Econ 221 Chapter 23 practice quiz

to continue production at a loss.

A company finds that at its present level of​ production, MC​ = AVC at​ $15, MC​ = ATC at​ $20, and MC​ = MR at​ $17. Your advice to the firm regarding its​ short-run operations is A. to shut down. B. to continue​ production, as it is earning an economic profit of​ $3 per unit. C. to continue​ production, as it is earning an economic profit of​ $2 per unit. D. to continue production at a loss.

to shut down.

A company finds that at its present level of​ production, MR​ = MC at​ $14, MC​ = AVC at​ $15, and MC​ = ATC at​ $20. Your advice to the firm regarding its​ short-run operations is A. to continue production at a loss. B. to continue​ production, as it is earning an economic profit of​ $6 per unit. C. to shut down. D. to continue​ production, as it is earning an economic profit of​ $1 per unit.

the price per unit sold is greater than the average variable cost per unit produced.

A firm earning economic losses should operate in the short run as long as A. the price per unit sold is greater than the average variable cost per unit produced. B. the price per unit sold is greater than the average fixed cost per unit produced. C. the price per unit sold is equal to or greater than the marginal cost of production. D. marginal revenue is at least the price per unit sold.

experiencing economic losses.

A firm in a perfectly competitive industry faces the following cost and revenue​ conditions: ATC​ = $6; AVC​ = $3; MR​ = MC​ = $5. The firm is A. in a position in which it should shut down. B. experiencing zero profits. C. earning economic profits. D. experiencing economic losses.

shut down.

A firm is currently producing at the rate of output at which total revenues just cover its total variable costs. If demand​ falls, the firm should A. increase its rate of output to make up for the lower price. B. not change its rate of output because it is still covering its variable costs. C. shut down. D. lower both price and its rate of output.

P​ < AVC.

A firm should never produce any output if 어려워 A. P​ < ATC. B. P​ < AVC. C. AR​ < ATC. D. MR​ < MC.

total fixed costs.

A firm that shuts down in the short run experiences losses equal to its 어려워 A. total variable costs minus its total fixed costs. B. average variable costs. C. total fixed costs. D. total variable costs.

prevent resources from flowing to their​ highest-valued uses.

A law that restricts plant closings will A. prevent resources from flowing to their​ highest-valued uses. B. provide useful market signals to all parties in the industry. C. make the economy more efficient by reducing poor decisions on the part of entrepreneurs. D. make the economy more efficient by slowing down the movement of resources to a more optimal rate.

. can be​ positive, negative, or zero.

A perfectly competitive firm is maximizing profits in the short run. This implies that the firm is earning the most economic profits​ possible, which A. can be​ positive, negative, or zero. B. exist at the point at which price equals total cost. C. must be positive. D. must be either zero or positive.

B. is earning a​ profit, but not necessarily the maximum profit.

A perfectly competitive firm is selling 300 units of output at​ $4 each. At this output​ level, total fixed cost is​ $100 and total variable cost is​ $500. The firm A. should shut down. B. is earning a​ profit, but not necessarily the maximum profit. C. is maximizing its profit. D. is experiencing an economic loss.

at the minimum point of its average total cost curve.

A perfectly competitive​ firm's short-run​ break-even output occurs A. at the intersection of its total cost curve and its marginal revenue curve. B. at the minimum point of its average variable cost curve. C. at the minimum point of its average total cost curve. D. at the minimum point of its marginal cost curve.

the forces of supply and demand.

A perfectly competitive​ industry's market or​ "going" price is established by A. the forces of supply and demand. B. the largest firm in the industry. C. the largest purchaser of this​ industry's output. D. each individual producing firm and reflects that​ firm's costs.

locating the intersection of the market demand and market supply curves.

A perfectly competitive​ industry's market price is found by A. the horizontal summation of all the industry​ firms' individual supply curves. B. identifying the price at which each firm realizes its largest economic profit. C. locating the intersection of the market demand and market supply curves. D. finding the point on the market demand curve where the largest number of units will be purchased.

Marginal Revenue​ = Marginal Cost

Which is always true at a​ firm's profit-maximizing rate of​ production? A. Marginal Revenue​ > Marginal Cost B. The total revenue curve lies below the total cost curve. C. Total Revenue​ = Total Costs D. Marginal Revenue​ = Marginal Cost

C. MR​ = MC

Which of the following conditions is TRUE for a​ profit-maximizing firm in a perfectly competitive​ industry? A. ATC​ = AFC B. MC​ = AVC C. MR​ = MC D. MR​ = AFC

D. Sellers have better information about the product than consumers.

Which of the following is NOT a characteristic of a perfectly competitive​ industry? A. The firms in the industry produce a homogeneous product. B. There are large numbers of buyers and sellers. C. Any firm can enter or leave the industry without serious impediments. D. Sellers have better information about the product than consumers.

A. It is difficult for a firm to enter or leave the market.

Which of the following is NOT a characteristic of a perfectly competitive​ market? A. It is difficult for a firm to enter or leave the market. B. Each firm is a price taker. C. There are many buyers and sellers in the market. D. The products sold by the firms in the market are homogeneous.

C. Easy entry and exit

Which of the following is a characteristic of perfect​ competition? A. Differentiated products B. Few firms C. Easy entry and exit D. None of the above

A. P​ = d​ = MR

Which of the following is always true for a perfectly competitive​ firm? A. P​ = d​ = MR B. MC​ = MR​ = AVC C. P​ = d​ = AVC D. AVC​ = ATC​ = P

P​ = d​ = MR​ = MC

Which of the following is always true in the short run for a perfectly competitive firm that is maximizing economic​ profits? A. P​ = d​ = MR​ = Q B. MR​ = MC​ = Q C. P​ = d​ = MR​ = MC​ = AVC D. P​ = d​ = MR​ = MC

C. the market for broccoli

Which of the following is closest to a perfectly competitive​ market? A. the market for athletic shoes B. the market for handmade guitars C. the market for broccoli D. the computer software market

D. the market for sugar

Which of the following is closest to a perfectly competitive​ market? A. the soda pop market B. the market for fast food C. the market for bread D. the market for sugar

D. Price and MR are always equal.

Which of the following is true for the perfectly competitive​ firm? A. AR is less than price. B. AR is more than price. C. Price elasticity of demand is equal to 1. D. Price and MR are always equal.

D. The products made by a perfectly competitive firm have no close substitutes.

Which of the following statements about the perfect competitor is​ INCORRECT? A. If an individual firm raises​ price, it will lose business. B. The perfectly competitive firm is always a price taker. C. The perfect competitor sells a homogeneous commodity. D. The products made by a perfectly competitive firm have no close substitutes.

. The market demand curve of the perfectly competitive industry is​ downward-sloping while the demand curve facing an individual firm is horizontal.

Which of the following statements is correct about the demand curve of the perfectly competitive​ industry? A. The demand curve of the perfectly competitive industry is horizontal as are the demand curves facing the individual firms. B. The market demand curve of perfect competition is vertical because the individual consumers are buying a homogeneous product. C. The market demand curve of the perfectly competitive industry is​ downward-sloping, so the demand curves of the individual firms are also​ downward-sloping. D. The market demand curve of the perfectly competitive industry is​ downward-sloping while the demand curve facing an individual firm is horizontal.

D. The firm can influence its demand curve by advertising its product.

Which of the following statements is not true for a perfectly competitive​ firm? A. A​ firm's demand curve is horizontal. B. The​ firm's demand curve is perfectly elastic. C. The market demand and supply curves determine the market price. D. The firm can influence its demand curve by advertising its product.

B. MR​ = TR

Which statement is not true for a perfectly competitive​ firm? A. AR​ = MR B. MR​ = TR C. P​ = AR D. P​ = MR

should reduce its output level.

If a firm is producing an output rate at which marginal cost is greater than​ price, the firm A. is sustaining economic loss. B. should increase its output level. C. will not be covering its fixed cost. D. should reduce its output level.

B. decrease its rate of output.

If marginal revenue is less than marginal​ cost, the firm should A. increase its rate of output. B. decrease its rate of output. C. raise price. D. raise marginal revenue.

average revenue and average total cost.

Profit per unit is the difference between A. marginal revenue and marginal cost. B. average revenue and marginal cost. C. total revenue and total cost. D. average revenue and average total cost.

C. Panel C

Refer to the figure above. The market supply and demand curves in a perfectly competitive market intersect at​ $4. Which of the graphs represent the situation for an individual​ firm? A. Panel A B. Panel B C. Panel C D. Panel D

C. An individual​ firm's demand curve will be horizontal at​ $5.

Refer to the figure at right. The figure represents the market demand and supply curves for widgets. What statement can be made about the demand curve for an individual firm in this​ market? A. An individual​ firm's demand curve cannot be determined from the graph above. B. An individual​ firm's demand curve will be a smaller version of the market demand curve. C. An individual​ firm's demand curve will be horizontal at​ $5. D. An individual​ firm's demand curve will be horizontal at a price below​ $5.

positive.

Accounting profits at a​ firm's break-even point are A. positive. B. negative. C. zero. D. indeterminate since we need to know what demand is.

B. produce identical products.

All firms in a perfect competition industry A. are price makers. B. produce identical products. C. lose money. D. produce differentiated products.

C. product differentiation.

All of the following are characteristics of perfect competition EXCEPT A. homogenous products. B. each firm is a price taker. C. product differentiation. D. a lack of barriers.

the individual firm is known as a market price maker.

All of the following are true regarding perfectly competitive price determination EXCEPT A. the market price is determined by the interactions among all buyers​ (households) and firms. B. the individual firm is known as a market price maker. C. the individual​ firm's marginal revenue curve is horizontal at the market price. D. the individual firm takes the market price as given.

earning zero economic profits.

At the​ short-run break-even​ point, the perfectly competitive firm is A. earning positive economic profits. B. earning zero economic profits. C. just covering its total variable costs. D. earning negative economic profits.

B. a firm cannot influence the market price.

Being a price taker essentially means A. the firm cannot legally set its price below the market price. B. a firm cannot influence the market price. C. a firm can influence the market price. D. the firm cannot legally set its price above the market price.

A. total economic profits.

Economists generally assume that firms attempt to maximize A. total economic profits. B. total revenue. C. marginal revenue. D. sales.

. a signal to entrepreneurs that some of the firms in the industry should exit and the resources of these firms should move into production of other goods.

Firms in a perfectly competitive industry are earning economic losses. This is A. a signal to entrepreneurs that some of the firms in the industry should exit and the resources of these firms should move into production of other goods. B. a signal to government officials that a subsidy is needed for the firms in the industry. C. a signal to entrepreneurs that additional resources should be brought into this industry in order to make it profitable. D. a signal that the entrepreneurs are doing a poor job and should become workers for someone else.

horizontal.

For a firm in a perfectly competitive​ industry, the demand curve for its own product is A. ​downward-sloping. B. horizontal. C. ​upward-sloping. D. vertical.

B. the same as the marginal revenue curve.

For a firm in a perfectly competitive​ industry, the demand curve for its own product is A. ​downward-sloping. B. the same as the marginal revenue curve. C. vertical. D. always above the marginal revenue curve.

. MR​ = P

For a firm in a perfectly competitive​ industry, which of the following is​ TRUE? A. AVC​ = ATC B. MR​ < P C. MR​ = P D. AFC​ = ATC

D. the producer has an incentive to expand output.

For a perfectly competitive​ firm, when MC is less than​ MR, A. economic profits must be positive. B. the producer has no incentive to change production. C. the producer has an incentive to decrease output. D. the producer has an incentive to expand output.

C. both average revenue and marginal revenue.

For a perfect​ competitor, price equals A. average revenue only. B. neither marginal revenue nor average revenue. C. both average revenue and marginal revenue. D. marginal revenue only.

earning​ $300 in economic profits and is maximizing economic profits.

If price is​ $5, marginal cost is​ $5, average total cost is​ $3, and the quantity produced is 150​ units, then the perfectly competitive firm is A. not maximizing economic profit. B. earning​ $300 in economic profits and is maximizing economic profits. C. earning​ $2 in economic profits and is maximizing economic profits. D. earning​ $150 in economic profits and is not maximizing economic profits.

firm's marginal cost of producing the good is​ $8.

In a perfectly competitive market in which all firms are maximizing their economic​ profits, the demand and supply curves intersect at a price of​ $8. From this we know that each A. firm is earning positive economic profits at a price of​ $8 or more. B. ​firm's average total cost of producing the good is​ $8. C. ​firm's marginal cost of producing the good is​ $8. D. ​firm's average variable cost of producing the good is​ $8.

B. firms will move labor and capital in pursuit of​ profit-making opportunities to whatever business venture gives them the highest return on their investment.

In a perfectly competitive market structure any firm can enter or leave the industry without serious impediments. This implies A. consumers are able to find out about lower prices charged by other firms. B. firms will move labor and capital in pursuit of​ profit-making opportunities to whatever business venture gives them the highest return on their investment. C. no one buyer or seller has any influence on price. D. the products sold will be alike.

hinder economic efficiency.

In a perfectly competitive​ industry, any restrictions that prevent new firms from entering A. lead to negative profits. B. hinder economic efficiency. C. reduce the average cost of production. D. guarantee that all existing firms will earn exactly a zero profit.

C. is​ downward-sloping.

In a perfectly competitive​ industry, the industry demand curve A. must be vertical. B. must be horizontal. C. is​ downward-sloping. D. is​ upward-sloping.

C. the same as its demand curve.

In a perfectly competitive​ market, the average revenue curve of a firm is A. the same its economic profits. B. the same as its total revenue curve. C. the same as its demand curve. D. the difference between its total revenue curve and its marginal revenue curve.

firms enter the​ industry, the market supply curve shifts​ rightward, and the market price falls.

In the long run when a perfectly competitive firm experiences positive economic​ profits, A. firms exit the​ industry, the market supply curve shifts​ leftward, and the market price rises. B. firms enter the​ industry, the market supply curve shifts​ rightward, and the market price falls. C. firms enter the​ industry, the market supply curve shifts​ rightward, and the market price rises. D. firms exit the​ industry, the market supply curve shifts​ rightward, and the market price falls.

B. P​ < AVC.

In the short​ run, a firm should shut down when A. P​ > MC. B. P​ < AVC. C. MR​ = ATC. D. MR​ > MC.

P​ > ATC.

In the short​ run, the perfectly competitive firm will always earn an economic profit when A. P​ > ATC. B. P​ = MC. C. P​ = ATC. D. P​ > AVC.

B. is the change in total revenues resulting from a change in output.

Marginal revenue A. is a change in revenue that is immeasurable and​ non-quantifiable. B. is the change in total revenues resulting from a change in output. C. cannot be used to determine the​ profit-maximizing rate of production. D. cannot be effectively utilized when analyzing the perfect competitor.

C. If the individual firm raises its​ price, it will capture all sales in the market.

Referring to the figure​ below, which of the following statements is​ INCORRECT? A. The individual firm takes as given the market price along the perfectly elastic demand curve​ "d." B. The equilibrium market price is​ $5, at which the industry demand and supply curves intersect. C. If the individual firm raises its​ price, it will capture all sales in the market. D. The individual firm faces the going market price as determined by the industry.

​$150.00

Suppose a perfectly competitive asparagus farm can produce six containers of asparagus at an output at which marginal cost equals marginal revenue. The price per container of asparagus is​ $100 and the average total cost is​ $75. What is the profit or loss that this asparagus farm is​ earning? A. ​$600.00 B. ​$450.00 C. minus−​$450.00 D. ​$150.00

The firm should maintain the current level of output.

Suppose that at the current level of​ output, price​ = $100, MC​ = $100, AVC​ = $80, and ATC​ = $90. Which of the following is​ true? A. The firm should increase output. B. The firm should decrease output. C. The firm should shut down. D. The firm should maintain the current level of output.

The firm should decrease output.

Suppose that at the current level of​ output, price​ = $12, MC​ = $14, AVC​ = $7, and ATC​ = $9. Which of the following is​ TRUE? A. The firm should increase output. B. The firm should maintain the current level of output. C. The firm should shut down. D. The firm should decrease output.

incurring​ $200 in total economic losses and is minimizing economic losses.

Suppose that in a perfectly competitive​ market, the market price is​ $10. A firm in that market has marginal cost of​ $10, average total cost of​ $12, and it is producing 100 units. The firm is A. incurring​ $200 in total economic losses and is minimizing economic losses. B. earning zero total economic profits and is not maximizing economic profits. C. earning​ $200 in total economic profits and is maximizing economic profits. D. earning​ $1,000 in total economic profits and is maximizing economic profits.

earning​ $3 in economic profits per unit of output and is not maximizing profits.

Suppose the market price is​ $5, marginal cost is​ $4, and average total cost is​ $2. The perfectly competitive firm in that market is A. earning​ $3 in economic profits per unit of output and is not maximizing profits. B. earning​ $2 in economic profits per unit of output and is maximizing profits. C. earning​ $1 in economic profits per unit of output and is not maximizing profits. D. none of the​ above: Insufficient information is given.

