Question 1

Table 7.1
   Quantity  Total Cost  (dollars)   Variable Cost  (dollars)  0$1000$0100136036020015605603001960960400276017605004000300060058004800\begin{array} { | c | c | c | } \hline 	ext { Quantity } & \begin{array} { c } 	ext { Total Cost } \	ext { (dollars)  }\end{array} & \begin{array} { c } 	ext { Variable Cost } \	ext { (dollars)  }\end{array} \\hline 0 & \$ 1000 & \$ 0 \\hline 100 & 1360 & 360 \\hline 200 & 1560 & 560 \\hline 300 & 1960 & 960 \\hline 400 & 2760 & 1760 \\hline 500 & 4000 & 3000 \\hline 600 & 5800 & 4800 \\hline\end{array} Quantity 0100200300400500600​ Total Cost  (dollars)  ​$1000136015601960276040005800​ Variable Cost  (dollars)  ​$0360560960176030004800​​  Table 7.1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
-Refer to Table 7.1.If the market price of each camera case is $8,the firm's total revenue is

Accepted Answer

A)   $2400.
B)   $3200.
C)   $4000.
D)   $4800. E) A) and B)
F) C) and D)

Question 2

Perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit.This condition is referred to as

Accepted Answer

A)   productive efficiency.
B)   constant returns to scale.
C)   allocative efficiency.
D)   perfectly competitive efficiency.E) A) and B)
F) A) and C)

Question 3

What are the two options for a firm that is operating at a loss in the short run?

Accepted Answer

A)   To reduce output or reduce its variable costs
B)   To go out of business or declare bankruptcy
C)   To shut down temporarily or continue to produce
D)   To adopt new technology or change the size of its physical plantE) A) and B)
F) A) and C)

Question 4

If a firm's total variable cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Accepted Answer

A) True 
 B)False

Question 5

If a typical firm in a perfectly competitive industry is earning profits,then

Accepted Answer

A)   all firms will continue to earn profits.
B)   new firms will enter in the long run causing market supply to decrease, market price to rise and profits to increase.
C)   new firms will enter in the long run causing market supply to increase, market price to fall and profits to decrease.
D)   the number of firms in the industry will remain constant in the long run.E) A) and D)
F) A) and C)

Question 6

How are a wheat farmer and a firm similar in a perfectly competitive market?

Accepted Answer

A)   Both face vertical demand curves.
B)   Both have to lower their prices if a rival firm lowers its price.
C)   Both face horizontal demand curves.
D)   Both will earn an economic profit if their total revenue equals their total cost.E) C) and D)
F) None of the above

Question 7

If total variable cost exceeds total revenue at all output levels,a perfectly competitive firm

Accepted Answer

A)   should produce in the short run.
B)   is making short-run profits.
C)   should shut down in the short run.
D)   has covered its fixed cost.E) None of the above
F) All of the above

Question 8

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.E) None of the above
F) A) and B)

Question 9

For a perfectly competitive firm,at the profit-maximising output,average revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 10

A perfectly competitive firm in a constant-cost industry produces 3000 units of a good at a total cost of $36 000.The prevailing market price is $15.What will happen to the number of firms in the industry and to the industry's output in the long run?

Accepted Answer

A)   The number of firms and the industry's output increase.
B)   The number of firms and the industry's output decrease.
C)   The number of firms remains constant and the industry's output increases.
D)   The number of firms remains constant and the industry's output decreases.E) A) and C)
F) A) and B)

Question 11

Suppose there are economies of scale in the production of a specialised memory chip that is used in manufacturing microwaves.This suggests that the microwave industry is a decreasing-cost industry.

Accepted Answer

A) True 
 B)False

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.E) B) and C)
F) All of the above

Question 13

If the market price is $25 in a perfectly competitive market,what is the marginal revenue from selling the fifth unit?

Accepted Answer

A)   $5.
B)   $12.50.
C)   $25.
D)   $125.E) B) and C)
F) A) and B)

Question 14

A constant cost,perfectly competitive market is in long-run equilibrium.At present,there are 1000 firms each producing 400 units of output.The price of the good is $60.Now suppose there is a sudden increase in demand for the industry's product which causes the price of the good to rise to $64.In the new long-run equilibrium,how will the average total cost of producing the good compare to what it was before the price of the good rose?

Accepted Answer

A)   The average total cost will be higher than it was before the price increase since the increase in demand will drive up input prices.
B)   The average total cost will be lower than it was before the price increase because of economies of scale.
C)   The average total cost will be higher than it was before the price increase because of diseconomies of scale arising from the increased demand.
D)   The average total cost will be the same as it was before the price increase.E) A) and B)
F) A) and C)

Question 15

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

Accepted Answer

A)   There is a large number of independently acting small sellers.
B)   All sellers sell products that are differentiated.
C)   There are low barriers to entry of new firms.
D)   Each firm must react to actions of other firms.E) All of the above
F) None of the above

Question 16

What is implied by a very large number of small sellers who sell identical products?

