CH12

Refer to the graph below. What is the value of total fixed cost for this perfectly competitive firm? $3,400 $5,800 $2,400 None of the above; there is insufficient information to answer the question.

$2,400

Refer to the graphs below. What do you expect to happen in this market as it approaches long-run equilibrium? a shift to the right of the market demand curve as new firms enter an upward shift of the firm's demand curve as new firms enter a shift to the left of the market demand curve as new firms enter a shift to the right of the market supply curve as new firms enter

a shift to the right of the market supply curve as new firms enter

A buyer or seller that is unable to affect the market price is called? a price maker a price taker an independent producer a monopoly

a price taker

Refer to the graphs below. The perfectly competitive firm represented in the graph on the right is experiencing a profit in the short run. a profit in the long run. a loss in the short run. a loss in the long run

a profit in the short run.

Refer to the graph below which shows the marginal cost and marginal revenue curves for a farmer in the perfectly competitive market for wheat. What is the profit-maximizing level of output if the producer can produce only whole units of output? 3 bushels 10 bushels 6 bushels 8 bushels

6 bushels

Refer to the table below. Based on the numbers in the table, how much should this farmer produce in order to maximize profit? 10 bushels 9 bushels 6 bushels 4 bushels

6 bushels

Refer to the graph below. Which of the curves is not necessary for determining the level of profit earned by a perfectly competitive firm? the marginal cost curve the demand curve the average total cost curve All three curves are needed to determine the level of profit earned by a perfectly competitive firm.

All three curves are needed to determine the level of profit earned by a perfectly competitive firm.

Refer to the graph below. Which demand curve is associated with the shutdown point for this perfectly competitive firm? Demand1 Demand2 Demand3 Demand4

Demand2

Refer to the graphs below. The graph on the left depicts demand and supply in the competitive market for wheat. The graph on the right depicts the demand curve facing Farmer Whapple, an individual producer in the market for wheat. The demand curve for Farmer Whapple's wheat is horizontal at the market price of $4.00 because Farmer Whapple is the only supplier of wheat in this market. Farmer Whapple is a price taker. Farmer Whapple has control over the price of wheat. Farmer Whapple can choose whether he faces a downward sloping demand curve or a horizontal demand curve.

Farmer Whapple is a price taker.

What is the relationship between price, average revenue, and marginal revenue for a firm in a perfectly competitive market? Price is equal to average revenue and greater than marginal revenue. Price is greater than average revenue and equal to marginal revenue. Price is equal to both average revenue and marginal revenue. Price, average revenue, and marginal revenue usually all have different values.

Price is equal to both average revenue and marginal revenue.

Refer to the graph below. At what level of output does this perfectly competitive firm maximize profit? Q1 Q2 Q3 0.

Q3

Refer to the graph below of the demand curve facing a firm in the perfectly competitive market for wheat. The fact that the demand curve is horizontal implies which of the following? The firm must lower the price of wheat to increase the quantity demanded. Increasing production of wheat from 3,000 bushels to 7,500 bushels results in an increase in marginal revenue. The market demand for wheat is identical to the demand for wheat faced by an individual firm. The firm can sell any amount of output as long as it accepts the market price of $4.00.

The firm can sell any amount of output as long as it accepts the market price of $4.00

Refer to the graphs below. As market demand shifts to the left, how will the firm's level of output change? The firm will increase its output to increase its profits. The firm will decrease its output and suffer losses. The firm will maintain its output at the current level but suffer losses. The firm will decrease its output and earn higher profit.

The firm will decrease its output and suffer losses.

If market demand shifts to the right, how will a competitive firm's level of output change? The firm will increase its output, and its profits will increase. The firm will need to decrease its output and suffer losses. The firm will keep its output constant, but its profits will increase. The firm will decrease its output, which will increase its profit.

The firm will increase its output, and its profits will increase.

Refer to the graph below. When the perfectly competitive firm faces demand curve Demand3, which of the following is true? The firm is earning positive economic profit. The firm should shut down. The firm will suffer losses, but should continue to operate. The firm should go out of business.

The firm will suffer losses, but should continue to operate.

