MicroEcon Ch 9 Quiz

Refer to Exhibit 23-1. The dollar amounts that go in blanks C and D are, respectively,

NOT: $14 and $7 & NOT: $1 and $14

Refer to Exhibit 23-8. What is the total revenue of Firm B at the point where it produces in the short run?

NOT: $700 & NOT: $300

Ultimately, market supply curves are upward sloping because of

the law of diminishing marginal returns.

Refer to Exhibit 23-4. The firm sells its product at P1 and produces Q1. Given this situation,

total cost is equal to areas 1 + 2 + 3

firm operating in a perfectly competitive market finds itself producing at an output level for which marginal revenue is lower than marginal cost. In order to maximize profits (or minimize losses), the firm should

decrease the level of output.

seller is a price taker. This means that the seller sells his product at the price

determined in the market.

market demand curve in a perfectly competitive market is

downward sloping.

perfectly competitive market is initially in long-run competitive equilibrium. Then, market demand falls. This causes the marginal revenue curves for existing firms to shift __________ and for these firms to produce __________ output. Some of the existing firms will end up __________.

downward, less, exiting the market

perfectly competitive market is initially in long-run competitive equilibrium. Then, market demand increases. As a result, existing firms in the market begin to __________. By the time all adjustments have been made, profits will __________.

earn positive economic profit; be back at zero

U.S. Postal Service earns a________________ profit per unit on its commemorative stamps than it does on its standard stamps because the ________________ cost is lower on the commemorative stamps.

higher; average variable

short-run industry supply curve is the

horizontal summation of the short-run supply curves for all firms in the industry.

demand curve for a perfectly competitive firm

is perfectly horizontal.

price charged by a perfectly competitive firm is determined by

market demand and market supply together.

For a perfectly competitive firm, MR = MC at 250 units of output. At 250 units, ATC is greater than AVC. It necessarily follows that

none of the above

Perfectly competitive industries are

none of the above

Which of the following is inconsistent with a long-run industry equilibrium?

none of the above

demand curve faced by a perfectly competitive firm is

one where price equals marginal revenue.

Refer to Exhibit 23-10. What price does this firm charge for its product?

$20

Which of the following is not a condition of long-run competitive equilibrium?

Marginal revenue is greater than marginal cost

Which of the following is not a condition of long-run competitive equilibrium?

None of the above; that is, all are conditions of long-run competitive equilibrium.

In the long run, a firm earns zero economic profit, given the condition that

P = ATC.

Consider the following data: equilibrium price = $8.50, quantity of output produced = 100 units, average total cost = $10, and average variable cost = $9. What will the firm do and why?

Shut down in the short run, because it will be taking a loss of $100.

Firm X is producing the quantity of output at which marginal revenue equals marginal cost. It is

There is not enough information to answer the question.

In the model of perfect competition, the firm's marginal revenue curve is

a and b

perfectly competitive market is initially in long-run competitive equilibrium. Then, market demand increases. As a result,

a and b

Firms with a ________ total fixed cost-total cost ratio are _____ likely to operate in the short run.

a and d

For a perfectly competitive firm,

a, b, and c

price at which a perfectly competitive firm sells its product is determined by

all sellers and buyers of the product, collectively.

increasing-cost industry is characterized by

an upward-sloping long-run supply curve.

If, for a perfectly competitive firm, marginal cost is greater than marginal revenue for the 100th unit, then it follows that

b and d

In the theory of perfect competition,

buyers and sellers of the product know everything that there is to know about the product.

In a perfectly competitive market, if a resource that one firm utilizes is superior to resources used by other firms, and, as a result, lowers unit costs for the firm, that firm is likely to earn __________ in the short run. In time, however, the firm's __________ curve will rise to reflect the superior-quality of the resource it employs and the firm will then earn __________.

positive economic profit; ATC; normal profit

firm produces the quantity of output at which P = MC and P = ATC. It follows that the firm is

resource allocative efficient, but not necessarily productive efficient.

Equilibrium price is $8 in a perfectly competitive market. For a perfectly competitive firm, MR = MC at 150 units of output. At 150 units, ATC is $11, and AVC is $10. The best policy for this firm is to __________ in the short run. Also, total fixed cost equals __________ and total variable cost equals __________ for this firm.

shut down; $150; $1,500