Accepted Answer

A)   A multitude of vastly different selling prices
B)   A downward-sloping demand for each seller's product
C)   The inability of one seller to influence price
D)   Chaos in the marketE) B) and C)
F) A) and B)

Question 17

In a graph that illustrates a perfectly competitive firm,marginal revenue is

Accepted Answer

A)   a diagonal line that lies below the firm's demand curve.
B)   a line that intersects the firm's demand curve from below at its lowest point.
C)   a line that intersects the firm's average total cost curve from below at its lowest point.
D)   the same as the firm's demand curve.E) C) and D)
F) B) and D)

Question 18

Mark Frost grows apples in a perfectly competitive market.If we drew a line in a graph that illustrates Mark's total revenue from selling apples,it would be

Accepted Answer

A)   a straight, upward-sloping line.
B)   a horizontal line.
C)   a straight, downward-sloping line.
D)   a curve that is negatively sloped at low levels of output and positively sloped at higher levels of output.E) None of the above
F) All of the above

Question 19

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit,then

Accepted Answer

A)   marginal revenue is less than price.
B)   average total cost is at a minimum.
C)   total revenue equals total cost.
D)   price exceeds average total cost.E) A) and B)
F) B) and C)

Question 20

In the long run,a firm in a perfectly competitive industry will supply output only if its total revenue covers its

Accepted Answer

A)   explicit plus its implicit costs.
B)   fixed costs.
C)   implicit costs.
D)   explicit costs.E) All of the above
F) None of the above

Exam 7: Firms in Perfectly Competitive Markets

If a firm's total variable cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

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

In a graph that illustrates a perfectly competitive firm,marginal revenue is

Correct Answer
verified

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit,then

Correct Answer
verified

If total variable cost exceeds total revenue at all output levels,a perfectly competitive firm

Correct Answer
verified

A perfectly competitive firm in a constant-cost industry produces 3000 units of a good at a total cost of $36 000.The prevailing market price is $15.What will happen to the number of firms in the industry and to the industry's output in the long run?

Correct Answer
verified

Mark Frost grows apples in a perfectly competitive market.If we drew a line in a graph that illustrates Mark's total revenue from selling apples,it would be

Correct Answer
verified

For a perfectly competitive firm,at the profit-maximising output,average revenue equals marginal cost.

Correct Answer
verified

If a typical firm in a perfectly competitive industry is earning profits,then

Correct Answer
verified

Perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit.This condition is referred to as

Correct Answer
verified

If total revenue exceeds fixed cost,a firm

Correct Answer
verified

If the market price is $25 in a perfectly competitive market,what is the marginal revenue from selling the fifth unit?

Correct Answer
verified

Suppose there are economies of scale in the production of a specialised memory chip that is used in manufacturing microwaves.This suggests that the microwave industry is a decreasing-cost industry.

Correct Answer
verified

Correct Answer
verified

What is implied by a very large number of small sellers who sell identical products?

Correct Answer
verified

Correct Answer
verified

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

Correct Answer
verified

What are the two options for a firm that is operating at a loss in the short run?

Correct Answer
verified

In the long run,a firm in a perfectly competitive industry will supply output only if its total revenue covers its

Correct Answer
verified

How are a wheat farmer and a firm similar in a perfectly competitive market?

Correct Answer
verified

Exam 7: Firms in Perfectly Competitive Markets

If a firm's total variable cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

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

In a graph that illustrates a perfectly competitive firm,marginal revenue is

Correct AnswerverifiedShow Answer

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit,then

Correct AnswerverifiedShow Answer

If total variable cost exceeds total revenue at all output levels,a perfectly competitive firm

Correct AnswerverifiedShow Answer

A perfectly competitive firm in a constant-cost industry produces 3000 units of a good at a total cost of $36 000.The prevailing market price is $15.What will happen to the number of firms in the industry and to the industry's output in the long run?

Correct AnswerverifiedShow Answer

Mark Frost grows apples in a perfectly competitive market.If we drew a line in a graph that illustrates Mark's total revenue from selling apples,it would be

Correct AnswerverifiedShow Answer

For a perfectly competitive firm,at the profit-maximising output,average revenue equals marginal cost.

Correct AnswerverifiedShow Answer

If a typical firm in a perfectly competitive industry is earning profits,then

Correct AnswerverifiedShow Answer

Perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit.This condition is referred to as

Correct AnswerverifiedShow Answer

If total revenue exceeds fixed cost,a firm

Correct AnswerverifiedShow Answer

If the market price is $25 in a perfectly competitive market,what is the marginal revenue from selling the fifth unit?

Correct AnswerverifiedShow Answer

Suppose there are economies of scale in the production of a specialised memory chip that is used in manufacturing microwaves.This suggests that the microwave industry is a decreasing-cost industry.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

What is implied by a very large number of small sellers who sell identical products?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What are the two options for a firm that is operating at a loss in the short run?

Correct AnswerverifiedShow Answer

In the long run,a firm in a perfectly competitive industry will supply output only if its total revenue covers its

Correct AnswerverifiedShow Answer

How are a wheat farmer and a firm similar in a perfectly competitive market?

Correct AnswerverifiedShow Answer

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