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

Ted's Pancake Kitchen suffers a short-run loss. When should Ted decide to shut down rather than continue to produce?

Accepted Answer

A)   if his Kitchen's revenue is less than its variable costs
B)   if his Kitchen's revenue is less than its fixed costs
C)   if his Kitchen's revenue is less than its explicit costs
D)   if his Kitchen's revenue is less than its total costs

Question 3

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 will produce

Accepted Answer

A)   60 units.
B)   80 units.
C)   100 units
D)   120 units

Question 4

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 5

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. The figure shows the cost structure of a firm in a perfectly competitive market. If the firm's fixed cost increases by $1,000 due to a new environmental regulation, what happens to its profit-maximizing output level?

Accepted Answer

A)   It increases.
B)   It decreases.
C)   It remains the same.
D)   It could increase, decrease or remain constant, depending on whether the firm is able to cut costs somewhere else.

Question 6

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

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.

Question 7

A perfectly competitive industry achieves allocative efficiency in the long run. What does allocative efficiency mean?

Accepted Answer

A)   Each firm produces up to the point where the price of the good equals the marginal cost of producing the last unit.
B)   Each firm produces up to the point where all scale economies are exhausted.
C)   Production occurs at the lowest average total cost.
D)   Firms use an input combination that minimizes cost and maximizes output.

Question 8

Which of the following does not hold true for a perfectly competitive firm in long-run equilibrium?

Accepted Answer

A)   Its economic profit will be zero.
B)   It will minimize average total cost.
C)   It will charge a price equal to marginal cost.
D)   Marginal cost will be minimized.

Question 9

Figure 12-10 
-Refer to Figure 12-10. The total cost at the profit-maximizing output level equals

Accepted Answer

A)   $4,800.
B)   $3,300.
C)   $2,500.
D)   $1,800.

Question 10

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 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. If the market price is $20, what is the firm's profit-maximizing output?

Accepted Answer

A)   750 units
B)   1,100 units
C)   1,350 units
D)   1,800 units

Question 12

Which of the following describes the difference between the market demand curve for a perfectly competitive industry and the demand curve for a firm in this industry?

Accepted Answer

A)   The market demand curve is a horizontal line; the firm's demand curve is downward sloping.
B)   The market demand curve is downward sloping; the firm's demand curve is a vertical line.
C)   The market demand curve cannot have a constant slope; the firm's demand curve has a slope equal to zero.
D)   The market demand curve is downward sloping; the firm's demand curve is a horizontal line.

Question 13

A perfectly competitive firm's marginal revenue curve is downward sloping.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Figure 12-12 
-Refer to Figure 12-12. Consider a typical firm in a perfectly competitive industry that makes short-run profits. Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Accepted Answer

A)   Panel A
B)   Panel B
C)   Panel C
D)   Panel D

Question 16

Which of the following is not true for a firm in perfect competition?

Accepted Answer

A)   Profit equals total revenue minus total cost.
B)   Price equals average revenue.
C)   Average revenue is greater than marginal revenue.
D)   Marginal revenue equals the change in total revenue from selling one more unit.

Question 17

If the market price is $40 in a perfectly competitive market, the marginal revenue from selling the fifth unit is

Accepted Answer

A)   $8.
B)   $20.
C)   $40.
D)   $200.

Question 18

Figure 12-9  Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-If total revenue exceeds fixed cost, a firm

Accepted Answer

A)   should produce in the short run.
B)   has covered its variable cost.
C)   is making short-run profits.
D)   may or may not produce in the short run, depending on whether total revenue covers variable cost.

Question 19

Figure 12-7  Figure 12-7 illustrates the cost curves of a perfectly competitive firm.
-Refer to Figure 12-7. If the market price is P3, the firm

Accepted Answer

A)   will break even.
B)   will make a profit.
C)   will earn enough revenue to cover its variable costs but not its fixed costs.
D)   will produce a quantity of Q1.

