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. To maximize his profit, Jason should produce the level of output indicated by point

Accepted Answer

A)   a.
B)   b.
C)   e.
D)   d.E) None of the above
F) A) and B)

Question 2

If a typical firm in a perfectly competitive industry is earning profits, then

Accepted Answer

A)   all firms will continue to earn profits.
B)   new firms will enter in the long run causing market supply to decrease, market price to rise, and profits to increase.
C)   new firms will enter in the long run causing market supply to increase, market price to fall, and profits to decrease.
D)   the number of firms in the industry will remain constant in the long run.E) None of the above
F) A) and C)

Question 3

Figure 12-9 4, the firm would A)  lose an amount equal to its fixed cost. B)  make a profit. C)  lose an amount less than fixed cost. D)  shut down." class="answers-bank-image d-inline" rel="preload" > Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9. At price P4, the firm would

Accepted Answer

A)   lose an amount equal to its fixed cost.
B)   make a profit.
C)   lose an amount less than fixed cost.
D)   shut down.E) None of the above
F) B) and C)

Question 4

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 5

Figure 12-1 
-Refer to Figure 12-1. If the firm is producing 500 units

Accepted Answer

A)   it is making a profit.
B)   it is making a loss.
C)   it should maintain its output to maximize profit.
D)   it should increase its output to maximize profit.E) A) and B)
F) A) and C)

Question 6

Figure 12-9  Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9. Identify the firm's short-run supply curve.

Accepted Answer

A)   the marginal cost curve
B)   the marginal cost curve from a and above
C)   the marginal cost curve from b and above
D)   the marginal cost curve from d and aboveE) A) and D)
F) A) and C)

Question 7

Explain two different ways to determine the profit-maximizing level of output for a firm in a perfectly competitive market.

Accepted Answer

One way is using total revenue and total...

Question 8

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 B)
F) All of the above

Question 9

Writing in the New York Times on the technology boom of the late 1990s, Michael Lewis argues, "The sad truth, for investors, seems to be that most of the benefits of new technologies are passed right through to consumers free of charge." What does Lewis means by the benefits of new technology being "passed right through to consumers free of charge"?

Accepted Answer

A)   Firms in perfect competition are price takers. Since they cannot influence price, they cannot dictate who benefits from new technologies, even if the benefits of new technology are being "passed right through to consumers free of charge."
B)   In perfect competition, price equals marginal cost of production. In this sense, consumers receive the new technology "free of charge."
C)   In the long run, price equals the lowest possible average cost of production. In this sense, consumers receive the new technology "free of charge."
D)   In perfect competition, consumers place a value on the good equal to its marginal cost of production and since they are willing to pay the marginal valuation of the good, they are essentially receiving the new technology "free of charge."E) A) and B)
F) None of the above

Question 10

Figure 12-10 
-Refer to Figure 12-10. The total cost at the profit-maximizing output level equals

Accepted Answer

A)   $4,800.
B)   $3,300.
C)   $2,500.
D)   $1,800.E) A) and B)
F) None of the above

Question 11

Which of the following describes a situation in which a good or service is produced at the lowest possible cost?

Accepted Answer

A)   productive efficiency
B)   allocative efficiency
C)   marginal efficiency
D)   profit maximizationE) A) and B)
F) B) and C)

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

To maximize profit, a perfectly competitive firm

Accepted Answer

A)   should sell the quantity of output determined by the interaction between industry demand and supply.
B)   should sell the quantity of output that results in a value for total revenue that is equal to total cost.
C)   should produce the quantity of output that results in the greatest difference between total revenue and total cost.
D)   should produce the quantity of output that results in the greatest difference between marginal revenue and marginal cost.E) All of the above
F) B) and D)

Question 14

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 15

Table 12-3
  ATC. C)  P  Arnie sells basketballs in a perfectly competitive market. Table 12-3 summarizes Arnie's output per day (Q) , total cost (TC) , average total cost (ATC)  and marginal cost (MC) .
-A firm will break even when

Accepted Answer

A)   P = ATC.
B)   P > ATC.
C)   P 
D)   P = AVC.E) All of the above
F) A) and D)

