question
Average revenue minus average total cost equals
a. total economic profit
b. a normal profit
c. economic profit per unit of output
d. marginal cost
e. total accounting profit
a. total economic profit
b. a normal profit
c. economic profit per unit of output
d. marginal cost
e. total accounting profit
answer
C
question
In perfect competition, each firm's output is a large fraction of total market supply.
a. False
b. True
a. False
b. True
answer
A
question
In Exhibit 8-11, total cost at the profit-maximizing output level is shown by area
a. ejx0
b. mfz0
c. giw0
d. abz0
e. cdy0
a. ejx0
b. mfz0
c. giw0
d. abz0
e. cdy0
answer
B
question
Marginal revenue is the change in total revenue from using one more unit of an input in the short run.
a. False
b. True
a. False
b. True
answer
A
question
In the long run, a perfectly competitive market will exhibit
a. zero consumer surplus
b. zero producer surplus
c. allocative and productive efficiency
d. allocative but not productive efficiency
e. positive economic profit
a. zero consumer surplus
b. zero producer surplus
c. allocative and productive efficiency
d. allocative but not productive efficiency
e. positive economic profit
answer
C
question
In the short run, a perfectly competitive ball bearing manufacturer will continue to produce at a loss if
a. it is covering all of its variable cost plus part of its fixed cost
b. fixed cost is zero
c. it is covering all of its fixed cost
d. variable cost is less than fixed cost
e. fixed cost is minimized
a. it is covering all of its variable cost plus part of its fixed cost
b. fixed cost is zero
c. it is covering all of its fixed cost
d. variable cost is less than fixed cost
e. fixed cost is minimized
answer
A
question
The purely competitive firm in Exhibit 8-15 should
a. produce 12 units of output
b. shut down
c. produce 10 units of output
d. produce 20 units of output
e. produce 5 units of output
a. produce 12 units of output
b. shut down
c. produce 10 units of output
d. produce 20 units of output
e. produce 5 units of output
answer
A
question
Which of the following firms is most likely to be a perfectly competitive firm?
a. one of the "Seven Sisters" oil producers
b. a soybean farmer
c. a public school operated by the government
d. a manufacturer of refrigerators
e. one of the three largest U.S. automakers
a. one of the "Seven Sisters" oil producers
b. a soybean farmer
c. a public school operated by the government
d. a manufacturer of refrigerators
e. one of the three largest U.S. automakers
answer
B
question
Profit maximization depends upon demand conditions, as well as upon productivity and costs.
a. False
b. True
a. False
b. True
answer
B
question
With the total cost and total revenue curves, we measure economic profit by the __________ between the two curves. With the per-unit curves, we measure economic profit by a(n) __________.
a. vertical distance, area
b. area, vertical distance
c. vertical distance, horizontal distance
d. horizontal distance, area
e. area, area
a. vertical distance, area
b. area, vertical distance
c. vertical distance, horizontal distance
d. horizontal distance, area
e. area, area
answer
A
question
In Exhibit 8-9, price equals
a. $28
b. $40
c. $12
d. $24
e. $20
a. $28
b. $40
c. $12
d. $24
e. $20
answer
A
question
Marginal revenue is defined as
a. total revenue divided by quantity
b. the change in total revenue divided by quantity
c. the change in total revenue divided by the change in quantity
d. the change in total revenue
e. total revenue minus total cost
a. total revenue divided by quantity
b. the change in total revenue divided by quantity
c. the change in total revenue divided by the change in quantity
d. the change in total revenue
e. total revenue minus total cost
answer
C
question
Which of the following characterizes a perfectly competitive market?
a. perfect information
b. a few firms fiercely competing by slashing prices
c. barriers to entry such as licenses
d. limited resource mobility
e. product differentiation through aggressive advertising
a. perfect information
b. a few firms fiercely competing by slashing prices
c. barriers to entry such as licenses
d. limited resource mobility
e. product differentiation through aggressive advertising
answer
A
question
If a perfectly competitive firm is producing at a quantity at which MC < AVC, it cannot be maximizing profit in the short run.
a. True
b. False
a. True
b. False
answer
A
question
Tim Tupper's term paper-typing business is a perfectly competitive firm in long-run equilibrium. Which of the following does not describes the firm's situation?
a. It will be minimizing average total cost.
b. Entrepreneurs outside the industry will be eager to enter.
c. It will be earning a normal profit.
d. It will be charging a price equal to marginal cost.
e. It will be charging a price equal to average total cost.
a. It will be minimizing average total cost.
b. Entrepreneurs outside the industry will be eager to enter.
c. It will be earning a normal profit.
d. It will be charging a price equal to marginal cost.
