microecon reinforce learning mod 4

Under perfect competition, the existence of economic profits and losses
a) produces economic inefficiencies leading to the misallocation of resources in the long run.
b) generally causes output in the short run to fall in markets where economic profits are being made and to rise in markets where economic losses are being made.
c) creates hardships for producers, leading to industry concentration in the hands of relatively few producers.
d) ensures that output will not be produced at minimum unit cost in the long rua) produces economic inefficiencies leading to the misallocation of resources in the long run.
b) generally causes output in the short run to fall in markets where economic profits are being made and to rise in markets where economic losses are being made.
c) creates hardships for producers, leading to industry concentration in the hands of relatively few producers.
d) ensures that output will not be produced at minimum unit cost in the long run.
e) causes firms to enter or leave markets and otherwise reallocate resources in the long run.

Which of the following is a principal determinant of the market supply curve?

a) Consumer preferences
b) The level of input prices
c) The price elasticity of demand
d) The number of buyers in the market
e) The level of expenditures in the market

The legal, technical, and financial difficulties a firm must overcome to participate in a particular market are called

a) implicit costs.
b) open market operations.
c) crowding-out conditions.
d) external economies and diseconomies.
e) barriers to entry.

The shape of the total revenue curve of a perfectly competitive firm is

a) a horizontal line.
b) a vertical line.
c) a downward-sloping straight line.
d) an upward-sloping straight line.
e) a parabolic line, rising at first then falling.

The relevant cost for making short-run production decisions is the

a) variable cost.
b) fixed cost.
c) sunk cost.
d) reproduction cost.
e) historic cost.

A perfectly competitive firm has the following cost schedule:
Output units Marginal cost
5,000 $4
6,000 $5
7,000 $6
8,000 $7
9,000 $8

If the firm is a profit-maximizing firm and it can sell its output for $5 each, it should produce


a) 5,000 units.
b) 6,000 units.
c) 7,000 units.
d) 8,000 units.
e) 9,000 units.

7. If a perfectly competitive firm in the short run can sell its output at $2.50 per bushel and it has an average variable cost of $2.75 per bushel and a marginal cost of $2.50 per bushel, it should

a) expand output.
b) raise its price.
c) cut output to zero.
d) advertise.
e) do nothing at all; it is currently maximizing profits.

Which of the following would be excluded from the key characteristics used to classify a market structure?

a) Number of firms
b) Type of product
c) Level of technology
d) Barriers to entry
e) Power of firm over price

In the long run, in a perfectly competitive industry,

a) economic profits are zero.
b) costs of production are zero.
c) average total costs are zero.
d) prices are zero.
e) variable costs are zero.

Profit-maximizing firms should increase output to the point where

a) total revenue is largest.
b) total revenue just exceeds total cost.
c) an increase in revenue is just offset by an increase in cost.
d) fixed costs are covered.
e) total cost is minimized.

If the marginal cost for a perfectly competitive, profit-maximizing firm currently exceeds the price of its output, the firm should

a) expand its output and lower price.
b) continue to produce at the same output rate and raise price.
c) contract output.
d) increase its non price competition.
e) do nothing; it is currently maximizing profits.

If price equals average total cost, economic profit will

a) become large.
b) equal marginal revenue.
c) equal total cost.
d) be zero.
e) exceed output.

In the short run the perfectly competitive firm will produce at a loss rather than discontinue production if

a) there is an output rate at which price exceeds average variable cost.
b) total losses exceed total fixed cost.
c) there is an output rate at which price equals marginal cost.
d) the firm's supply curve is upward sloping.
e) total revenue can be increased by producing more.

A perfectly competitive firm's marginal cost curve above the minimum value of average variable cost is equivalent to the

a) industry demand curve.
b) long-run average cost curve.
c) firm's production function.
d) production possibilities curve.
e) firm's supply curve.

Which of the following characteristics would be inappropriate when describing a perfectly competitive market?

a) Many firms
b) Homogeneous product
c) Some power over price
d) Low barriers to entry
e) No form of non price competition practices

. The Golden Rule of Output Determination for a perfectly competitive firm is to

a) choose the output rate at which price is greatest.
b) choose the output rate at which price equals marginal cost.
c) produce to the point of diminishing marginal returns.
d) produce until total revenue exceeds total cost.
e) choose the output rate at which total cost is the lowest.

17. A price ceiling often necessitates that

a) the government buy up and store surplus production.
b) a formal system of rationing be established.
c) the government encourage producers to buy more at existing prices.
d) consumers be encouraged to buy more at existing prices.
e) producers be required to increase equilibrium prices.