Question 16

If a typical firm in a perfectly competitive industry is incurring losses, then

Accepted Answer

A)   all firms will continue to lose money.
B)   some firms will exit in the long run, causing market supply to decrease and market price to rise, increasing profits for the remaining firms.
C)   some firms will exit in the long run, causing market supply to decrease and market price to fall, increasing losses for the remaining firms.
D)   some firms will enter in the long run, causing market supply to increase and market price to rise, increasing profit for all firms.E) A) and D)
F) C) and D)

Question 17

A perfectly competitive firm's supply curve is its

Accepted Answer

A)   marginal cost curve.
B)   marginal cost curve above its minimum average total cost.
C)   marginal cost curve above its minimum average variable cost.
D)   marginal cost curve above its minimum average fixed cost.E) All of the above
F) C) and D)

Question 18

The perfectly competitive market structure benefits consumers because

Accepted Answer

A)   firms do not produce goods at the lowest possible price in the long run.
B)   firms are forced by competitive pressure to be as efficient as possible.
C)   firms add a much smaller markup over average cost than firms in any other type of market structure.
D)   firms produce high-quality goods at low prices.E) C) and D)
F) B) and C)

Question 19

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) All of the above
F) A) and D)

Question 20

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

Accepted Answer

A) True 
 B)False

Exam 12: Firms in Perfectly Competitive Markets

Explain two different ways to determine the profit-maximizing level of output for a firm in a perfectly competitive market.

Correct Answer
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One way is using total revenue and total...
View Answer

Figure 12-1 -Refer to Figure 12-1. If the firm is producing 500 units

Correct Answer
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If a typical firm in a perfectly competitive industry is earning profits, then

Correct Answer
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If a typical firm in a perfectly competitive industry is incurring losses, then

Correct Answer
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A perfectly competitive firm's supply curve is its

Correct Answer
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Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9. Identify the firm's short-run supply curve.

Correct Answer
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Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9. At price P₄, the firm would

Correct Answer
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To maximize profit, a perfectly competitive firm

Correct Answer
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Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

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

Correct Answer
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If a firm shuts down in the short run

Correct Answer
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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 Answer
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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. To maximize his profit, Jason should produce the level of output indicated by point

Correct Answer
verified

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.

Correct Answer
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Which of the following describes a situation in which a good or service is produced at the lowest possible cost?

Correct Answer
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Correct Answer
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Figure 12-10 -Refer to Figure 12-10. The total cost at the profit-maximizing output level equals

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

Correct Answer
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The perfectly competitive market structure benefits consumers because

Correct Answer
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Table 12-3 Arnie sells basketballs in a perfectly competitive market. Table 12-3 summarizes Arnie's output per day (Q) , total cost (TC) , average total cost (ATC) and marginal cost (MC) . -A firm will break even when

Correct Answer
verified

Exam 12: Firms in Perfectly Competitive Markets

Explain two different ways to determine the profit-maximizing level of output for a firm in a perfectly competitive market.

Correct AnswerverifiedOne way is using total revenue and total...View AnswerShow Answer

Figure 12-1 -Refer to Figure 12-1. If the firm is producing 500 units

Correct AnswerverifiedShow Answer

If a typical firm in a perfectly competitive industry is earning profits, then

Correct AnswerverifiedShow Answer

If a typical firm in a perfectly competitive industry is incurring losses, then

Correct AnswerverifiedShow Answer

A perfectly competitive firm's supply curve is its

Correct AnswerverifiedShow Answer

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9. Identify the firm's short-run supply curve.

Correct AnswerverifiedShow Answer

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9. At price P4, the firm would

Correct AnswerverifiedShow Answer

To maximize profit, a perfectly competitive firm

Correct AnswerverifiedShow Answer

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If a firm shuts down in the short run

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

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. To maximize his profit, Jason should produce the level of output indicated by point

Correct AnswerverifiedShow Answer

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.

Correct AnswerverifiedShow Answer

Which of the following describes a situation in which a good or service is produced at the lowest possible cost?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 12-10 -Refer to Figure 12-10. The total cost at the profit-maximizing output level equals

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

The perfectly competitive market structure benefits consumers because

Correct AnswerverifiedShow Answer

Table 12-3 Arnie sells basketballs in a perfectly competitive market. Table 12-3 summarizes Arnie's output per day (Q) , total cost (TC) , average total cost (ATC) and marginal cost (MC) . -A firm will break even when

Correct AnswerverifiedShow Answer

Correct Answer
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One way is using total revenue and total...
View Answer

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Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9. At price P₄, the firm would

Correct Answer
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