Microeconomics chapter 13

During a recession, the price of restaurant meals falls by over 10 percent. The most likely cause is:

a shift of the demand curve to the left.

Refer to the graph shown depicting a perfectly competitive firm. If average variable cost is $3 at quantity 450, points A through E represent the:

firm's supply curve.

Which graph depicts a perfectly competitive firm in long-run equilibrium?

graph ii

As long as marginal cost is below marginal revenue, a perfectly competitive firm should:

increase production.

The perfectly competitive firm depicted is currently:

incurring a loss, but the loss is smaller than it would be if the firm shut down.

The long-run industry supply curve will be upward-sloping if:

input prices increase with the level of output.

Suppose there are 1,000 firms in a perfectly competitive market and each maximizes profit at 25 units of output when market price is $1.00 per unit. One of the points on the market supply curve must be at:

price = $1 and quantity supplied = 25,000.

Refer to the graph shown. To maximize profit, this perfectly competitive firm should produce:

50 units of output

Refer to the graph shown. If market price is currently $5.00 per unit, this perfectly competitive firm will maximize profit by producing:

650 units of output

Refer to the graph shown. What level of output should the perfectly competitive firm produce to maximize profits?

8

Refer to the graph shown. If the market price is P4, the firm will produce:

Q4 and earn a profit

In a perfectly competitive market, an increase in market demand in a long-run constant-cost industry causes:

an increase in price, quantity, and profit in the short run.

In a perfectly competitive long-run constant-cost industry, an increase in market demand causes:

an increase in quantity, no change in price, and no change in profit in the long run.

Suppose cookie sales fall as consumers become more carbohydrate-conscious. If the cookie industry is a constant-cost, perfectly competitive industry, this decline in market demand will cause market supply to:

decrease in the long run until the equilibrium price is again equal to minimum average total cost.

Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand decreases from D0 to D1, the firm will:

earn negative economic profit in the short run.

The perfectly competitive firm depicted is currently:

earning positive economic profit.

The existence of positive economic profits induces firms to:

enter an industry, which shifts the market supply curve to the right and decreases market price.

In 2009 the electronics retailer Circuit City closed its stores. If we assume this was a short-run decision, the most likely explanation for it is that the price of a typical product sold at Circuit City stores was:

less than the average variable cost of producing the toy.

Suppose there is an improvement in the technology of producing TVs and the production of TVs is a competitive industry. Assuming that the TV industry is initially in equilibrium, the long-run effect of this improvement is:

lower TV prices and greater TV production.

Refer to the graphs shown, which depict a perfectly competitive market and firm in a constant-cost industry. If market demand increases from D0 to D1, in the long run:

new firms will enter this market and price will return to P0.

Suppose there are 50 firms in a perfectly competitive market and each maximizes profit at 50 units of output when market price is $15.00 per unit. One of the points on the market supply curve must be at:

price = $15 and quantity supplied = 2,500.

Suppose a perfectly competitive firm can increase its profits by increasing its output. Then it must true that the firm's:

price exceeds its marginal cost

To maximize profits, a perfectly competitive firm should do all the following except:

produce until per-unit profits are maximized

Barriers to entry:

restrict the number of firms in an industry.

Each firm in perfect competition:

sets quantity based on market price

Refer to the graph shown, which depicts a perfectly competitive firm. If the price of the product is $8 and the firm maximizes profit:

the firm will earn economic profits of more than $330 per day.

Refer to the graph shown, which depicts a perfectly competitive firm. When the industry is in long-run competitive equilibrium:

the firm will produce 100 units of output

The demand for clothing increases. As a result, the price of clothing increases above the minimum average cost of producing it. In the long run, if the clothing industry is perfectly competitive and is a constant-cost industry:

the supply of clothing will increase but the price will not.

Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand is D0:

this market is in long-run equilibrium because the firm is earning zero economic profit.

Total profit is maximized at the output level at which the:

vertical distance between the total revenue curve and the total cost curve is maximized.