Question 20

Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney. The lease has five years remaining and requires a monthly payment of $4,000. The lease

Accepted Answer

A)   is a fixed cost of operating the tattoo parlor.
B)   is a variable cost of operating the tattoo parlor.
C)   is an implicit cost of operating the tattoo parlor.
D)   is part of the marginal cost of operating the tattoo parlor.

Exam 12: Firms in Perfectly Competitive Markets

Correct Answer
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A perfectly competitive firm's marginal revenue curve is downward sloping.

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Marginal revenue is

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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. If the market price is $20, what is the firm's profit-maximizing output?

Correct Answer
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Ted's Pancake Kitchen suffers a short-run loss. When should Ted decide to shut down rather than continue to produce?

Correct Answer
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If the market price is $40 in a perfectly competitive market, the marginal revenue from selling the fifth unit is

Correct Answer
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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 will produce

Correct Answer
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Figure 12-7 Figure 12-7 illustrates the cost curves of a perfectly competitive firm. -Refer to Figure 12-7. If the market price is P3, the firm

Correct Answer
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Figure 12-12 -Refer to Figure 12-12. Consider a typical firm in a perfectly competitive industry that makes short-run profits. Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Correct Answer
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Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -If total revenue exceeds fixed cost, a firm

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

Correct Answer
verified

Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney. The lease has five years remaining and requires a monthly payment of $4,000. The lease

Correct Answer
verified

A perfectly competitive industry achieves allocative efficiency in the long run. What does allocative efficiency mean?

Correct Answer
verified

Profit is the difference between

Correct Answer
verified

Which of the following is not true for a firm in perfect competition?

Correct Answer
verified

Which of the following describes the difference between the market demand curve for a perfectly competitive industry and the demand curve for a firm in this industry?

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

Which of the following does not hold true for a perfectly competitive firm in long-run equilibrium?

Correct Answer
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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

Correct Answer
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Figure 12-10 -Refer to Figure 12-10. The total cost at the profit-maximizing output level equals

Correct Answer
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Exam 12: Firms in Perfectly Competitive Markets

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A perfectly competitive firm's marginal revenue curve is downward sloping.

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Marginal revenue is

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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. If the market price is $20, what is the firm's profit-maximizing output?

Correct AnswerverifiedShow Answer

Ted's Pancake Kitchen suffers a short-run loss. When should Ted decide to shut down rather than continue to produce?

Correct AnswerverifiedShow Answer

If the market price is $40 in a perfectly competitive market, the marginal revenue from selling the fifth unit is

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 will produce

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Figure 12-7 Figure 12-7 illustrates the cost curves of a perfectly competitive firm. -Refer to Figure 12-7. If the market price is P3, the firm

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Figure 12-12 -Refer to Figure 12-12. Consider a typical firm in a perfectly competitive industry that makes short-run profits. Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

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Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -If total revenue exceeds fixed cost, a firm

Correct AnswerverifiedShow Answer

For a firm in a perfectly competitive market, price is

Correct AnswerverifiedShow Answer

Max Shreck, an accountant, quit his $80,000-a-year job and bought an existing tattoo parlor from its previous owner, Sylvia Sidney. The lease has five years remaining and requires a monthly payment of $4,000. The lease

Correct AnswerverifiedShow Answer

A perfectly competitive industry achieves allocative efficiency in the long run. What does allocative efficiency mean?

Correct AnswerverifiedShow Answer

Profit is the difference between

Correct AnswerverifiedShow Answer

Which of the following is not true for a firm in perfect competition?

Correct AnswerverifiedShow Answer

Which of the following describes the difference between the market demand curve for a perfectly competitive industry and the demand curve for a firm in this industry?

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

Which of the following does not hold true for a perfectly competitive firm in long-run equilibrium?

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

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Figure 12-10 -Refer to Figure 12-10. The total cost at the profit-maximizing output level equals

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