Question 1

Exhibit 12-9 1 to P0,the firm will most likely: A)  continue providing q1 units of services. B)  decrease its production of services. C)  leave the industry. D)  increase its production of services." class="answers-bank-image d-inline" rel="preload" > Refer to Exhibit 12-9.When the market price for lawn care services decreases from P1 to P0,the firm will most likely:

Accepted Answer

A)   continue providing q1 units of services.
B)   decrease its production of services.
C)   leave the industry.
D)   increase its production of services.

Question 2

If a perfectly competitive industry uses a large proportion of the available inputs in a resource market,then the long-run market supply curve for the industry will most likely be:

Accepted Answer

A)   vertical.
B)   horizontal.
C)   upward sloping.
D)   downward sloping.

Question 3

During a period when new entrants are being attracted to an industry,we would expect that:

Accepted Answer

A)   economic profits are positive.
B)   as a result, economic profits are falling.
C)   as a result, economic profits are rising.
D)   both (a)  and (b)  are true.

Question 4

If a competitive firm is operating in short run equilibrium and then its fixed costs fall by 40 percent,it should:

Accepted Answer

A)   use more labor and less capital in current production.
B)   not change its output.
C)   increase its output.
D)   decrease its output.

Question 5

Beginning from a long run equilibrium in a competitive industry,if there is a substantial,permanent increase in demand for industry output:

Accepted Answer

A)   firms will enter the industry, the quantity produced will rise, and prices will end up lower than their initial long run equilibrium level.
B)   firms will enter the industry, the quantity produced will rise, and prices will end up higher than their initial long run equilibrium level.
C)   firms will enter the industry, the quantity produced will rise, and prices will end up at the same level as their initial long run equilibrium level.
D)   firms will enter the industry, the quantity produced will rise, and but without more information, we cannot know if prices will end up higher than their initial long run equilibrium level.

Question 6

Which of the following is true?

Accepted Answer

A)   The objective of the firm is to maximize profits, by producing the amount that equates total revenue and total cost.
B)   The objective of the firm is to maximize profits, by producing the amount that equates average revenue and average total cost.
C)   The objective of the firm is to maximize profits, by producing the amount that equates average revenue and average variable cost.
D)   The objective of the firm is to maximize profits, by producing the amount that equates marginal revenue and marginal cost.

Question 7

A profit-maximizing firm that is operating in the short run will sell an additional unit of output as long as:

Accepted Answer

A)   as doing so reduces the firm's per-unit costs.
B)   doing so reduces the firm's marginal costs.
C)   doing so adds more to revenue than it adds to cost.
D)   there is additional plant capacity with which to produce.

Question 8

Assume a perfectly competitive firm sells its output for $150 per unit.At its current 2,000 units of output,marginal cost is $180 and increasing,and average variable cost is $160.Assuming it wants to maximize its profits,it should:

Accepted Answer

A)   increase output.
B)   decrease output, but not shut down.
C)   maintain its current output rate.
D)   shut down.

Question 9

In the short run,a perfectly competitive firm can earn:

Accepted Answer

A)   positive economic profits.
B)   zero economic profits.
C)   negative economic profits.
D)   any of the above.

Question 10

When perfectly competitive firms in an industry are earning positive economic profits,

Accepted Answer

A)   we would expect entry into the industry.
B)   we would expect stability in the industry, since it is in long run equilibrium.
C)   we would expect exit from the industry.
D)   we do not know whether there would tend to be entry, exit, or stability in the industry.

Question 11

Exhibit 12-3  Refer to Exhibit 12-3.Graph B exhibits a price-taking firm:

Accepted Answer

A)   which will lose money when the market price equals $4.90.
B)   which will make an economic profit when the market price equals $4.90.
C)   which will break even when the market price equals $4.90.
D)   which will shut down when the market price equals $4.90.

Question 12

A price-taking firm will tend to expand its output as long as price exceeds average variable cost and:

Accepted Answer

A)   its marginal revenue is positive.
B)   its marginal revenue is greater than the market price.
C)   its marginal revenue is less than the market price.
D)   its marginal cost is less than the market price.

Question 13

Exhibit 12-3  Refer to Exhibit 12-3.Graph A exhibits a price-taking firm:

Accepted Answer

A)   experiencing an economic loss of $80.
B)   making an economic profit of $80.
C)   making an economic profit of $400.
D)   experiencing an economic loss of $400.

Question 14

If input costs remain the same as industry output expands,what would you expect to be the long-run impact of an increase in demand on an industry currently in long-run equilibrium?

Accepted Answer

A)   There will be more firms but the price will remain the same.
B)   There will be fewer firms but the price will remain the same.
C)   There will be more firms and the price will increase.
D)   There will be fewer firms and the price will decrease.

Question 15

In a perfectly competitive market,in response to a permanent decrease in demand:

Accepted Answer

A)   the short run equilibrium price will be higher than the eventual long run equilibrium price.
B)   the short run equilibrium price will be lower than the eventual long run equilibrium price.
C)   the short run equilibrium price will be the same as than the eventual long run equilibrium price.
D)   we cannot know whether the short run equilibrium price will be below the eventual long run equilibrium price.

Question 16

The graph represents a price-taking firm producing q1 units of output.Is the firm making a profit,experiencing a loss,or earning a normal profit? Should the firm increase output,decrease output,or shut down? Explain.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> This price-taking firm is operating at ...

Question 17

In the short run,a perfectly competitive firm will maximize profit by producing where:

Accepted Answer

A)   MC = MR.
B)   MC = ATC.
C)   ATC = MR.
D)   AVC = MC.

Question 18

If new entry occurs in a perfectly competitive industry,the demand curve for each existing firm will:

Accepted Answer

A)   shift up.
B)   shift down.
C)   shift right.
D)   shift left.

Question 19

When perfectly competitive firms are earning zero accounting profits,

Accepted Answer

A)   we would expect entry into the industry.
B)   we would expect stability in the industry, since it is in long run equilibrium.
C)   we would expect exit from the industry.
D)   we would expect none of the above.

Question 20

The perfectly competitive model assumes that:

Accepted Answer

A)   individual sellers can influence the market price.
B)   sellers can increase their total revenue by raising prices.
C)   firms can enter and exit the industry with relative ease.
D)   firms compete by varying a product's quality rather than a product's price.

Exam 12: Firms in Perfectly Competitive Markets

The perfectly competitive model assumes that:

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When perfectly competitive firms are earning zero accounting profits,

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Which of the following is true?

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Exhibit 12-3 Refer to Exhibit 12-3.Graph A exhibits a price-taking firm:

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A price-taking firm will tend to expand its output as long as price exceeds average variable cost and:

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Exhibit 12-3 Refer to Exhibit 12-3.Graph B exhibits a price-taking firm:

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In the short run,a perfectly competitive firm will maximize profit by producing where:

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A profit-maximizing firm that is operating in the short run will sell an additional unit of output as long as:

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In the short run,a perfectly competitive firm can earn:

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If a perfectly competitive industry uses a large proportion of the available inputs in a resource market,then the long-run market supply curve for the industry will most likely be:

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In a perfectly competitive market,in response to a permanent decrease in demand:

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If input costs remain the same as industry output expands,what would you expect to be the long-run impact of an increase in demand on an industry currently in long-run equilibrium?

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If new entry occurs in a perfectly competitive industry,the demand curve for each existing firm will:

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If a competitive firm is operating in short run equilibrium and then its fixed costs fall by 40 percent,it should:

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Exhibit 12-9 Refer to Exhibit 12-9.When the market price for lawn care services decreases from P1 to P0,the firm will most likely:

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During a period when new entrants are being attracted to an industry,we would expect that:

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Beginning from a long run equilibrium in a competitive industry,if there is a substantial,permanent increase in demand for industry output:

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The graph represents a price-taking firm producing q1 units of output.Is the firm making a profit,experiencing a loss,or earning a normal profit? Should the firm increase output,decrease output,or shut down? Explain.

Correct Answerverified This price-taking firm is operating at ...View AnswerShow Answer

When perfectly competitive firms in an industry are earning positive economic profits,

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Assume a perfectly competitive firm sells its output for $150 per unit.At its current 2,000 units of output,marginal cost is $180 and increasing,and average variable cost is $160.Assuming it wants to maximize its profits,it should:

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Exhibit 12-9 Refer to Exhibit 12-9.When the market price for lawn care services decreases from P₁ to P₀,the firm will most likely:

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The graph represents a price-taking firm producing q₁ units of output.Is the firm making a profit,experiencing a loss,or earning a normal profit? Should the firm increase output,decrease output,or shut down? Explain.

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This price-taking firm is operating at ...
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