Question 1

Exhibit 8-14  total cost at the loss-minimizing output? A)  0cda B)  0jka C)  0efa D)  0hib E)  0egb" class="answers-bank-image d-inline" rel="preload" >
-In Exhibit 8-14, what area represents total cost at the loss-minimizing output?

Accepted Answer

A)   0cda
B)   0jka
C)   0efa
D)   0hib
E)   0egb

Question 2

Exhibit 8-18  firm's total revenue A)  from $8 to $12 B)  from $16,000 to $30,000 C)  from $40 to $50 D)  from $320 to $600 E)  by an unspecified amount" class="answers-bank-image d-inline" rel="preload" >
-The increase in demand shown in Exhibit 8-18 increases each firm's total revenue

Accepted Answer

A)   from $8 to $12
B)   from $16,000 to $30,000
C)   from $40 to $50
D)   from $320 to $600
E)   by an unspecified amount

Question 3

Exhibit 8-14  total loss at the loss-minimizing output? A)  0cda B)  0jka C)  0efa D)  cefd E)  ejkf" class="answers-bank-image d-inline" rel="preload" >
-In Exhibit 8-14, what area represents total loss at the loss-minimizing output?

Accepted Answer

A)   0cda
B)   0jka
C)   0efa
D)   cefd
E)   ejkf

Question 4

Exhibit 8-9 
-In Exhibit 8-9, price equals

Accepted Answer

A)   $28
B)   $12
C)   $40
D)   $20
E)   $24

Question 5

The short-run industry supply curve in a perfectly competitive market is the horizontal sum of each firm's short-run supply curve.

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 8-13 
-For the market shown in Exhibit 8-13, at what price will a perfectly competitive firm earn zero profit?

Accepted Answer

A)   $4
B)   $6
C)   $8
D)   $9
E)   more than $9

Question 7

Tim Tupper contracts with two other students to help him provide a term paper-typing service. In the last two weeks of the semester, he sees a tremendous increase in demand. His profit-maximizing response would be represented by

Accepted Answer

A)   a rightward shift of the supply curve because it is possible to earn economic profits
B)   a rightward shift of the supply curve because the increase in demand is probably only temporary
C)   a reduction in supply to take full advantage of the increase in demand
D)   a movement up to the right along the supply curve because the increase in demand is probably only temporary
E)   an upward movement in horizontal demand curve he faces because now he can charge a lower price

Question 8

Which of the following would not help identify market structure?

Accepted Answer

A)   number of firms in the industry
B)   type of product produced in the industry
C)   ease of entry into the industry
D)   forms of competition among firms in the industry
E)   price of the good

Question 9

Peg's Kegs sells kegs in a perfectly competitive market. Because low demand forced price below average variable cost, Peg has made the short-run decision to shut down. Her current loss is

Accepted Answer

A)   zero
B)   greater than if she had kept operating
C)   the same as the losses she was incurring while operating
D)   equal to fixed cost
E)   less than her total revenue

Question 10

Suppose the market for hot pretzels in New York City is perfectly competitive. What is true of demand in this market?

Accepted Answer

A)   The demand curve facing each seller is perfectly elastic.
B)   The demand curve facing each seller is perfectly inelastic.
C)   The market demand curve is perfectly elastic.
D)   The market demand curve is perfectly inelastic.
E)   The market demand curve is elastic.

Question 11

If two perfectly competitive firms produce the same quantity at the market price, then, at that quantity, they must have the same

Accepted Answer

A)   marginal cost and average total cost
B)   marginal cost and average fixed cost
C)   average total cost and average fixed cost
D)   average fixed cost and average variable cost
E)   marginal cost

Question 12

In the short run, a perfectly competitive firm suffering a loss

Accepted Answer

A)   will close if P 
B)   will shut down operations if P 
C)   cannot leave the industry even if P 
D)   can sell off all its resources to competitors
E)   can raise the price to increase revenues

Question 13

Suppose, as a result of a long-run adjustment in a perfectly competitive industry to a change in demand, price and output both rose. Therefore, demand must have __________ in this __________ industry

Accepted Answer

A)   fallen; increasing cost
B)   fallen; decreasing cost
C)   increased; increasing cost
D)   increased; decreasing cost
E)   decreased; constant cost

Question 14

When market exchange occurs voluntarily in a competitive market

Accepted Answer

A)   choice incurs no opportunity cost
B)   the sum of consumer surplus and producer surplus is maximized
C)   both consumer surplus and producer surplus are eliminated
D)   buyers benefit at the expense of producers
E)   the exchange confers no net benefit to the participants

Question 15

Which of the following is true at each output level for a perfectly competitive firm?

