Question 1

Consider the market for wheat which is a perfectly competitive market.Is the market demand curve the same as the demand curve facing an individual producer? If not, explain how and why they are different? Illustrate your answer graphically.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The market demand is downward sloping wh...

Question 2

If the market price is $25, what is the average revenue of selling five units?

Accepted Answer

A)  $5.
B)  $12.50.
C)  $25.
D)  $125.E) A) and D)
F) None of the above

Question 3

Figure 8.5  Figure 8.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 8.5.If the market price is $20, the average profit at the profit-maximising quantity is

Accepted Answer

A)  $5
B)  $6
C)  $9
D)  $20E) A) and B)
F) A) and C)

Question 4

Use a graph to show the demand, AVC, ATC, MC, and MR curves of a firm that should temporarily shut down in the short run.Identify the shutdown point on the graph.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The answer of Use a graph to show the demand,...

Question 5

A teenaged babysitter is similar to a firm in a perfectly competitive industry in that, for both,

Accepted Answer

A)  fixed costs are lower than variable costs.
B)  there are many other suppliers of similar goods or services.
C)  the implicit costs of production exceed the explicit costs of production.
D)  average costs of production do not change when their industry expands.E) A) and B)
F) A) and C)

Question 6

Figure 8.4  Figure 8.4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market.
-Refer to Figure 8.4.Assuming the firm is profit maximising, the amount of its total fixed cost is

Accepted Answer

A)  $1080
B)  $1440
C)  $2520
D)  It cannot be determined.E) A) and C)
F) A) and B)

Question 7

Which of the following could not be used to calculate a firm's total profit?

Accepted Answer

A)  total revenue minus total cost.
B)  average profit per unit times quantity sold.
C)  (price minus average total cost) times quantity sold.
D)  marginal profit times quantity sold.E) None of the above
F) A) and B)

Question 8

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) C) and D)

Question 9

Why is the demand curve for each seller's product in perfect competition horizontal at the market price?

Accepted Answer

A)  Because each seller is too small to affect market price.
B)  Because the price is set by the government.
C)  Because all the sellers get together and set the price.
D)  Because all the demanders get together and set the price.E) A) and B)
F) All of the above

Question 10

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) A) and C)
F) None of the above

Question 11

The statement that does not hold true for a perfectly competitive firm in long-run equilibrium is

Accepted Answer

A)  Its economic profit will be zero.
B)  It will minimise average total cost.
C)  It will charge a price equal to marginal cost.
D)  Marginal cost will be minimised.E) B) and C)
F) A) and C)

Question 12

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 13

Figure 8.7 1, the firm would produce A) Q1 units. B) Q3 units. C) Q5 units. D) zero units." class="answers-bank-image d-inline" rel="preload" > Figure 8.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm.
-Refer to Figure 8.7.At price P1, the firm would produce

Accepted Answer

A)  Q1 units.
B)  Q3 units.
C)  Q5 units.
D)  zero units.E) A) and D)
F) B) and C)

Question 14

The marginal revenue curve for a perfectly competitive firm

Accepted Answer

A)  is downward sloping.
B)  is the same as its demand curve.
C)  is perfectly inelastic.
D)  is the same as its marginal cost curve.E) B) and C)
F) A) and D)

Question 15

Assume that firms in a perfectly competitive market are earning economic profits.The statement which describes the change in market price and output as a result of the entry of new firms into this market is

Accepted Answer

A)  The market demand curve shifts to the right, causing price to rise and market output to increase.
B)  The market demand curve shifts to the left, causing price to fall and market output to decrease.
C)  The short-run market supply curve shifts to the right, causing price to fall and total market output to increase.
D)  The short-run market supply curve shifts to the left, causing price to rise and total market output to decrease.E) A) and B)
F) A) and D)

Question 16

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Accepted Answer

A) True 
 B)False

Question 17

In the short run, if a firm shuts down it avoids its variable cost but not its fixed cost.

