Question 1

In the short run,the relevant costs for a firm to consider whether to shut down production are:

Accepted Answer

A)   average total costs.
B)   average variable costs.
C)   average fixed costs.
D)   fixed costs.E) All of the above
F) A) and C)

Question 2

The profit-maximizing level of output for any firm in a perfectly competitive market is to produce where:

Accepted Answer

A)   MC = MR.
B)   MC > MR.
C)   MC 
D)   MR = P*.E) All of the above
F) None of the above

Question 3

In the long run,firms in a perfectly competitive market choose to produce a quantity:

Accepted Answer

A)   that earns zero economic profits.
B)   that does not cover minimum average variable costs.
C)   where marginal costs are less than average variable costs.
D)   where ATC and AVC are at their minimum values.E) All of the above
F) B) and D)

Question 4

Having free entry and exit in a market can help drive:

Accepted Answer

A)   innovation.
B)   cost-cutting.
C)   quality improvements.
D)   All of these occur more often with free entry and exit.E) All of the above
F) A) and B)

Question 5

If a firm in a perfectly competitive market faces the cost curves in the graph shown and observes a market price of $13,the firm:

Accepted Answer

A)   can make positive profits by producing more than 35 units.
B)   can make positive profits by producing where MC = MR.
C)   cannot make positive profits and should shut down in the short run.
D)   should continue to operate in the short run, but plan to exit in the long run.E) A) and C)
F) None of the above

Question 6

The short-run shutdown rule is to shut down if:

Accepted Answer

A)   P > AVC.
B)   P 
C)   P > ATC.
D)   P < ATC.E) None of the above
F) All of the above B

Question 7

For firms that sell one product in a perfectly competitive market,average revenue is:

Accepted Answer

A)   calculated by total output divided by total revenue.
B)   equal to marginal cost.
C)   equal to the market price.
D)   greater than market price.E) B) and D)
F) A) and C)

Question 8

The number of firms in a perfectly competitive market:

Accepted Answer

A)   is fixed in the short run.
B)   is fixed in the long run.
C)   varies in the short run.
D)   is the same at all possible long-run equilibria.E) None of the above
F) A) and D)

Question 9

Of the curves displayed in graph shown,what does curve C most likely represent?

Accepted Answer

A)   Marginal cost
B)   Average total cost
C)   Average variable cost
D)   Marginal revenueE) A) and B)
F) B) and C) C

Question 10

When demand increases in a perfectly competitive market,the market price:

Accepted Answer

A)   increases in the short run and falls in the long run.
B)   decreases in the short run and increases in the long run.
C)   increases in the short run and stays permanently higher in the long run.
D)   decreases in the short run and stays permanently lower in the long run.E) B) and D)
F) A) and D)

Question 11

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market. nd unit, then increase. D)  increase until the 4th unit, then decrease." class="answers-bank-image d-inline" rel="preload" > According to the table shown,the firm's marginal costs:

Accepted Answer

A)   are constant.
B)   increase as output increases.
C)   decrease until the 2nd unit, then increase.
D)   increase until the 4th unit, then decrease.E) C) and D)
F) None of the above

Question 12

In a perfectly competitive market,when the price is greater than the minimum average total cost for most firms,some will:

Accepted Answer

A)   exit until the price drops to equal minimum ATC.
B)   enter until the price drops to equal minimum ATC.
C)   exit until the price increases to equal minimum ATC.
D)   enter until the price increases to equal minimum ATC.E) A) and D)
F) B) and C)

Question 13

In the long run in a perfectly competitive market:

Accepted Answer

A)   firms earn zero economic profits.
B)   firms operate at an efficient scale.
C)   supply is perfectly elastic when all firms have the same cost structure.
D)   All of these are true.E) None of the above
F) All of the above D

Question 14

When economic profits are zero for a firm in a perfectly competitive market,it means that:

Accepted Answer

A)   average total costs are zero.
B)   price is equal to minimum average total cost.
C)   average variable costs are minimized.
D)   MR is equal to AVC.E) None of the above
F) All of the above

Question 15

If firms are producing at a profit-maximizing level of output where the price exceeds the average total cost:

Accepted Answer

A)   accounting profits must be negative.
B)   economic profits must be zero.
C)   other firms will enter the market.
D)   firms will exit the market.E) C) and D)
F) A) and C)

Question 16

A firm realizes that the market price has fallen below its average total costs,and it is now earning a loss.What is the best action for the firm to take in the short run?

