Unit 5 Test
Refer to the chart below. The average total cost to the firm of producing 2 units of output is
$ 95.00
A farmer produces peppers in a perfectly competitive market. If the price falls, in the short run the farmer should
continue to produce only if the new price covers average variable costs
When a perfectly competitive firm sells additional units of output, its total revenue will
increase at a constant rate
The diagram below shows a perfectly competitive 11rm's short-run cost curves. If the price of the output increases from $8 to $10, the profit maximizing firm will
increase output to 18 units because this is the output at which price equals marginal cost
Refer to the graph below. lf the market price is $10, how many widgets should this profit-maximizing firm produce?
16,000
At the current production level of good X, price is greater than marginal cost. Which of the following actions would lead to greater efficiency?
Increasing the production of good X
In the short run in perfect competition, the industry's demand curve and a firm's demand curve have which of the following slopes?
Industry's Demand Curve - Downward sloping; Firm's Demand Curve - Horizontal
Which of the following is true for a perfectly competitive firm in the long-run equilibrium?
It is allocatively efficient
In the short run, a profit maximizing firm should shut down if which of the following is true?
Its product price is less than its average variable cost.
Which of the following best describes a perfectly competitive market?
Many small firms producing a homogeneous product and facing no significant barriers to entry
Which of the following is true if a perfectly, competitive market is in long-run equilibrium?
Marginal revenue is equal to average total cost.
In a perfectly competitive market, which of the following shifts in the supply and demand curves will definitely cause both the equilibrium price and quantity to decrease?
Supply Curve - No shift; Demand Curve - Shifts to the left
Refer to the graph below. If marginal revenue is equal to P1, all of the following statements are true EXCEPT:
The firm will increase production in the long-run.
Which of the following is true if a perfectly competitive industry is earning zero economic profits in the long run?
The resources invested in this industry are earning at least as high a return as they would in any alternative use
A perfectly competitive firm earning economic profits, produces and sells 100 units of output at a price of $20 per unit. If its marginal cost of increasing output to a rate of 101 units is $18, which of the following statements is correct?
The total profit from selling 101 units is $2 greater than the total profit from selling 100 units
Refer to the graph below. The vertical distance CF represents the
average fixed cost of producing Qt units of output
In the short run, if the product price of a perfectly competitive firm is less than the minimum average variable cost, the firm will
lose more by continuing to produce than by shutting down
