Econ 1010: Ch 11 Moodle Quizzes

all remaining firms are making zero economic profit

Firms will stop exiting a market only when ___

large relative to the minimum efficient scale of a single firm

For perfect competition to arise, it is necessary that market demand be ___

yes, because Homer's is incurring an economic loss

Homer's Holesome Donuts has determined that its profit-maximizing quantity is 10000 donuts per year. Homer's total revenue from the sale of donuts is $12000 a year. Homer's costs are $16000 in annual rental payments for its five-year lease on its store and $5000 for ingredients. Should Homer's exit the market in the long run?

its marginal revenue curve is horizontal at the market price

If a firm faces a perfectly elastic demand for its product, then ___

is breaking even

If a perfectly competitive firm is producing an output at which price is equal to minimum average total cost, the firm ___

is incurring an economic loss but will continue to operate as long as price is above minimum average variable cost

If a perfectly competitive firm is producing in the short run at an output where price is less than average total cost, the firm ___

will increase its output to increase economic profit

If a perfectly competitive firm's marginal revenue is greater than its marginal cost, the firm ___

will decrease its output to increase economic profit

If a perfectly competitive firm's marginal revenue is less than its marginal cost, the firm ___

marginal cost is greater than average total cost

If a profit-maximizing firm in a perfectly competitive market is making an economic profit, then it must be producing a level of output where ___

supply curve leftward, and the market price rises

If firms in a perfectly competitive market are incurring an economic loss, some firms will exit. This exit shifts the market ___

supply curve rightward, and the market price falls

If firms in a perfectly competitive market are making an economic profit, new firms will enter. This entry shifts the market ___

stop production and incur a loss equal to total fixed cost

If price falls below minimum average variable cost, the best a firm can do is ___

marginal social benefit; no external benefits; marginal social cost; no external costs

In a competitive market, the market demand curve measures the ___ if ___ exist. In a competitive market, the market supply curve measures the ___ if ___ exist

downward sloping curve

In a perfectly competitive market, the market demand curve is illustrated by a ___

the horizontal sum of the supply curves of all the individual firms

In a perfectly competitive market, the short-run market supply curve is ___

an increase in market demand

In a perfectly competitive market, which of the following increases the price that the firms charge in the short run?

the same as its marginal cost curve

In the price range above the minimum average variable cost, a perfectly competitive firm's supply curve is ___

vertical at zero output

In the price range below minimum average variable cost, a perfectly competitive firm's supply curve is ___

can make an economic profit, incur an economic loss, or break even

In the short run, a firm in a perfectly competitive market ___

MR > ATC

In what situation will a perfectly competitive firm make an economic profit?

ATC > MR

In which one fo the following situations will a perfectly competitive firm incur an economic loss?

falls; positive; incur an economic loss

Initially, a perfectly competitive market that has 1000 firms is in long-run equilibrium. Then 100 firms in the industry adopt a new technology that reduces the average cost of producing the good. In the short run, the price ___, firms with the new technology make ___ economic profit, and firms with the old technology ___

supply will decrease (11.4.3)

Refer to Figure 11.4.3, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. In the long run, market ___

in the long run, the price will fall as new firms enter the market

Refer to Figure 11.4.4, which shows the cost curves for a perfectly competitive firm. If all firms in market have the same cost curves and the price is $16 per unit, ___

$75

Refer to Table 11.1.1 which gives the demand schedule for a perfectly competitive firm. If the firm sells 5 units of output, total revenue is ___

$15

Refer to Table 11.1.1 which gives the demand schedule for a perfectly competitive firm. If the quantity sold by the firm rises from 5 to 6, marginal revenue is ___

6

Refer to Table 11.2.1, which gives the total revenue schedule and total cost schedule of a perfectly competitive firm. Economic profit is maximized when the firm produces ___ units of output

$16

Refer to Table 11.2.1, which gives the total revenue schedule and total cost schedule of a perfectly competitive firm. The marginal cost of increasing production from 4 units to 5 units is ___

$30 (4th unit)

Refer to Table 11.2.1, which gives the total revenue schedule and total cost schedule of a perfectly competitive firm. The marginal revenue received from the sale of the 4th unit of output is ___

$30 (short-run equilibrium price)

Refer to Table 11.2.1, which gives the total revenue schedule and total cost schedule of a perfectly competitive firm. The short-run equilibrium price of one unit of the good is ___

$10 an hour

Refer to Table 11.2.2, which gives the total cost schedule for Chip's Pizza Palace, a perfectly competitive firm. If Chip shuts down in the short run, his total cost is ___

3 pizzas

Refer to Table 11.2.2, which gives the total cost schedule for Chip's Pizza Palace, a perfectly competitive firm. If the price of a pizza is $7, what is Chip's profit-maximizing output per hour?

$3.00

Refer to Table 11.2.3 which gives the total cost schedule for Brenda's Balloon Shop, a perfectly competitive firm. The average variable cost of producing the 1st balloon is ___

$4.80

Refer to Table 11.2.3, which gives the total cost schedule for Brenda's Balloon Shop, a perfectly competitive firm.

$4 an hour

Refer to Table 11.2.3, which gives the total cost schedule for Brenda's Balloon Shop, a perfectly competitive firm. Brenda's total fixed cost is ___

$1.00

Refer to Table 11.2.3, which gives the total cost schedule for Brenda's Balloon Shop, a perfectly competitive firm. The average fixed cost of producing the 4th balloon is ___

firms make an economic profit

The market for maple syrup is perfectly competitive. Suppose that the market is in long-run equilibrium when the market demand for maple syrup increases. What does not happen in the long run?

its total fixed cost

The maximum loss a firm will experience in the short run equals ___

inefficiency

A decrease in demand does not bring ___

MC < AVC

A firm in a perfectly competitive industry is maximizing its economic profit by producing 500 units of output. At 500 units of output, what is not true?

marginal cost; marginal revenue

A firm is producing the profit-maximizing amount of output when it is producing where its ___ curve intersects its ___ curve

marginal revenue

A firm maximizes profit by producing the output at which marginal cost equals ___

below minimum average variable cost

A firm shuts down if price is ___

marginal cost equals price and price is not below minimum average variable cost

A perfectly competitive firm is maximizing profit or minimizing loss if it is producing the quantity at which ___

increases; decreases

A perfectly competitive firm is producing at the point at which marginal cost equals marginal revenue. If the firm increases production, total revenue ___ and economic profit ___

no restrictions on entry into the market

A perfectly competitive market is characterized by ___

market output will increase

A perfectly competitive market is in short-run equilibrium with price below average total cost. What is not a prediction of the long-run consequences of such a situation?

cannot influence the market price

A price taker is a firm that ___

perfectly elastic demand

A price-taking firm faces a ___

producers are selecting points on their supply curves; the sum of consumer surplus and producer surplus is maximized; consumers are selecting points on their demand curves

An efficient allocation is achieve when ___ (three things)

wheat industry

An example of a perfectly competitive industry is the ___

downward sloping; horizontal

Assume that the leather market is a perfectly competitive market. The market demand curve for leather is ___ and each individual leather producer's demand curve is ___

rises and the equilibrium quantity increases

Consider a perfectly competitive market. In the short run, if demand increases due to a technological advance, the equilibrium price ___

total revenue minus total cost

Economic profit equals ___

perfectly competitive

Lin's fortune cookies are identical to the fortune cookies made by dozens of other firms, and there is free entry in the fortune cookie market. Buyers and sellers are well informed about prices. Lin's fortune cookies operates in a ___ market

economic profit and economic loss have been eliminated

Long-run equilibrium occurs in a competitive market when ___

an identical product

Perfect competition occurs in a market where there are many firms, each selling ___

if it raises its price, the station will lose customers

Refer to Fact 11.1.1. Each of these gas stations has little control over the price of gasoline because ___

average variable cost (GM)

Refer to Fact 11.2.1. GM will start producing the Chevy Volt again when price is greater than ___

average variable cost (Fact 11.2.1)

Refer to Fact 11.2.1. The shutdown decision maximizes GM's economic profit (or minimizes its loss) when price is less than ___

made zero economic profit

Refer to Fact 11.4.1. If the price of fiddleheads last month was $15 per bad, Franklin ___

No, because total revenue must cover all costs for factors of production to remain in fiddlehead farming in the long run

Refer to Fact 11.4.1. Suppose the price of fiddleheads is expected to stay at $10 per bag for the foreseeable future, and Franklin's production and cost figures are expected to stay the same. His total fixed cost consists entirely of rent on land, and his five-year lease on the land runs out at the end of the month. Should Franklin renew the lease?

rotates downward and becomes flatter

Refer to Figure 11.1.1. The firm competes in a perfectly competitive market. If price decreases, the total revenue curve ___

a price taker

Refer to Figure 11.1.1. The firm competes in a perfectly competitive market. The total revenue curve is a straight line because the firm is ___

False (11.2.1)

Refer to Figure 11.2.1, which shows a perfectly competitive firm's total revenue and total cot curves. True or False; at an output of Q2 units a day, the firm incurs an economic loss

B and D

Refer to Figure 11.2.2, which shows a perfectly competitive firm's economic profit and loss. The firm is breaking even at points ___

point A

Refer to Figure 11.2.2, which shows a perfectly competitive firm's economic profit and loss. The firm is incurring a loss at ___

less than 10; incurs an economic loss of less than $20

Refer to Figure 11.3.1, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry. In the short run, if the market price of the good is $10, the firm produces ___ units of output and ___

incur an economic loss if price is greater than average variable cost

Refer to Figure 11.3.1, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry. In the short run, the firm will ___

making an economic profit

Refer to Figure 11.3.2, which shows the cost curves and marginal revenues curve of a firm in a perfectly competitive industry, the firm is ___

incurring an economic loss

Refer to Figure 11.3.3, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive industry. The firm is ___

30; $360

Refer to Figure 11.3.4, which shoes the cost curves of Paul's Picture Frames Inc. The picture frame market is perfectly competitive and the market price is $12 a frame. Paul produces ___ frames each day and makes daily total revenue of ___

30; $40

Refer to Figure 11.3.5, which shows the cost curves ad the marginal revenue curve for a perfectly competitive firm. To maximize profit, the firm produces ___ units of output and the price is ___ a unit

firms that remain in the market will expand production (11.4.1)

Refer to Figure 11.4.1, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. In the long run, ___

supply will decrease (11.4.1)

Refer to Figure 11.4.1, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. In the long run, market ___

firms that remain in the market will decrease production

Refer to Figure 11.4.2, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. In the long run, ___

supply will increase

Refer to Figure 11.4.2, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. In the long run, market ___

incurring an economic loss, and some firms leave the market. Market supply decreases

Refer to Figure 11.4.3, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. Firms are ___

firms that remain in the market will expand production (11.4.3)

Refer to Figure 11.4.3, which shows the cost curves and marginal revenue curve of a firm in a perfectly competitive market. In the long run, ___

$8.40; 350 000; 350; incurs an economic loss of $581 a week

Refer to Table 11.2.4. The market is perfectly competitive and there are 1000 firms that produce paper. The top table sets out the market demand schedule for paper. Each producer of paper has the costs shown in the bottom table when it uses its least-cost plant size. The market price is ___ a box and the market output is ___ boxes. The output produced by each firm is ___ boxes. Each firm ___

-$10.00 an hour

Refer to Table 11.2.5. Archibald's Tattoos is a perfectly competitive firm. The firm's total costs are shown in the table. If the price of a tattoo is $12.50, Archibald's economic profit is ___

$12.50

Refer to Table 11.2.5. Archibald's Tattoos is a perfectly competitive firm. The firm's total costs are shown in the table. The price at Archibald's shut-down point is ___

$10.00; 300 000

Refer to Table 11.4.1. The top table shows the market demand schedule for paper. The market is perfectly competitive and there are 1000 firms that produce paper. Each firm has the costs shown in the bottom table when it uses its least-cost plant. The market price in the long is ___ a box and the equilibrium quantity produced in the long run is ___ boxes a week

market demand and market supply; price

Refer to fact 11.1.1. the price of gasoline is determined by ___. The marginal revenue from gasoline equals ___

total revenue equals total variable cost, and the loss equals total fixed cost

Suppose a firm is trying to decide whether to temporarily shut down to minimize total loss. If price equals average variable cost and the firm continues to produce, ___

average variable cost (shutdown)

The shutdown point occurs at the point of minimum ___

equal to zero

The slope of perfectly competitive firm's demand curve is ___

False (consumer's demand curve)

True or False; firms get the most value out of their resources at every point along a consumer's demand curve

False (producer surplus)

True or False; producer surplus is maximized at the competitive equilibrium

only high quality goods are produced

What does not need to be satisfied to achieve allocative efficiency?

each firm increases production

What does not occur when firms in a perfectly competitive market make an economic profit?

cannot influence the market price of the good that it sells

When a firm is a "price taker," the firm ___

there are significant restrictions on entry into the market

Which does not occur in perfect competitive? (barriers)

total fixed cost

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

the change in total revenue that results from a one-unit increase in the quantity sold

marginal revenue is ___

brings only temporary gains to producers

technological change