Question 1

For firms that sell one product in a perfectly competitive market, the market price:

Accepted Answer

A)  will remain constant regardless of any one firm's output decision.
B)  is equal to a firm's average total cost.
C)  is equal to a firm's marginal cost.
D)  All of these are correct.E) None of the above
F) B) and C)

Question 2

In the short run, a firm must consider its ______ when deciding whether to shut down production.

Accepted Answer

A)  average total costs
B)  average variable costs
C)  average fixed costs
D)  fixed costsE) B) and D)
F) B) and C)

Question 3

Firms in perfectly competitive markets who wish to maximize profits should produce where ______ are equal.

Accepted Answer

A)  marginal revenue and marginal cost
B)  marginal revenue and market price
C)  marginal revenue and average revenue
D)  marginal cost and average costE) A) and C)
F) A) and B)

Question 4

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) All of the above
F) B) and C)

Question 5

If a firm in a perfectly competitive market is producing at a level of output where marginal costs exceed marginal revenue, the firm's profits:

Accepted Answer

A)  must be negative.
B)  are maximized.
C)  will increase if production decreases.
D)  cannot be determined.E) C) and D)
F) B) and C)

Question 6

Firms in perfectly competitive markets who wish to maximize profits should produce:

Accepted Answer

A)  more if marginal cost is greater than marginal revenue.
B)  less if marginal cost is less than marginal revenue.
C)  an amount at which marginal cost equals marginal revenue.
D)  All of these are correct.E) A) and B)
F) A) and C)

Question 7

The graph shown represents the cost and revenue curves of a firm in a perfectly competitive market.  What is the market price?

Accepted Answer

A)  P1
B)  P2
C)  P3
D)  This cannot be determined.E) B) and D)
F) A) and C)

Question 8

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 = MC
D)  MR > MCE) A) and D)
F) B) and D)

Question 9

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

Accepted Answer

A)  increase if marginal revenue decreases.
B)  decrease if marginal revenue increases.
C)  always be equal to marginal revenue.
D)  always be greater than average total cost.E) A) and D)
F) B) and C)

Question 10

In the long run, in a perfectly competitive market:

Accepted Answer

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

Question 11

The graph shown represents the cost and revenue curves of a firm in a perfectly competitive market.  If the firm is producing at Q3:

Accepted Answer

A)  profits are being maximized.
B)  average total costs exceed the market price.
C)  it should increase production.
D)  marginal revenue is greater than marginal cost.E) A) and D)
F) A) and C)

Question 12

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

Accepted Answer

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

Question 13

Firms in perfectly competitive markets typically have:

Accepted Answer

A)  one profit-maximizing level of output.
B)  several profit-maximizing levels of output to choose from.
C)  two profit-maximizing levels of output to choose from.
D)  no chance of maximizing profits since they have no control over market price.E) A) and D)
F) A) and B)

Question 14

If a firm in a perfectly competitive market faces the curves in the graph shown and observes a market price of $16, the firm:  A) can earn positive profits by producing less than 43 units. B) can earn positive profits by producing where marginal cost equals marginal revenue. 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." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  can earn positive profits by producing less than 43 units.
B)  can earn positive profits by producing where marginal cost equals marginal revenue.
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) None of the above
F) A) and D)

Question 15

If demand increases in a perfectly competitive market, then supply will _______ in the short run.

Accepted Answer

A)  increase
B)  decrease
C)  not change
D)  either increase or decreaseE) A) and C)
F) B) and C)

Question 16

In a perfectly competitive market, producers:

Accepted Answer

A)  are able to sell as much as they want without affecting the market price.
B)  can influence the price upward by restricting output.
C)  often undercut the competition's price and force firms to leave the market.
D)  None of these are true.E) A) and C)
F) A) and B)

Question 17

In a perfectly competitive market, when the price is greater than the minimum average total cost for most firms, some firms will _______ the market until the price ______ to equal the minimum average total cost.

Accepted Answer

A)  exit; falls
B)  enter; falls
C)  exit; rises
D)  enter; risesE) A) and D)
F) B) and C)

Question 18

The table shown displays the total costs for various levels of output for a firm operating in a perfectly competitive market.

This firm's profit is:

Accepted Answer

A)  maximized at 3 units of output.
B)  maximized at 4 units of output.
C)  maximized at 5 units of output.
D)  not maximized at any level of output given.E) B) and C)
F) All of the above

Question 19

In the long run, firms in a perfectly competitive market will:

Accepted Answer

A)  exit if the price is lower than their lowest average total cost.
B)  attract other firms to the market if the price is equal to their lowest average total cost.
C)  repel other firms from entering the market if they are earning only slightly positive economic profits.
D)  earn positive economic profits.E) B) and C)
F) None of the above

Question 20

Firms in perfectly competitive markets who wish to maximize profits should:

Accepted Answer

A)  produce more if marginal cost is less than marginal revenue.
B)  produce less if marginal cost is greater than marginal revenue.
C)  produce an amount at which marginal cost and marginal revenue are equal.
D)  All of these are correct.E) None of the above
F) A) and C)

Exam 13: Perfect Competition

In the short run, a firm must consider its ______ when deciding whether to shut down production.

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Firms in perfectly competitive markets who wish to maximize profits should produce where ______ are equal.

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

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The graph shown represents the cost and revenue curves of a firm in a perfectly competitive market. What is the market price?

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Firms in perfectly competitive markets who wish to maximize profits should:

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The table shown displays the total costs for various levels of output for a firm operating in a perfectly competitive market. This firm's profit is:

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If a firm in a perfectly competitive market faces the curves in the graph shown and observes a market price of $16, the firm:

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For firms that sell one product in a perfectly competitive market, the market price:

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The graph shown represents the cost and revenue curves of a firm in a perfectly competitive market. If the firm is producing at Q3:

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

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If a firm in a perfectly competitive market is producing at a level of output where marginal costs exceed marginal revenue, the firm's profits:

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In a perfectly competitive market, when the price is greater than the minimum average total cost for most firms, some firms will _______ the market until the price ______ to equal the minimum average total cost.

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If demand increases in a perfectly competitive market, then supply will _______ in the short run.

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In the long run, in a perfectly competitive market:

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

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

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In the long run, firms in a perfectly competitive market will:

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Firms in perfectly competitive markets typically have:

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Firms in perfectly competitive markets who wish to maximize profits should produce:

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In a perfectly competitive market, producers:

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In a perfectly competitive market, when the price is greater than the minimum average total cost for most firms, some firms will _ the market until the price to equal the minimum average total cost.

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