Accepted Answer

A)   Stay open if price is greater than average variable costs.
B)   Shut down immediately and pay fixed costs only.
C)   Stay open if total revenue is greater than fixed costs.
D)   Shut down if price is greater than average variable costs.E) A) and B)
F) B) and C)

Question 17

Transactions costs are defined to be the:

Accepted Answer

A)   costs a buyer or seller incurs to make a transaction take place.
B)   taxes they pay when purchasing a good or service.
C)   fees they are charged if they purchase a good or service on credit.
D)   costs a buyer faces if they re-sell a good or service.E) A) and B)
F) A) and C)

Question 18

For a firm in a perfectly competitive market,if it is producing at a level of output where marginal costs are equal to marginal revenue it:

Accepted Answer

A)   should cut back production to increase profits.
B)   should increase production to increase profits.
C)   is producing a profit-maximizing quantity.
D)   is impossible to tell how quantity should be changed without more information.E) B) and D)
F) C) and D)

Question 19

Which of the following holds true at the chosen level of output in the long run for firms in a perfectly competitive market?

Accepted Answer

A)   P = MC
B)   P = minimum AVC
C)   MR = AVC
D)   MR > ATCE) None of the above
F) A) and B)

Question 20

An essential characteristic of a perfectly competitive market is:

Accepted Answer

A)   buyers and sellers share market power.
B)   sellers are price makers.
C)   goods are standardized.
D)   goods are unique.E) B) and D)
F) B) and C)

Exam 13: Perfect Competition

In the short run,the relevant costs for a firm to consider whether to shut down production are:

Correct AnswerverifiedShow Answer

The profit-maximizing level of output for any firm in a perfectly competitive market is to produce where:

Correct AnswerverifiedShow Answer

In the long run,firms in a perfectly competitive market choose to produce a quantity:

Correct AnswerverifiedShow Answer

Having free entry and exit in a market can help drive:

Correct AnswerverifiedShow Answer

If a firm in a perfectly competitive market faces the cost curves in the graph shown and observes a market price of $13,the firm:

Correct AnswerverifiedShow Answer

The short-run shutdown rule is to shut down if:

Correct AnswerverifiedB

For firms that sell one product in a perfectly competitive market,average revenue is:

Correct AnswerverifiedShow Answer

The number of firms in a perfectly competitive market:

Correct AnswerverifiedShow Answer

Of the curves displayed in graph shown,what does curve C most likely represent?

Correct AnswerverifiedC

When demand increases in a perfectly competitive market,the market price:

Correct AnswerverifiedShow Answer

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market. According to the table shown,the firm's marginal costs:

Correct AnswerverifiedShow Answer

In a perfectly competitive market,when the price is greater than the minimum average total cost for most firms,some will:

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In the long run in a perfectly competitive market:

Correct AnswerverifiedD

When economic profits are zero for a firm in a perfectly competitive market,it means that:

Correct AnswerverifiedShow Answer

If firms are producing at a profit-maximizing level of output where the price exceeds the average total cost:

Correct AnswerverifiedShow Answer

A firm realizes that the market price has fallen below its average total costs,and it is now earning a loss.What is the best action for the firm to take in the short run?

Correct AnswerverifiedShow Answer

Transactions costs are defined to be the:

Correct AnswerverifiedShow Answer

For a firm in a perfectly competitive market,if it is producing at a level of output where marginal costs are equal to marginal revenue it:

Correct AnswerverifiedShow Answer

Which of the following holds true at the chosen level of output in the long run for firms in a perfectly competitive market?

Correct AnswerverifiedShow Answer

An essential characteristic of a perfectly competitive market is:

Correct AnswerverifiedShow Answer

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B

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C

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D

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