Accepted Answer

A)   MC = AVC = ATC
B)   MR = MC
C)   P > AVC
D)   AR = MR = P
E)   MR = AR = MC

Question 16

Suppose a price-taking firm produces 400 units at its optimal output level. At that output rate marginal cost is $200, average total cost is $240, and average variable cost is $170. What can you determine about the market price that would force the firm to shut down in the short run?

Accepted Answer

A)   It equals $200.
B)   It is between $170 and $240.
C)   It is less than $170.
D)   It is between $170 and $200.
E)   It equals $240.

Question 17

Exhibit 8-14 total revenue at the loss-minimizing output? A)  0cda B)  0jka C)  0efa D)  0hib E)  0egb" class="answers-bank-image d-inline" rel="preload" >
-In Exhibit 8-14, what area represents total revenue at the loss-minimizing output?

Accepted Answer

A)   0cda
B)   0jka
C)   0efa
D)   0hib
E)   0egb

Question 18

A constant-cost industry is one

Accepted Answer

A)   that faces constant average costs in the short run
B)   that experiences economies of scale
C)   that experiences stable demand
D)   whose cost curves do not change as new firms enter
E)   that faces increasing resource prices as new firms enter

Question 19

Farmer Fanny sells her crops in a perfectly competitive market. If she produces 500 bushels for total revenue of $2,500 and if harvesting the 501st bushel would raise her total cost from $2,500 to $2,505, her

Accepted Answer

A)   revenue will increase by $10 if she harvests the 501st bushel
B)   revenue will fall by $5 if she harvests the 501st bushel
C)   average fixed cost will rise if she harvests the 501st bushel
D)   profit will fall by $10 if she harvests the 501st bushel
E)   profit will remain unchanged if she harvests the 501st bushel

Question 20

Exhibit 8-16 
-Claude's Copper Clappers sells clappers for $40 each in a perfectly competitive market. At its present rate of output, Claude's marginal cost is $39, average variable cost is $25, and average total cost is $45. To improve his profit/loss situation, Claude should

Accepted Answer

A)   increase output
B)   reduce output but not to zero
C)   maintain the present rate of output
D)   shut down
E)   raise the price

Exam 8: A: perfect Competition

Exhibit 8-18 -The increase in demand shown in Exhibit 8-18 increases each firm's total revenue

Correct AnswerverifiedShow Answer

Farmer Fanny sells her crops in a perfectly competitive market. If she produces 500 bushels for total revenue of $2,500 and if harvesting the 501st bushel would raise her total cost from $2,500 to $2,505, her

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Suppose, as a result of a long-run adjustment in a perfectly competitive industry to a change in demand, price and output both rose. Therefore, demand must have __________ in this __________ industry

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In the short run, a perfectly competitive firm suffering a loss

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Exhibit 8-13 -For the market shown in Exhibit 8-13, at what price will a perfectly competitive firm earn zero profit?

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Exhibit 8-9 -In Exhibit 8-9, price equals

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Suppose the market for hot pretzels in New York City is perfectly competitive. What is true of demand in this market?

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The short-run industry supply curve in a perfectly competitive market is the horizontal sum of each firm's short-run supply curve.

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Exhibit 8-14 -In Exhibit 8-14, what area represents total revenue at the loss-minimizing output?

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If two perfectly competitive firms produce the same quantity at the market price, then, at that quantity, they must have the same

Correct AnswerverifiedShow Answer

Peg's Kegs sells kegs in a perfectly competitive market. Because low demand forced price below average variable cost, Peg has made the short-run decision to shut down. Her current loss is

Correct AnswerverifiedShow Answer

A constant-cost industry is one

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Which of the following is true at each output level for a perfectly competitive firm?

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Exhibit 8-14 -In Exhibit 8-14, what area represents total cost at the loss-minimizing output?

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Exhibit 8-14 -In Exhibit 8-14, what area represents total loss at the loss-minimizing output?

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Suppose a price-taking firm produces 400 units at its optimal output level. At that output rate marginal cost is $200, average total cost is $240, and average variable cost is $170. What can you determine about the market price that would force the firm to shut down in the short run?

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Which of the following would not help identify market structure?

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Exhibit 8-16 -Claude's Copper Clappers sells clappers for $40 each in a perfectly competitive market. At its present rate of output, Claude's marginal cost is $39, average variable cost is $25, and average total cost is $45. To improve his profit/loss situation, Claude should

Correct AnswerverifiedShow Answer

Tim Tupper contracts with two other students to help him provide a term paper-typing service. In the last two weeks of the semester, he sees a tremendous increase in demand. His profit-maximizing response would be represented by

Correct AnswerverifiedShow Answer

When market exchange occurs voluntarily in a competitive market

Correct AnswerverifiedShow Answer

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Suppose, as a result of a long-run adjustment in a perfectly competitive industry to a change in demand, price and output both rose. Therefore, demand must have in this industry

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