Question 1

-Refer to the above figure.If the market price is equal to A,which statement can be made about profits?

Accepted Answer

A)  Profits are positive and equal to BCEA.
B)  Profits are positive and equal to BCFG.
C)  Profits are negative and equal to BCEA.
D)  Profits are negative and equal to GFQ * 0.E) All of the above
F) A) and B)

Question 2

In the long run,all firms in a perfectly competitive industry

Accepted Answer

A)  earn economic profits.
B)  break even.
C)  suffer economic losses.
D)  sell differentiated products to earn economic profits.E) All of the above
F) A) and B)

Question 3

What is marginal cost pricing? Why is marginal cost pricing important?

Accepted Answer

Marginal cost pricing is a situation in ...

Question 4

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

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) A) and B)
F) All of the above

Question 5

Why is the demand curve horizontal for a perfectly competitive firm?

Accepted Answer

The demand curve for a perfect...

Question 6

If there is no output for which product price is sufficient to cover variable costs,

Accepted Answer

A)  the firm should stay open in the short-run.
B)  the firm should shut down in the short run.
C)  the firm earns economic profits by staying open.
D)  the firm should increase production.E) B) and C)
F) All of the above

Question 7

A firm in a perfectly competitive industry faces the following cost and revenue conditions: ATC = $6; AVC = $3; MR = MC = $5.The firm is

Accepted Answer

A)  earning economic profits.
B)  experiencing economic losses.
C)  experiencing zero profits.
D)  in a position in which it should shut down.E) None of the above
F) A) and B)

Question 8

A constant-cost industry is one in which

Accepted Answer

A)  output increases lead to productivity gains.
B)  the marginal product of labor is constant.
C)  there is no change in long-run per-unit costs,even as output varies.
D)  each firm has a horizontal long-run average cost curve.E) A) and C)
F) A) and D)

Question 9

"A firm should shut down immediately when it earns zero economic profits." Do you agree or disagree? Explain your answer.

Accepted Answer

Disagree.When a firm earns economic prof...

Question 10

Why does the industry short-run supply curve slope upward?

Accepted Answer

The industry short-run supply curve slop...

Question 11

Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $8.00; AVC = $5.00; MC = $8.00; MR = $9.00.The firm should

Accepted Answer

A)  decrease output.
B)  increase output.
C)  increase price.
D)  continue to produce its current output.E) A) and B)
F) None of the above

Question 12

-In the long run,a perfect competitor

Accepted Answer

A)  earns positive profits but will not make losses.
B)  earns positive economic profits.
C)  earns zero economic profits.
D)  produces at its shutdown point.E) A) and B)
F) All of the above

Question 13

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

Accepted Answer

A)  a decreasing-cost industry.
B)  a constant-cost industry.
C)  an increasing-cost industry.
D)  a situations in which some input prices change as firms enter and exit the industry.E) C) and D)
F) All of the above

Question 14

-In the above figure,the firm will shut down if quantity falls below

Accepted Answer

A)  A.
B)  B.
C)  C.
D)  D.E) C) and D)
F) A) and C)

Question 15

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

Accepted Answer

A)  Horizontal
B)  Increasing
C)  Downward sloping
D)  Upward slopingE) None of the above
F) B) and C)

Question 16

2 is equal to A) Q1 + Q2. B) Q1 + Q3. C) Q2 + Q4. D) Q4 - Q2." class="answers-bank-image d-inline" rel="preload" >
-In the above figure,assuming Firm 1 and Firm 2 are the sole producers in the industry,the industry quantity supplied at price P2 is equal to

Accepted Answer

A)  Q1 + Q2.
B)  Q1 + Q3.
C)  Q2 + Q4.
D)  Q4 - Q2.E) All of the above
F) B) and C)

Question 17

If an industry has constant marginal and average costs,any shift in demand will eventually

Accepted Answer

A)  result in a higher equilibrium price.
B)  be met by a smaller change in quantity supplied.
C)  be met by an equal change in quantity supplied,and equilibrium price will not change.
D)  make economic profits zero in the short run.E) A) and D)
F) A) and C)

Question 18

-In the above figure,at the profit-maximizing rate of production for the perfectly competitive firm total cost is

Accepted Answer

A)  $100.
B)  $70.
C)  $30.
D)  $130.E) A) and D)
F) B) and C)

Question 19

The equation TR/Q is used to compute

Accepted Answer

A)  total cost.
B)  average revenue.
C)  demand.
D)  marginal revenue.E) C) and D)
F) A) and B)

Question 20

-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) B) and C)
F) A) and D)

Exam 10: Perfect Competition

Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $8.00; AVC = $5.00; MC = $8.00; MR = $9.00.The firm should

Correct AnswerverifiedShow Answer

"A firm should shut down immediately when it earns zero economic profits." Do you agree or disagree? Explain your answer.

Correct AnswerverifiedDisagree.When a firm earns economic prof...View AnswerShow Answer

-Refer to the above figure.If the market price is equal to A,which statement can be made about profits?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

In the long run,all firms in a perfectly competitive industry

Correct AnswerverifiedShow Answer

What is marginal cost pricing? Why is marginal cost pricing important?

Correct AnswerverifiedMarginal cost pricing is a situation in ...View AnswerShow Answer

A constant-cost industry is one in which

Correct AnswerverifiedShow Answer

If an industry has constant marginal and average costs,any shift in demand will eventually

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

-In the above figure,assuming Firm 1 and Firm 2 are the sole producers in the industry,the industry quantity supplied at price P2 is equal to

Correct AnswerverifiedShow Answer

-In the above figure,at the profit-maximizing rate of production for the perfectly competitive firm total cost is

Correct AnswerverifiedShow Answer

A firm in a perfectly competitive industry faces the following cost and revenue conditions: ATC = $6; AVC = $3; MR = MC = $5.The firm is

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Why does the industry short-run supply curve slope upward?

Correct AnswerverifiedThe industry short-run supply curve slop...View AnswerShow Answer

-In the long run,a perfect competitor

Correct AnswerverifiedShow Answer

Why is the demand curve horizontal for a perfectly competitive firm?

Correct AnswerverifiedThe demand curve for a perfect...View AnswerShow Answer

-In the above figure,the firm will shut down if quantity falls below

Correct AnswerverifiedShow Answer

If there is no output for which product price is sufficient to cover variable costs,

Correct AnswerverifiedShow Answer

The equation TR/Q is used to compute

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
Disagree.When a firm earns economic prof...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Marginal cost pricing is a situation in ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

-In the above figure,assuming Firm 1 and Firm 2 are the sole producers in the industry,the industry quantity supplied at price P₂ is equal to

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The industry short-run supply curve slop...
View Answer

Correct Answer
verified

Correct Answer
verified
The demand curve for a perfect...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified