econ

Paul runs a shop that sells printers. Paul is a perfect competitor and can sell each printer for a price of $300. The marginal cost of selling one printer a day is $200; the marginal cost of selling a second printer is $250; and the marginal cost of selling a third printer is $350. To maximize his profit, Paul should sell

A) two printers a day.

In the long run, the economic profits of a firm in a perfectly competitive industry

A) will equal zero.

Which of the following characterizes a perfectly competitive industry?

C) The demand for each individual firm is perfectly elastic.

In the above table, if the firm produces 2 units of output, it will make an economic

C) loss of $9.

External economies are factors beyond the control of an individual firm that ________ as the total industry output increases.

C) lower its costs

A competitive firm is more likely to shut down during a recession, when the demand for its product declines, than during an economic expansion, because during the recession it might be unable to cover its

C) variable costs.

In the above figure, if the price is P1, the firm maximizes its profit by producing

C) where MC equals P1.

The above figure illustrates a firm's total revenue and total cost curves. Which one of the following statements is FALSE?

D) At output Q2 the firm incurs an economic loss.

The figure above represents a firm in a perfectly competitive market. The firm's supply curve is the curved line linking

D) point b to point d and continuing on past point d along the MC curve.

A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its revenue will

D) rise and its total variable cost will rise even more.

For a perfectly competitive firm, in a diagram with quantity on the horizontal axis and both total revenue and total cost on the vertical axis, the firm's ________ is a straight line ________.

D) total revenue curve; through the origin

Suppose the cost curves in the above figure apply to all firms in the industry. Then, if the initial price is P1, in the long run the market

A) supply will decrease.

If the price of its product just equals the average variable cost of production for a competitive firm

A) total revenue equals total variable cost and the firm's loss equals total fixed cost.

If there are external economies, as demand increases,

B) the price falls in the long run.

A firm that shuts down and produces no output incurs a loss equal to its

B) total fixed costs.

The break-even point is defined as occurring at an output rate at which

B) total revenue equals total opportunity cost.

In the above figure, if the price is P1, the firm will produce

B) where MC equals P1.

In the above figure, when the firm produces output corresponding to point c, the firm's marginal cost

D) equals its marginal revenue.

In the above table, the price of the product is

A) $30.

New reports indicate that eating turnips helps people remain healthy. The news shifts the demand curve for turnips rightward. In response, new farms enter the turnip industry. During the period in which the new farms are entering, the price of a turnip ________ and the profit of each existing firm ________.

D) falls; falls

In the above table, if the quantity sold by the firm rises from 5 to 6, its marginal revenue is

A) $15.

In perfect competition, the product of a single firm

C has many perfect substitutes produced by other firms

In the above figure showing a perfectly competitive firm's total revenue line, the firm's marginal revenue

A) does not change as output increases.

In perfect competition, the marginal revenue of an individual firm

A) equals the price of the product.

If the slope of the long-run supply curve for a perfectly competitive industry is negative, the industry experiences

A) external economies.

The costs incurred even when no output is produced are called

A) fixed costs.

If Steve's Apple Orchard, Inc. is a perfectly competitive firm, the demand for Steve's apples has

C infinite elasticity.

The price elasticity of demand for any particular perfectly competitive firm's output is

C infinite.

A perfectly competitive firm's marginal revenue exceeds its marginal cost at its current output. To increase its profit, the firm will

A) increase its output.

In the above figure, if the firm increases its output from Q1 to Q2, it will

A) increase its profit.

In the above figure, by increasing its output from Q1 toQ2, the firm

A) increases its profit.

The figure above shows short-run cost curves for a perfectly competitive firm. If the price of the product is $8, in the short run the firm will

A) incur an economic loss

Carol's Candies is producing 150 boxes of candy a day. Carol's marginal revenue and marginal cost curves are shown in the figure above. To increase her profit, Carol should

A) is horizontal.

When Sidney's Sweaters, Inc. makes exactly zero economic profit, Sidney, the owner

A) makes an income equal to his best alternative forgone income

In the above table, the firm

A) must be in a perfectly competitive industry, because its marginal revenue is constant.

In a perfectly competitive industry, a permanent increase in demand initially brings a higher price, economic

A) profit, and entry into the industry

In the above table, the marginal revenue from the fourth unit of output is

D) $30.

The economic profit of a perfectly competitive firm

A ) is less than its total revenue.

In perfect competition, restrictions on entry into an industry

A do not exist.

In perfect competition, the elasticity of demand for the product of a single firm is

A infinite, because many other firms produce identical products.

In a perfectly competitive industry, there are

A many buyers and many sellers

Total economic profit is

A total revenue minus total opportunity cost

Based on the table above which shows Chip's costs, if Chip shuts down in the short run, his economic loss will be

A) $1,000.

The figure above portrays a total revenue curve for a perfectly competitive firm. The firm's marginal revenue from selling a unit of output

B) equals $2.00.

The figure above portrays a total revenue curve for a perfectly competitive firm. The price of the product in this industry

B) equals $2.00.

The above figure shows a firm's total revenue line. The firm must be in a market with

C ) perfect competition.

In the above table, if the quantity sold by the firm rises from 6 to 7, its marginal revenue is

D) $15.

Based on the table above which shows Chip's costs, if rice sells for $600 a ton, Chip will

B) stay open because the price is above his minimum average variable cost.

In a perfectly competitive industry, the industry supply curve is the sum of the

B) supply curves of all the individual firms.

As firms enter a perfectly competitive industry,

B) the price falls and the existing firms' economic profits decrease

A firm's shutdown point is the quantity and price at which the firm's total revenue just equals its

B) total variable cost.

In the long run, fixed costs are

B) zero and variable costs are positive.

A perfectly competitive firm is definitely earning an economic profit when

A) P > ATC.

The figure represents a firm in a perfectly competitive market. The firm will shut down if price falls below

A) P2.

In the above figure, the firm's initial average total cost curve is SRAC with an initial marginal cost curve of SRMC. The price of the product is P1. In the short run the firm will produce output equal to the amount

A) Q2.

A perfectly competitive firm's supply curve is made up of its marginal cost curve at all points above its minimum

A) average variable cost curve.

The short-run supply curve for a perfectly competitive firm is its marginal cost curve above the minimum point on the

A) average variable cost curve.

It definitely pays a firm to shut down if the price of its product is

A) below its minimum average variable cost.

Among the obstacles to the efficient allocation of resources are all of the following EXCEPT

A) competition.

The gains from trade that go to households are called

A) consumer surplus

Joe's Shiny Shoes is a firm that operates in a perfectly competitive market. The figure above shows Joe's cost and revenue curves. If the number of firms in the shoe market decreases, Joe will

A) decrease output to increase profit.

Congestion of airports and airspace causes the airline industry to experience external

A) diseconomies and have a long-run supply curve with positive slope.

In the above figure, the firm is making an economic loss at

A) point a.

Economists assume that a perfectly competitive firm's objective is to maximize its

B economic profit.

In perfect competition, the elasticity of demand for the product of a single firm is

B infinite.

The market for fish is perfectly competitive. So, the price elasticity of demand for fish from a single fishery

B is greater than the elasticity of demand for fish overall.

The demand for wheat from farm A is perfectly elastic because wheat from farm A is a(n)

B perfect substitute for wheat from farm B.

In perfect competition, the price of the product is determined where the industry

B supply curve and industry demand curve intersect.

In the above table, the average variable cost at 2 units of output is

B) $2.00.

In the above table, the firm's total fixed cost of production is

B) $4.00.

The figure represents a firm in a perfectly competitive market. If the firm does not shut down, the least amount of output that it will produce is

B) 8 units.

In the above figure when the firm has reached its long-run equilibrium position, it will produce output equal to the amount

B) Q3.

In perfect competition, the firm's marginal revenue curve

B) always lies below its demand curve

In the above figure, the firm is breaking even at points

B) b and d.

In the case of a perfectly competitive firm, the

B) change in the firm's total revenue equals the price of the product multiplied by the change in quantity sold.

In the above figure, the firm's initial average total cost curve is SRAC. If the price is P1., in the long run the firm will

B) expand its plant size.

In the above figure, if the price is P1, the firm is

B) incurring an economic loss.

Based on the table above which shows Chip's costs, if rice sells for $600 a ton, Chip

B) incurs an economic loss, but should stay open in the short run.

If firms exit an industry, the

B) industry supply curve shifts leftward

In the above figure, if the firm produced Q1, the firm's economic profit is ________ than if it produced Q2 and ________ than if it produced Q3.

B) less; more

A perfectly competitive firm maximizes its profit by producing the output at which its marginal cost equals its

B) marginal revenue

A firm will expand the amount of output it produces as long as its

B) marginal revenue exceeds its marginal cost.

In the above figure, the industry short-run supply curve shifts from S0 to S2 as the

B) number of firms increases.

An example of an external cost is

B) pollution.

The feature of the above figure that indicates that the firm is a perfectly competitive firm is the

B) shape of the total revenue curve.

Assuming long-run external economies exist, when demand increases in a perfectly competitive market, in the long run the average total cost curve for a typical firm

B) shifts downward.

If the price of its product falls below the minimum point on the AVC curve, the best a perfectly competitive firm can do is to

B) shut down and incur a loss equal to its total fixed cost.

Suppose firms in a perfectly competitive industry are suffering an economic loss. Over time

B) some firms leave the industry, so the price rises and the economic loss decreases.

For a firm in perfect competition, a diagram shows quantity on the horizontal axis and both the firm's marginal cost (MC) and its marginal revenue (MR) on the vertical axis. The firm's profit-maximizing quantity occurs at the point where the

C MC curve intersects the MR curve from below, going from left to right.

Based on the table above which shows Chip's costs, if Chip shuts down in the short run, his total cost will be

C) $1,000.

In the above table, the average fixed cost at 4 units of output is

C) $1.00.

In the above table, if the firm sells 5 units of output, its total revenue is

C) $75.

The figure represents a firm in a perfectly competitive market. If the price rises from P3 to P4 then output will increase by

C) 1 unit.

A perfectly competitive firm will have an economic profit of zero if, at its profit-maximizing output, its marginal revenue equals its

C) average total cost.

The owners definitely will shut down a perfectly competitive firm if the price of its good falls below its minimum

C) average variable cost.

Based on the table above which shows Chip's costs, if rice sells for $600 a ton, Chip's profit-maximizing output is

C) between two and three tons.

As firms leave an industry because they are incurring an economic loss, the economic loss of each remaining firm

C) decreases and the price of the product rises

In the above figure, by increasing its output from Q2 to Q3, the firm

C) decreases its profit.

A long-run supply curve for a perfectly competitive industry can slope upward because of

C) external diseconomies.

If the slope of the long-run supply curve for a perfectly competitive industry is positive, the industry experiences

C) external diseconomies.

The curve LS0 in the above figure is the long-run supply curve of a perfectly competitive industry. As the demand curve shifts rightward, the industry exhibits

C) external diseconomies.

Assuming long-run external economies exist, when demand increases in a perfectly competitive market, in the long run, the price of the product

C) falls below the initial price (before the increase in demand) and the quantity increases.

Because of a decrease in the wage rate it must pay, a perfectly competitive firm's marginal costs decrease but its demand curve stays the same. As a result, the firm

C) increases the amount of output it produces and does not change its price.

The figure above portrays a total revenue curve for a perfectly competitive firm. Curve A is straight because the firm

C) is a price taker.

The above figure shows the total revenue curve for Dizzy Discs. The demand curve for CD's sold by Dizzy Discs

C) is horizontal.

In a perfectly competitive market, if there are no external economies or diseconomies, an increase in demand

C) leaves the price the same in the long run.

The firm's supply curve is its

C) marginal cost curve, at all points above the minimum average variable cost curve.

The demand for a product produced in a perfectly competitive market permanently increases. In the short run the price

C) rises and each firm produces more output.

For prices above the minimum average variable cost, a perfectly competitive firm's supply curve is

C) the same as its marginal cost curve.

For a perfectly competitive firm, curve A in the above figure is the firm's

C) total revenue curve.

The figure above shows short-run cost curves for a perfectly competitive firm. If the price of the product is $8 and the firm does not shut down, the firm's output in the short run

C) will be between 0 and 10.

In perfect competition, a firm that maximizes its economic profit will sell its good

D ) at the market price.

In perfect competition,

D all firms in the market sell their product at the same price

In perfect competition, an individual firm

D faces infinitely elastic demand.

In a perfectly competitive industry, the price elasticity of demand for the market demand is

D less than infinite; infinite

Perfect competition is an industry with

D many firms producing identical goods.

A perfectly competitive firm's demand curve is

D the same as the firm's marginal revenue curve.

To which of the following situations does the term "external diseconomies" apply?

D) Increases in an industry's output raise the costs of the firms in an industry.

The short-run supply curve for a perfectly competitive firm is its marginal cost curve

D) above its shutdown point.

A perfectly competitive firm's marginal cost exceeds its marginal revenue at its current output. To increase its profit, the firm will

D) decrease its output.

In the above figure, if the firm increases its output from Q2 to Q1, it will

D) decrease its profit.

If there are 1,000 rutabaga farms, all perfectly competitive, an increase in the price of fertilizer used for growing rutabagas will

D) decrease the total quantity of rutabagas supplied, because each farm's supply curve shifts leftward.

In the long run, a perfectly competitive firm can

D) earn a normal profit.

In the short run, a perfectly competitive firm can

D) earn an economic profit, earn a normal profit, or incur an economic loss.

Suppose the cost curves in the above figure apply to all firms in the industry. If the initial price is P1, firms are

D) incurring an economic loss and some firms will enter the industry.

If the cost curves shown in the above figure apply to all firms in the industry and the initial price is P1, in the long run the price will be

D) less than P1.

In the above figure, if the firm produced Q3, the firm's economic profit is ________ than if it produced Q1 and ________ than if it produced Q2

D) less; less

In a perfectly competitive industry, a permanent decrease in demand initially brings a lower price, economic

D) loss, and exit from the industry.

In the above figure, if the price is P1, the firm is

D) making an economic profit.

The short-run supply curve for a perfectly competitive firm is its

D) marginal cost curve above its shutdown point

A perfectly competitive firm is producing more than the profit-maximizing amount of its product. You can conclude that its

D) marginal cost exceeds the price of the product.

At a firm's break-even point, definitely its

D) marginal revenue exceeds its marginal cost

A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue will ________ and its profit will ________

D) rise; rise

Assuming long-run external diseconomies exist, when demand increases in a perfectly competitive market, in the long run, the price of the product

D) rises above the initial price (before the increase in demand) and the quantity increases.

If there are external diseconomies in an industry, in the long run, after a permanent increase in demand, the price

D) will be higher than it was initially before the increase in demand.

The shutdown point occurs at the level of output for which the ________ is at its minimum.

D)average variable cost

By producing less, a firm can reduce

its variable costs but not its fixed costs