Question 1

Figure 12-6
  
Figure 12-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples.
-Refer to Figure 12-6.If Jason maximizes his profit he will produce the output level indicated by point ________ and his average profit will equal ________.

Accepted Answer

A)  d; $3 minus ATC at point d
B)  b; $3 minus ATC at point b
C)  e; $3 minus ATC at point e
D)  a; $3E) A) and B)
F) A) and C)

Question 2

A wheat farmer and a firm in a perfectly competitive market are similar in that

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) A) and C)
F) B) and D)

Question 3

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

Accepted Answer

A) True 
 B)False

Question 4

After an increase in demand in a constant-cost industry, firms will find themselves with higher average cost curves.

Accepted Answer

A) True 
 B)False

Question 5

In the short run, a firm that incurs losses might choose to produce rather than shut down if the amount of its revenue is less than its fixed cost.

Accepted Answer

A) True 
 B)False

Question 6

A perfectly competitive firm in long-run equilibrium produces output at the lowest possible average total cost.

Accepted Answer

A) True 
 B)False

Question 7

Under what conditions should a competitive firm shut down in the short run?

Accepted Answer

When market price is below ave...

Question 8

Perfectly competitive industries tend to produce low-priced, low-technology products.

Accepted Answer

A) True 
 B)False

Question 9

If a firm shuts down in the short run,

Accepted Answer

A)  its loss equals zero.
B)  its loss equals its fixed cost.
C)  is makes zero economic profit.
D)  its total revenue is not large enough to cover its fixed cost.E) A) and D)
F) A) and C)

Question 10

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.If the prevailing market price is $48, the number of firms and the industry's output will decrease in the long run.

Accepted Answer

A) True 
 B)False

Question 11

If price is equal to average variable cost, then a perfectly competitive firm breaks even.

Accepted Answer

A) True 
 B)False

Question 12

In the short run, a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

Accepted Answer

A) True 
 B)False

Question 13

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) A) and B)
F) A) and C)

Question 14

An industry's long-run supply curve shows

Accepted Answer

A)  the relationship in the long run between market price and quantity supplied.
B)  how the government determines the price of the product.
C)  how average productivity is changing.
D)  greater than normal profit.E) All of the above
F) C) and D)

Question 15

Figure 12-1
 
-Refer to Figure 12-1.If the firm is producing 700 units,

Accepted Answer

A)  it is making a profit.
B)  it is incurring a loss.
C)  it should cut back its output to maximize profit.
D)  it should increase its output to maximize profit.E) None of the above
F) All of the above

Question 16

Marginal revenue is

Accepted Answer

A)  total revenue divided by the total quantity of output.
B)  the change in profit divided by the change in the quantity of output.
C)  the change in total revenue divided by the change in total cost.
D)  the change in total revenue divided by the change in the quantity of output.E) B) and C)
F) A) and B)

Question 17

In long-run competitive equilibrium, the perfectly competitive firm produces where price equals minimum average total cost.
a.What is this efficiency criterion called?
b.How does it benefit consumers?

Accepted Answer

a.Productive efficiency
b.Productive eff...

Question 18

Table 12-2
  
Table 12-2 lists the various pounds (lbs.) of apples that Margie Stattler can sell. Assume that Margie operates in a perfectly competitive market.
-Refer to Table 12-2.What is Margie's total revenue if she sells 250 pounds of apples?

Accepted Answer

A)  $250
B)  $500
C)  $750
D)  There is not enough information in the table to determine Margie's total revenue.E) A) and C)
F) None of the above

Question 19

Suppose there are economies of scale in the production of a specialized 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 20

What is always true at the quantity where a firm's average total cost equals average revenue?

Accepted Answer

A)  The firm's revenue is maximized.
B)  The firm's profit is maximized.
C)  The firm breaks even.
D)  Marginal cost equals marginal revenue.E) A) and D)
F) A) and C)

Exam 12: Firms in Perfectly Competitive Markets

After an increase in demand in a constant-cost industry, firms will find themselves with higher average cost curves.

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Marginal revenue is

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Under what conditions should a competitive firm shut down in the short run?

Correct AnswerverifiedWhen market price is below ave...View AnswerShow Answer

Figure 12-1 -Refer to Figure 12-1.If the firm is producing 700 units,

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Figure 12-6 Figure 12-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples. -Refer to Figure 12-6.If Jason maximizes his profit he will produce the output level indicated by point ________ and his average profit will equal ________.

Correct AnswerverifiedShow Answer

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

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What is always true at the quantity where a firm's average total cost equals average revenue?

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If total revenue exceeds fixed cost, a firm

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If a firm shuts down in the short run,

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

Correct AnswerverifiedShow Answer

A perfectly competitive firm in long-run equilibrium produces output at the lowest possible average total cost.

Correct AnswerverifiedShow Answer

In the short run, a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

Correct AnswerverifiedShow Answer

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.If the prevailing market price is $48, the number of firms and the industry's output will decrease in the long run.

Correct AnswerverifiedShow Answer

In the short run, a firm that incurs losses might choose to produce rather than shut down if the amount of its revenue is less than its fixed cost.

Correct AnswerverifiedShow Answer

Perfectly competitive industries tend to produce low-priced, low-technology products.

Correct AnswerverifiedShow Answer

A wheat farmer and a firm in a perfectly competitive market are similar in that

Correct AnswerverifiedShow Answer

If price is equal to average variable cost, then a perfectly competitive firm breaks even.

Correct AnswerverifiedShow Answer

In long-run competitive equilibrium, the perfectly competitive firm produces where price equals minimum average total cost. a.What is this efficiency criterion called? b.How does it benefit consumers?

Correct Answerverifieda.Productive efficiencyb.Productive eff...View AnswerShow Answer

An industry's long-run supply curve shows

Correct AnswerverifiedShow Answer

Table 12-2 Table 12-2 lists the various pounds (lbs.) of apples that Margie Stattler can sell. Assume that Margie operates in a perfectly competitive market. -Refer to Table 12-2.What is Margie's total revenue if she sells 250 pounds of apples?

Correct AnswerverifiedShow Answer

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When market price is below ave...
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Figure 12-6 Figure 12-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples. -Refer to Figure 12-6.If Jason maximizes his profit he will produce the output level indicated by point and his average profit will equal .

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a.Productive efficiency
b.Productive eff...
View Answer

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