Question 1

-In the above figure, assuming Firm 1 and Firm 2 are the sole producers in the industry, the industry quantity supplied at price P1 is equal to

Accepted Answer

A)   Q1 + Q2.
B)   Q1 + Q3.
C)   Q2 + Q4.
D)   Q4 - Q2.

Question 2

-Refer to the above figure. Profits will be negative

Accepted Answer

A)   when the price equals $2.
B)   when the price is above $2.
C)   when the price is below $2.
D)   only when the price equals $1.

Question 3

In a perfectly competitive market, the average revenue curve of a firm is

Accepted Answer

A)   the same as its total revenue curve.
B)   the same as its demand curve.
C)   the same its economic profits.
D)   the difference between its total revenue curve and its marginal revenue curve.

Question 4

Malfeasance at Enron, a Houston-based energy firm, led to overstatement of revenues by almost $92 billion. As Enron closed its operations, U.S. energy prices remained stable. This may have been evidence that

Accepted Answer

A)   Enron could charge whatever price it wanted to for energy.
B)   there was lack of any competition, so Enron was the winner.
C)   there is a competitive market in energy distribution in the United States.
D)   the accounting profession needs to review its policies quickly.

Question 5

The short-run break-even price

Accepted Answer

A)   is the price at which the firm's current liabilities are paid off.
B)   is the price at which a firm's total revenues equal total costs.
C)   occurs at the output at which the firm yields a below normal rate of return.
D)   occurs at the output at which the firm yields a positive economic profit.

Question 6

Which of the following is always TRUE in the short run for a perfectly competitive firm that is maximizing economic profits?

Accepted Answer

A)   P = d = MR = MC = AVC
B)   P = d = MR = MC
C)   P = d = MR = Q
D)   MR = MC = Q

Question 7

In a perfectly competitive market, positive economic profits act to

Accepted Answer

A)   attract new entrants into the industry.
B)   drive potential competitors away from the industry.
C)   prevent reinvestment on the part of firms within the industry.
D)   signal resource owners elsewhere not to invest their capital in this industry.

Question 8

The vertical distance between the horizontal axis and any point on a perfect competitor's demand curve measures

Accepted Answer

A)   total cost.
B)   total revenues.
C)   product price, marginal revenue, and average revenue.
D)   supply curve for the product.

Question 9

AVC. C)  P = MC. D)  P > ATC." class="answers-bank-image d-inline" rel="preload" >
-In the short run, the perfectly competitive firm will always earn an economic profit when

Accepted Answer

A)   P = ATC.
B)   P > AVC.
C)   P = MC.
D)   P > ATC.

Question 10

Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $6.00; AVC = $4.00; MC = $3.50; MR = $3.50. The firm should

Accepted Answer

A)   increase output.
B)   increase price.
C)   remain at the same position.
D)   shut down.

Question 11

-Refer to the above figure. Profits will equal zero

Accepted Answer

A)   when the price equals $1.
B)   when the price equals $2.
C)   when the price equals $4.
D)   at prices between $1 and $2.

Question 12

Which is always TRUE at a firm's profit-maximizing rate of production?

Accepted Answer

A)   Total Revenue = Total Costs
B)   The total revenue curve lies below the total cost curve.
C)   Marginal Revenue > Marginal Cost
D)   Marginal Revenue = Marginal Cost

Question 13

Economists generally assume that firms attempt to maximize

Accepted Answer

A)   total revenue.
B)   sales.
C)   marginal revenue.
D)   total economic profits.

Question 14

-Refer to the above table. If the price is $3 the maximum profit this firm could earn is

Accepted Answer

A)   $99.
B)   $306.
C)   -$100.
D)   -$99.

Question 15

A firm in a perfectly competitive industry is a

Accepted Answer

A)   price taker.
B)   quantity taker.
C)   profit maker.
D)   price maker.

Question 16

What is the shape of the long-run supply curve in an increasing-cost industry?

Accepted Answer

A)   horizontal
B)   inverted U-shape
C)   downward sloping
D)   upward sloping

Question 17

-In the above figure, what is the profit at the profit-maximizing output level?

Accepted Answer

A)   $70
B)   $2
C)   $20
D)   $10

Question 18

-Refer to the above figure. If the market price is equal to A, which statement can be made about profits?

Accepted Answer

A)   Profits are positive and equal to BCEA.
B)   Profits are positive and equal to BCFG.
C)   Profits are negative and equal to BCEA.
D)   Profits are negative and equal to GFQ0.

Question 19

-If the firm in the above figure produces output level D, it incurs an average fixed cost of production equal to the distance

Accepted Answer

A)   DK.
B)   RN.
C)   JL.
D)   KR.

Question 20

If the wage rate increases and firms in a perfectly competitive industry are hiring labor, then

Accepted Answer

A)   the firms will quit using labor.
B)   profits will increase.
C)   market supply will decrease.
D)   market price will decrease.

Exam 23: Perfect Competition

-In the short run, the perfectly competitive firm will always earn an economic profit when

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-Refer to the above figure. If the market price is equal to A, which statement can be made about profits?

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-Refer to the above figure. Profits will be negative

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-Refer to the above table. If the price is $3 the maximum profit this firm could earn is

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Economists generally assume that firms attempt to maximize

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-If the firm in the above figure produces output level D, it incurs an average fixed cost of production equal to the distance

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Which of the following is always TRUE in the short run for a perfectly competitive firm that is maximizing economic profits?

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In a perfectly competitive market, positive economic profits act to

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-In the above figure, assuming Firm 1 and Firm 2 are the sole producers in the industry, the industry quantity supplied at price P1 is equal to

Correct AnswerverifiedShow Answer

The vertical distance between the horizontal axis and any point on a perfect competitor's demand curve measures

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-Refer to the above figure. Profits will equal zero

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Which is always TRUE at a firm's profit-maximizing rate of production?

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Malfeasance at Enron, a Houston-based energy firm, led to overstatement of revenues by almost $92 billion. As Enron closed its operations, U.S. energy prices remained stable. This may have been evidence that

Correct AnswerverifiedShow Answer

The short-run break-even price

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-In the above figure, what is the profit at the profit-maximizing output level?

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If the wage rate increases and firms in a perfectly competitive industry are hiring labor, then

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What is the shape of the long-run supply curve in an increasing-cost industry?

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Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $6.00; AVC = $4.00; MC = $3.50; MR = $3.50. The firm should

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In a perfectly competitive market, the average revenue curve of a firm is

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A firm in a perfectly competitive industry is a

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