e. It will be charging a price equal to average total cost.
answer
B
question
If the market price in Exhibit 8-13 is $6, what is the greatest possible short-run profit for this perfectly competitive firm?
a. $3
b. $20
c. -$30
d. -$3
e. $30
a. $3
b. $20
c. -$30
d. -$3
e. $30
answer
C
question
If price is less than its minimum average variable cost, a perfectly competitive firm that continues to produce in the short run
a. can cover all of its fixed cost and some of its variable cost
b. cannot cover any of its variable cost
c. can cover both its fixed costs and its variable cost
d. incurs a loss greater than its fixed cost
e. can cover all of its variable cost and some of its fixed cost
a. can cover all of its fixed cost and some of its variable cost
b. cannot cover any of its variable cost
c. can cover both its fixed costs and its variable cost
d. incurs a loss greater than its fixed cost
e. can cover all of its variable cost and some of its fixed cost
answer
D
question
The term productive efficiency refers to
a. the production of all goods and services that consumers need
b. any short-run equilibrium position of the competitive firm
c. the equality between average total and average variable cost
d. the production of a good at the lowest long-run average cost
e. satisfying the condition that MR = MC
a. the production of all goods and services that consumers need
b. any short-run equilibrium position of the competitive firm
c. the equality between average total and average variable cost
d. the production of a good at the lowest long-run average cost
e. satisfying the condition that MR = MC
answer
D
question
Which of the following is likely to be present in a perfectly competitive market?
a. nonprice competition such as advertising
b. government licenses
c. high capital costs
d. patents
e. firms producing identical products
a. nonprice competition such as advertising
b. government licenses
c. high capital costs
d. patents
e. firms producing identical products
answer
E
question
A firm in perfectly competitive industry is maximizing profit at Q = 3,000. Then its fixed cost increases. The profit-maximizing output is now
a. equal to 3,000 and profit decreases
b. less than 3,000 and profit decreases
c. greater than 3,000 and profit is unchanged
d. greater than 3,000 and profit decreases
e. equal to 3,000 and profit increases
a. equal to 3,000 and profit decreases
b. less than 3,000 and profit decreases
c. greater than 3,000 and profit is unchanged
d. greater than 3,000 and profit decreases
e. equal to 3,000 and profit increases
answer
A
question
Adam's Apples, a small firm supplying apples in a perfectly competitive market, decides to cut its production in half this year. As a result, the
a. market price will fall
b. market quantity will rise
c. market price will rise
d. total expenditures on apples will rise
e. market price will not be affected
a. market price will fall
b. market quantity will rise
c. market price will rise
d. total expenditures on apples will rise
e. market price will not be affected
answer
E
question
In the short run, a firm will produce a positive amount of output as long as
a. P < AVC at some output level
b. AVC < ATC at some output level
c. P > AVC at some output level
d. FC > TR at some output level
e. P > MC at some output level
a. P < AVC at some output level
b. AVC < ATC at some output level
c. P > AVC at some output level
d. FC > TR at some output level
e. P > MC at some output level
answer
C
question
In Exhibit 8-11, the profit-maximizing output is
a. x
b. z
c. w
d. y
e. 0
a. x
b. z
c. w
d. y
e. 0
answer
B
question
In Exhibit 8-10, total cost at the profit-maximizing output level equals
a. $6,000
b. $3,600
c. $2,800
d. $4,800
e. $4,000
a. $6,000
b. $3,600
c. $2,800
d. $4,800
e. $4,000
answer
D
question
Perfectly competitive markets maximize the sum of producer and consumer surplus.
a. False
b. True
a. False
b. True
answer
B
question
Marginal revenue is the change in total revenue from selling one more unit of output.
a. True
b. False
a. True
b. False
answer
A
question
In a perfectly competitive industry we are likely to find
a. no profit possible in the short run
b. firms producing a wide variety of products
c. firms that can choose the price of their products
d. barriers to entry
e. firms that do not advertise
a. no profit possible in the short run
b. firms producing a wide variety of products
c. firms that can choose the price of their products
d. barriers to entry
e. firms that do not advertise
answer
E
question
Firms in perfect competition have no control over
a. what price to charge
b. how many inputs to use
c. all of the following
d. how much to produce
e. where to operate on their average total cost curves
a. what price to charge
b. how many inputs to use
c. all of the following
d. how much to produce
e. where to operate on their average total cost curves
answer
A
question
A perfectly competitive firm has a horizontal supply curve in the short run.
a. True
b. False
a. True
b. False
answer
B
question
When marginal revenue equals marginal cost, the firm just "breaks even."
a. False
b. True
a. False
b. True
answer
A
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