Microeconomics- Chapter 10

In perfect competition, restrictions on entry into an industry: a) do not exist b) apply to labor but not to capital c) apply to both capital and labor d) apply to capital but not to labor

a) do not exist

Total economic profit is: a) total revenue minus total opportunity cost b) marginal revenue minus marginal cost c) total revenue divided by total cost d) marginal revenue divided by marginal cost

a) total revenue minus total opportunity cost

Economists assume that a perfectly competitive firm's objective is to maximize its: a) revenue b) economic profit c) output price d) quantity sold

b) economic profit

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: a) MC curve intersects the MR curve from above, going from left to right b) slope f the MC curve is zero c) MC curve intersects the MR curve from below, going from left to right d) MC and MR curves are parallel

c) MC curve intersects the MR curve from below, going from left to right

In perfect competition, the product of a single firm: a) is sold to different customers at different prices b) has many perfect complements produced by other firms c) has many perfect substitutes produced by other firms d) is sold under many differing brand names

c) has many perfect substitutes produced by other firms

The price elasticity of demand for any particular perfectly competitive firm's output is: a) less than 1 b) equal to zero c) infinite d) 1

c) infinite

If Steve's Apple Orchard, Inc. is a perfectly competitive firm, the demand for Steve's apples has: a) elasticity equal to the price of apples b) unitary elasticity c) infinite elasticity d) zero elasticity

c) infinite elasticity

At a firm's break-even point, its: a) marginal revenue equals its average fixed cost b) marginal revenue equals its average variable cost c) total revenue equals its total opportunity cost d) marginal revenue exceeds its marginal cost

c) total revenue equals its total opportunity cost

In perfect competition, the firm's marginal revenue curve: a) cuts its demand curve from above, going from left to right b) always lies below its demand curve c) cuts its demand curve from below, going from left to right d) is the same as its demand curve

d) is the same as its demand curve

In a perfectly competitive industry there are: a) many buyers and many sellers b) many sellers, only one or two buyers c) many buyers, one one or two sellers d) one firm that sets the price for the others to follow

a) many buyers and many sellers

In the case of a perfectly competitive firm, the: a) firm's marginal revenue exceeds the price of the product b) change in the firm's total revenue equals the price of the product multiplied by the change in quantity sold c) firm's marginal revenue is less than average revenue d) price of the product falls sharply when the quantity the firm sells doubles

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

In perfect competition, the elasticity of demand for the product of a single firm is: a) 0 b) infinite c) 1 d) between 0 and 1 (a decimal)

b) infinite (many other firms produce identical products)

A perfectly competitive firm's demand curve is: a) perfectly elastic b) the same as the market demand curve c) downward sloping d) the same as the firm's marginal revenue curve

d) the same as the firm's marginal revenue curve

It definitely pays a firm to shut down if the price of its product is: a) below its minimum average variable cost b) above its maximum variable cost c) above its minimum average variable cost d) below its minimum total cost

a) below its minimum average variable cost

In perfect competition, the marginal revenue of an individual firm: a) equals the price of the product b) is positive but less than the price of the product c) exceeds the price of the product d) is zero

a) equals the price of the product

The costs incurred when no output is produced are called: a) fixed costs b) external costs c) variable costs d) marginal costs

a) fixed costs

A perfectly competitive firm's marginal revenue exceeds its marginal cost at its current output. To increase its profit, a firm will: a) increase its output b) raise its price c) decrease its output d) lower its price

a) increase its output

The economic profit of a perfectly competitive firm: a) is less than its total revenue b) is greater than its total revenue c) equals its total revenue d) is less than its total revenue if its supply curve is inelastic and is greater than its total revenue if its supply curve is elastic

a) is less than its total revenue

When a sweater company makes exactly 0 economic profit, the owner: a) makes an income equal to his best alternative forgone income b) will boost output c) will shut down in the short run d) is taking a loss

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

The market for fish is perfectly competitive. So, the price of elasticity of demand for fish from a single fishery: a) is sometimes greater than and sometimes less than the elasticity of demand for fish overall b) is greater than the elasticity of demand for fish overall c) is less than the elasticity of demand for fish overall d) equals the elasticity of demand for fish overall

b) is greater than the elasticity of demand for fish overall

A perfectly competitive firm maximizes its profit by producing the output at which its marginal cost equals its: a) average variable cost b) marginal revenue c) average total cost d) average fixed cost

b) marginal revenue

A firm will expand the amount of output it produces as long as its: a) average total revenue exceeds its average cost variable cost b) marginal revenue exceeds its marginal cost c) marginal cost exceeds its marginal revenue d) average total revenue exceeds its average total cost

b) marginal revenue exceeds its marginal cost

The demand for wheat from farm A is perfectly elastic because wheat from farm A is a(n): a) perfect complement to wheat from farm B b) perfect substitute for wheat from farm B c) normal good d) inferior good

b) perfect substitute for wheat from farm B

In perfect competition, the price of the product is determined where the industry: a) elasticity of supply equals the industry elasticity of demand b) supply curve and industry demand curve intersect c) fixed cost is zero d) average variable cost equals the industry average total cost

b) supply curve and industry demand curve intersect

The break-even point is defined as occurring at an output rate at which: a) total cost is minimized b) total revenue equals total opportunity cost c) economic profit is maximized d) marginal revenue equals marginal cost

b) total revenue equals total opportunity cost

A firm's shutdown point is the quantity and price at which the firm's total revenue just equals its: a) marginal cost b) total variable cost c) total cost d) total fixed cost

b) total variable 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 revenue will: a) rise and its total variable cost will rise, but not by as much b) fall but its total variable cost will rise c) fall and its total variable cost will fall, but not by much d) rise and its total variable cost will rise even more

d) rise and its total variable cost will rise even more

In perfect competition: a) there are significant restrictions on entry b) each firm can influence the price of the good c) there are few buyers d) all firms in the market sell their product at the same price

d) all firms in the market sell their product at the same price

In perfect competition, a firm that maximizes its economic profit will sell its good: a) below the market price b) above the market price c) below the market price if its supply curve is inelastic and above the market price if its supply curve is elastic d) at the market price

d) at the market price

A perfectly competitive firm;s marginal cost exceeds its marginal revenue at its current output. To increase its profit, the firm will: a) increase its output b) raise its price c) lower price d) decrease its output

d) decrease its output

In perfect competition, an individual firm: a) has a price elasticity of supply equal to one b) faces unitary elasticity of demand c) has a price elasticity of supply equal to infinity d) faces infinitely elastic demand

d) faces infinitely elastic demand

In a perfectly competitive industry, the price elasticity of demand for the market demand is __________ and the price elasticity of demand for an individual firm's demand is __________. a) infinite, less than infinite b) infinite, infinite c) less than infinite, less than infinite d) less than infinite, infinite

d) less than infinite, infinite

Perfect competition is an industry with: a) a few firms producing identical goods b) many firms producing goods that differ somewhat c) a few firms producing goods that differ somewhat in quality d) many firms producing identical goods

d) many firms producing identical goods

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 __________. a) fall, fall b) fall, rise c) rise, rise d) rise, fall

d) rise, fall

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 __________. a) total cost curve, through the origin b) total revenue curve, zero slope c) total cost curve, with zero slope d) total revenue curve, through the origin

d) total revenue curve, through the origin