A. its production decisions cannot influence the market price.

The demand curve for a perfectly competitive firm is horizontal because A. its production decisions cannot influence the market price. B. its product is easy for consumers to differentiate from those of other firms. C. consumers are willing to pay any price to obtain its product. D. the firm profits from setting its price higher than the market price.

raises its​ price, sales will fall to zero.

The demand curve for the product of a perfectly competitive​ firm's demand curve indicates that if the firm A. lowers its​ price, it can sell more. B. accepts the​ market-set price, the number of units the firm can sell is limited. C. changes its​ price, the quantity demanded will change in the opposite direction. D. raises its​ price, sales will fall to zero.

A. average revenue.

The equation TR/Q is used to compute A. average revenue. B. marginal revenue. C. total cost. D. demand.

opportunity costs cannot be covered.

The exiting of firms from a perfectly competitive industry occurs when A. MR equals MC. B. accounting profit is less than economic profit. C. P​ = ATC. D. opportunity costs cannot be covered.

D. its production is too small to affect the market.

The perfectly competitive firm cannot influence the market price because A. a few buyers have control over the market price. B. it has market power. C. its costs are too high. D. its production is too small to affect the market.

A. it produces and sells the quantity at which marginal revenue and marginal cost are equal.

The perfectly competitive firm maximizes profits when A. it produces and sells the quantity at which marginal revenue and marginal cost are equal. B. it produces and sells the quantity at which the difference between price and average cost is the greatest. C. it produces and sells the quantity at which the difference between marginal revenue and marginal cost is the greatest. D. it produces and sells the quantity at which the difference between average revenue and average cost is the greatest.

C. total revenue.

The price per unit times the total quantity sold is A. price revenue. B. marginal revenue. C. total revenue. D. average revenue.

A. total revenue.

The total amount received from the sale of output is A. total revenue. B. price revenue. C. average revenue. D. marginal revenue.

B. multiplying price by quantity.

The total revenue of a perfectly competitive firm is calculated by A. dividing price by quantity. B. multiplying price by quantity. C. multiplying average revenue by price. D. multiplying quantity by average total cost.

MR​ = MC.

The​ profit-maximizing output for the perfectly competitive firm occurs at the point at which A. TRminus−MR is at a maximum. B. MR​ = MC. C. TRminus−TC is at a minimum. D. TRminus−ATC is at a maximum.

B. marginal​ cost, average total cost and marginal revenue are all equal.

The​ short-run break-even price is the point at which A. marginal​ cost, price and average variable cost are all equal. B. marginal​ cost, average total cost and marginal revenue are all equal. C. average variable cost is at a minimum. D. price is less than marginal cost.

minimum AVC.

The​ short-run shutdown price for a perfectly competitive firm is where price equals 어려워 A. minimum AVC. B. MR. C. minimum ATC. D. AR.

average revenue.

Total revenue divided by quantity is A. quantity revenue. B. price revenue. C. average revenue. D. marginal revenue.

D. perfectly elastic.

Under the perfectly competitive market​ structure, the demand curve of an individual firm is A. perfectly inelastic. B. ​downward-sloping. C. relatively inelastic. D. perfectly elastic.

D. want to maximize profits.

We assume that​ firms, when they are deciding the best rate of output at which to​ produce, A. want to minimize costs. B. want to maximize sales. C. try to get the highest price possible. D. want to maximize profits.

B. MR​ = MC​ = P​ = AR

What is always true about the​ short-run equilibrium position for a firm in perfect​ competition? A. TR​ = TC B. MR​ = MC​ = P​ = AR C. MC​ = ATC D. MR​ = MC​ = P​ = ATC​ = AR

reduce its level of output.

When MR​ < MC for a​ firm, the firm should A. increase​ output, unless P​ < AVC. B. stay at the same level of output. C. stop producing. D. reduce its level of output.

economic profits equal zero and the firm is earning a nominal rate of return on investment.

When a firm is at its​ short-run break-even​ point, A. economic profits equal zero and the firm should shut down. B. economic profits are negative but the firm should continue to produce because accounting profits are positive. C. economic profits equal zero and the firm is earning a nominal rate of return on investment. D. economic profits are positive.

P​ = ATC.

When a firm is earning zero economic​ profits, A. total revenue is greater than total cost. B. P is greater than ATC. C. accounting profit is zero. D. P​ = ATC.