each bushel is $50.The firm's short-run profit or loss is

Correct Answer
verified

Correct Answer
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Figure 7.8 -Refer to Figure 7.8.What is total revenue at the profit-maximising level of output?

Correct Answer
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For a perfectly competitive firm,which of the following is not true at profit maximisation?

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Which of the following is not a characteristic of a perfectly competitive market structure?

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

Correct Answer
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Exam 7: Firms in Perfectly Competitive Markets

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

Correct AnswerverifiedShow Answer

A perfectly competitive firm in a constant-cost industry produces 1000 units of a good at a total cost of $50 000.The prevailing market price is $48.Assuming that this firm continues to produce in the long run,what happens to output level in the long run?

Correct AnswerverifiedShow Answer

For a firm in a perfectly competitive market,price is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedWhen firms earn no economic profit but e...View AnswerShow Answer

Marginal revenue is

Correct AnswerverifiedShow Answer

For a perfectly competitive firm,to what is average revenue equal?

Correct AnswerverifiedShow Answer

In the long run,a perfectly competitive market will

Correct AnswerverifiedShow Answer

What does an industry's long-run supply curve show?

Correct AnswerverifiedShow Answer

Why is the demand curve for each seller's product in perfect competition horizontal at the market price?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is allocative efficiency?

Correct AnswerverifiedShow Answer

If a perfectly competitive apple farm's marginal revenue exceeds the marginal cost of the last bushel of apples sold,to maximise its profit,the farm should

Correct AnswerverifiedShow Answer

If the market price is $25,what is the average revenue of selling five units?

Correct AnswerverifiedShow Answer

Figure 7.7 Figure 7.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 7.7.Identify the short-run shut down point for the firm.

Correct AnswerverifiedShow Answer

A perfectly competitive apple farm produces 1000 bushels of apples at a total cost of $36 000.The price of each bushel is $50.The firm's short-run profit or loss is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 7.8 -Refer to Figure 7.8.What is total revenue at the profit-maximising level of output?

Correct AnswerverifiedShow Answer

For a perfectly competitive firm,which of the following is not true at profit maximisation?

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of a perfectly competitive market structure?

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

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When firms earn no economic profit but e...
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