Accepted Answer

A) True 
 B)False

Question 18

A firm will make a profit when

Accepted Answer

A)  P > AVC.
B)  P > ATC.
C)  P = ATC.
D)  P = MC.E) A) and B)
F) A) and C)

Question 19

If productive efficiency characterises a market,

Accepted Answer

A)  the marginal cost of production is minimised.
B)  firms produce the goods that consumers desire most.
C)  the output is being produced at the lowest possible cost.
D)  firms use the best technology available to produce the good.E) None of the above
F) All of the above

Question 20

Figure 8.7 2, the firm would produce A) Q2 units. B) Q3 units. C) Q4 units. D) zero units." class="answers-bank-image d-inline" rel="preload" > Figure 8.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm.
-Refer to Figure 8.7.At price P2, the firm would produce

Accepted Answer

A)  Q2 units.
B)  Q3 units.
C)  Q4 units.
D)  zero units.E) None of the above
F) B) and C)

Exam 8: Firms in Perfectly Competitive Markets

Which of the following could not be used to calculate a firm's total profit?

Correct Answer
verified

A firm will make a profit when

Correct Answer
verified

The statement that does not hold true for a perfectly competitive firm in long-run equilibrium is

Correct Answer
verified

If productive efficiency characterises a market,

Correct Answer
verified

Figure 8.7 Figure 8.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 8.7.At price P₁, the firm would produce

Correct Answer
verified

Figure 8.4 Figure 8.4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market. -Refer to Figure 8.4.Assuming the firm is profit maximising, the amount of its total fixed cost is

Correct Answer
verified

Assume that firms in a perfectly competitive market are earning economic profits.The statement which describes the change in market price and output as a result of the entry of new firms into this market is

Correct Answer
verified

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

If the market price is $25, what is the average revenue of selling five units?

Correct Answer
verified

Why is the demand curve for each seller's product in perfect competition horizontal at the market price?

Correct Answer
verified

The marginal revenue curve for a perfectly competitive firm

Correct Answer
verified

Figure 8.7 Figure 8.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 8.7.At price P₂, the firm would produce

Correct Answer
verified

Correct Answer
verified
The market demand is downward sloping wh...
View Answer

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Correct Answer
verified

Figure 8.5 Figure 8.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 8.5.If the market price is $20, the average profit at the profit-maximising quantity is

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

In the short run, if a firm shuts down it avoids its variable cost but not its fixed cost.

Correct Answer
verified

Correct Answer
verified

A teenaged babysitter is similar to a firm in a perfectly competitive industry in that, for both,

Correct Answer
verified

Exam 8: Firms in Perfectly Competitive Markets

Which of the following could not be used to calculate a firm's total profit?

Correct AnswerverifiedShow Answer

A firm will make a profit when

Correct AnswerverifiedShow Answer

The statement that does not hold true for a perfectly competitive firm in long-run equilibrium is

Correct AnswerverifiedShow Answer

If productive efficiency characterises a market,

Correct AnswerverifiedShow Answer

Figure 8.7 Figure 8.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 8.7.At price P1, the firm would produce

Correct AnswerverifiedShow Answer

Figure 8.4 Figure 8.4 shows the cost and demand curves for a profit-maximising firm in a perfectly competitive market. -Refer to Figure 8.4.Assuming the firm is profit maximising, the amount of its total fixed cost is

Correct AnswerverifiedShow Answer

Assume that firms in a perfectly competitive market are earning economic profits.The statement which describes the change in market price and output as a result of the entry of new firms into this market is

Correct AnswerverifiedShow Answer

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

If the market price is $25, what is the average revenue of selling five units?

Correct AnswerverifiedShow Answer

Why is the demand curve for each seller's product in perfect competition horizontal at the market price?

Correct AnswerverifiedShow Answer

The marginal revenue curve for a perfectly competitive firm

Correct AnswerverifiedShow Answer

Figure 8.7 Figure 8.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 8.7.At price P2, the firm would produce

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe market demand is downward sloping wh...View AnswerShow Answer

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Correct AnswerverifiedShow Answer

Figure 8.5 Figure 8.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 8.5.If the market price is $20, the average profit at the profit-maximising quantity is

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

In the short run, if a firm shuts down it avoids its variable cost but not its fixed cost.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A teenaged babysitter is similar to a firm in a perfectly competitive industry in that, for both,

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Figure 8.7 Figure 8.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 8.7.At price P₁, the firm would produce

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Figure 8.7 Figure 8.7 shows cost and demand curves facing a profit-maximising, perfectly competitive firm. -Refer to Figure 8.7.At price P₂, the firm would produce

Correct Answer
verified

Correct Answer
verified
The market demand is downward sloping wh...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified