Question 1

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market.  According to the table shown,what is the market price?

Accepted Answer

A)   $500
B)   $150
C)   $50
D)   $27.50E) B) and D)
F) B) and C)

Question 2

For a firm in a perfectly competitive market,a price decrease:

Accepted Answer

A)   increases the profit-maximizing quantity.
B)   lowers the profit-maximizing quantity.
C)   is unrelated to the profit-maximizing quantity.
D)   signifies the firm should leave the market.E) None of the above
F) A) and D)

Question 3

In the long run,firms in a perfectly competitive market:

Accepted Answer

A)   produce a quantity that maximizes profits.
B)   earn zero economic profit.
C)   choose the level of output that minimizes average total costs.
D)   All of these are true.E) B) and C)
F) All of the above

Question 4

If a firm is earning a positive economic profit,it means that 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)   operating in the long run in a perfectly competitive market.E) None of the above
F) All of the above

Question 5

If a firm in a perfectly competitive market faces a market price of $7,and it decides to increase its production from 4,000 to 12,000 units,the firm's marginal revenue will:

Accepted Answer

A)   diminish once diminishing marginal product sets in.
B)   rise once diminishing marginal product sets in.
C)   stay the same.
D)   increase from $28,000 to $84,000.E) B) and C)
F) A) and B)

Question 6

A firm realizes that the market price has fallen below its average total costs,and it is now earning a loss.What is the best action for the firm to take in the short run?

Accepted Answer

A)   Produce where MC = MR to minimize losses if P > AVC.
B)   Shut down if price is greater than average variable costs.
C)   Produce where MC = MR to minimize losses if P 
D)   Shut down if total revenue is less than fixed costs.E) B) and D)
F) None of the above

Question 7

If the market price falls below the bottom of the firm's ATC curve:

Accepted Answer

A)   there is no level of output at which the firm can make a profit.
B)   the firm is earning profits.
C)   the market price must be lower than the firm's AVC.
D)   Total revenue must be higher than total cost.E) A) and D)
F) B) and C)

Question 8

In a perfectly competitive market,when the price is greater than the minimum average total cost for all firms:

Accepted Answer

A)   positive economic profits are being earned.
B)   firms will enter, causing the price to increase.
C)   firms will exit, causing the price to drop.
D)   None of these is true.E) All of the above
F) B) and C)

Question 9

Which of the following holds true at the chosen level of output in the long run for firms in a perfectly competitive market?

Accepted Answer

A)   P > MC
B)   P = minimum AVC
C)   MR = MC
D)   MR > MCE) A) and B)
F) B) and D)

Question 10

This graph represents the cost and revenue curves of a firm in a perfectly competitive market.  According to the graph shown,if a firm is producing at Q1:

Accepted Answer

A)   profits are being maximized.
B)   average total costs exceed the market price.
C)   the firm should not increase production because it will earn loss.
D)   marginal revenue is greater than average total cost.E) B) and C)
F) B) and D)

Question 11

When the market price has fallen below a firm's ATC but is above its AVC,in the short run,the firm:

Accepted Answer

A)   then MC must be greater than MR.
B)   can minimize its losses by staying open.
C)   is earning positive profits.
D)   then a firm is covering all of its fixed costs, but not all of its variable costs.E) A) and B)
F) B) and D)

Question 12

In a perfectly competitive market,total revenue:

Accepted Answer

A)   measures how much revenue the firm takes in from all sales less any costs they incur.
B)   is equal to price multiplied by quantity sold.
C)   varies due to changes in price, since quantity is constant.
D)   should vary across firms.E) A) and B)
F) A) and C)

Question 13

If demand increases in a perfectly competitive market,then in the short run supply will:

Accepted Answer

A)   increase.
B)   decrease.
C)   not change.
D)   either increase or decrease.E) B) and D)
F) A) and D)

Question 14

In a perfectly competitive market,producers:

Accepted Answer

A)   are able to sell as much as they want without affecting the market price.
B)   can influence the price upward by restricting output.
C)   often undercut the competition's price and force firms to leave the market.
D)   None of these is true of perfectly competitive markets.E) B) and D)
F) B) and C)

Question 15

As long as market price remains above the average total cost,and the firm chooses the profit-maximizing level of output,it will:

Accepted Answer

A)   make profits.
B)   earn zero profits.
C)   make a loss.
D)   Any of these is possible.E) A) and D)
F) A) and C)

Question 16

Because market price always tends back to the minimum average total cost for all identical firms in a perfectly competitive market in the long run,in theory:

Accepted Answer

A)   the supply will remain a constant quantity.
B)   price will be the same at any quantity.
C)   the supply curve will be upward sloping.
D)   the supply curve may be downward sloping.E) B) and C)
F) A) and D)

Question 17

If a firm in a perfectly competitive market faces a market price of $5,and it decides to produce 400 units,the firm's total revenue will be:

Accepted Answer

A)   $5.
B)   $400.
C)   $2,000.
D)   $405.E) A) and C)
F) A) and B)

Question 18

Firms in perfectly competitive markets who wish to maximize profits should:

Accepted Answer

A)   keep producing more as long as marginal cost is less than marginal revenue.
B)   produce less as long as marginal cost is greater than marginal revenue.
C)   produce where marginal cost and marginal revenue are equal.
D)   All of these are true.E) A) and C)
F) C) and D)

Question 19

For a firm in a perfectly competitive market,if it 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) C) and D)
F) All of the above

Question 20

For a firm in a perfectly competitive market,if it produces where marginal cost exceeds 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)   is impossible to tell if it is actually maximizing profits.E) None of the above
F) C) and D)

Exam 13: Perfect Competition

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

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If the market price falls below the bottom of the firm's ATC curve:

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Because market price always tends back to the minimum average total cost for all identical firms in a perfectly competitive market in the long run,in theory:

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Which of the following holds true at the chosen level of output in the long run for firms in a perfectly competitive market?

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For a firm in a perfectly competitive market,if it produces where marginal cost exceeds marginal revenue it:

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Firms in perfectly competitive markets who wish to maximize profits should:

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In a perfectly competitive market,total revenue:

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This graph represents the cost and revenue curves of a firm in a perfectly competitive market. According to the graph shown,if a firm is producing at Q1:

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This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market. According to the table shown,what is the market price?

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If a firm in a perfectly competitive market faces a market price of $5,and it decides to produce 400 units,the firm's total revenue will be:

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In a perfectly competitive market,producers:

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For a firm in a perfectly competitive market,a price decrease:

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If demand increases in a perfectly competitive market,then in the short run supply will:

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If a firm in a perfectly competitive market faces a market price of $7,and it decides to increase its production from 4,000 to 12,000 units,the firm's marginal revenue will:

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

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A firm realizes that the market price has fallen below its average total costs,and it is now earning a loss.What is the best action for the firm to take in the short run?

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In the long run,firms in a perfectly competitive market:

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As long as market price remains above the average total cost,and the firm chooses the profit-maximizing level of output,it will:

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In a perfectly competitive market,when the price is greater than the minimum average total cost for all firms:

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When the market price has fallen below a firm's ATC but is above its AVC,in the short run,the firm:

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