Which of the following are characteristics of a perfectly competitive industry? firms are unable to control the prices of the products they sell firms are unable to earn an economic profit in the long run firms sell identical products all of the above

all of the above

Economic loss refers to a situation in which a firm's total revenue is less than its total cost. To calculate the amount of a loss, which of the following costs should be included? explicit costs only implicit costs only both explicit costs and implicit costs fixed costs only

both explicit costs and implicit costs

To maximize profit, which of the following should a firm attempt to do? maximize revenue minimize cost find the largest difference between total revenue and total cost all of the above

find the largest difference between total revenue and total cost

Refer to the graph below. Based on the information on the graph, what is true about marginal revenue? marginal revenue increases as the quantity of bushels sold increases marginal revenue decreases as the quantity of bushels sold increases marginal revenue remains constant as the quantity of bushels sold increases marginal revenue is always greater than marginal cost

marginal revenue remains constant as the quantity of bushels sold increases

Refer to the graph below. What does the shaded area in the graph represent for a perfectly competitive firm that produces at output level Q? positive economic profit accounting profit negative economic profit total cost of producing Q

negative economic profit

If an individual firm in a perfectly competitive market increases its price, the firm will experience higher revenue. lower average total cost. increased sales. none of the above

none of the above

Which term best describes the minimum amount that a firm needs to earn on a $100,000 investment to be willing to remain in a perfectly competitive industry in the long run? explicit cost opportunity cost economic profit economic loss

opportunity cost

Which of the following terms best describes how the result of the forces of competition drives the market price to the minimum average cost of the typical firm? allocative efficiency productive efficiency decreasing-cost industry competitive markdown

productive efficiency

What is the term given to a cost that has already been paid and cannot be recovered? unrecoverable cost variable cost sunk cost implicit cost

sunk cost

Refer to the graph below. Which of the curves in the graph is not necessary for determining the level of output that maximizes profit for a perfectly competitive firm? the MC curve the demand curve the ATC curve All three curves are needed to determine which level of output maximizes profit.

the ATC curve

Refer to the graph of costs for a perfectly competitive firm below. Which of the following best represents profit per unit? the shaded rectangle the distance between points A and B the market price none of the above

the distance between points A and B

Refer to the graphs below. Suppose the graph on the left represents a typical firm's supply curve in a perfectly competitive industry, and there are 100 identical firms in the industry. Then the graph on the right represents the market supply curve. the average total cost curve for the industry. the individual supply curve for each firm in the industry. the individual demand curve facing each firm in the industry.

the market supply curve.

Long-run competitive equilibrium is the situation in which the entry and exit of firms have resulted in the typical firm just breaking even. a situation in which market price is at a level equal to the minimum point on the typical firm's marginal cost curve. the end of a process during which firms are prevented from adjusting their production methods. all of the above

the situation in which the entry and exit of firms have resulted in the typical firm just breaking even.

Refer to the graph below. At which of the following prices is the perfectly competitive firm earning negative economic profit? $495 $250 both $250 and $495 any price above $495

$250

Refer to the graph below. If a perfectly competitive firm is producing at point A, which of the following is true? The firm earns zero accounting profit. The firm suffers a loss. The firm earns zero economic profit. The firm earns positive economic profit.

The firm earns zero economic profit.

Refer to the graphs below. After the market demand curve shifts to the left, which of the following would happen in this perfectly competitive market as it adjusts to long-run equilibrium? The market demand curve will shift back to the right. The market supply curve will shift to the right. The market supply curve will shift to the left. The market demand curve will shift further to the left.

The market supply curve will shift to the left.

If firms in a perfectly competitive industry are earning positive profits, what would you expect to see in the long run? The market demand curve will shift to the left as firms exit the market, prices will rise, and profits will rise. The market supply curve will shift to the right as firms enter the market, prices will fall, and profits will fall. The market supply curve will shift to the left as firms exit the market, prices will rise, and profits will rise. The market demand curve will shift to the right as firms enter the market, prices will rise, and profits will rise.

The market supply curve will shift to the right as firms enter the market, prices will fall, and profits will fall.

Refer to the graphs below. What do you expect to happen in this perfectly competitive market as it approaches long-run equilibrium? The price will increase and profits will become zero. The price will decrease until it is equal to the minimum of average total cost, and profits will increase. The price will decrease until it is equal to the minimum of average total cost, and profits will become zero. Firms will exit because economic profit will become zero.

The price will decrease until it is equal to the minimum of average total cost, and profits will become zero.

Which of the following conditions must exist in order to have a perfectly competitive market? There must be many buyers and many sellers, all of whom are small relative to the market. The products sold by firms in the market must be different from each other. There must be some barriers to entry in order to protect perfect competition. all of the above

There must be many buyers and many sellers, all of whom are small relative to the market.