Econ test 2
The figure above shows a perfectly competitive firm. If the market price is $20 per unit, then the firm produces _____ units and makes an economic profit that is ______.
30; zero
Based on the figure above, what is the price of a can?
$3 per can
The firm in the figure above has a total cost equal to
$5.10 * 10
Use the figure above to answer this question. Consider a perfectly competitive market experiencing good times. Figure ____ shows a firm maximizing profit in the short run because it produces ____ units and makes an economic profit of ____
A 100 $2/unit
A firm that is a price taker faces
a perfectly elastic demand curve
A perfectly competitive firm is producing 50 units of output and selling at the market price of $23. The firms average total cost is $20. What is the firm's total cost?
$1,000
A monopoly occurs when
one firm sells a good that has no close substitutes and a barrier blocks entry for other firms
When new firms enter a perfectly competitive market, the market supply curve shifts _____ and the price _____
rightward; falls
Suppose that marginal revenue for a perfectly competitive firm is $20. When the firm produces 10 units, its marginal cost is $20, its average total cost is $22, and its average variable cost is $17. Then to maximize its profit in the short run, the firm
should stay open and incur the economic loss of $20
The above figure illustrates a perfectly competitive firm. If the market price is $10 a unit, to maximize its profit (or minimize its loss) the firm should
shut down
If the price is less than a perfectly competitive firm's minimum average variable cost, the firm
shuts down and incurs an economic loss equal to total fixed cost
______ a large number of firms competing by making similar but slightly different products.
monopolistic competition require
Suppose a perfectly competitive market is in long-run equilibrium and then there is a permanent increase in the demand for that product. The new long-run equilibrium will have
more firms in the market
To maximize its profit, the firm in the figure above produces _____ cans per day and _______
10; earns an economic profit of 29
The above table has the total revenue and total cost schedule for Omar, a perfectly competitive grower of rutabagas. Omar's total profit is maximized when he produces ____ bushels of rutabagas.
5
If the market supply curve and market demand curve for a good intersect 600,000 units and there are 10,000 identical firms in the market, then each firm is producing
60 units
Which of the following will increase a perfectly competitive seller's short-run supply and shift the firm's short-run supply curve rightward?
a decrease in marginal cost
A market is classified as a oligopoly when
a firm firms compete
A market is initially in a long-run equilibrium and there is a permanent demand. After the new long-run equilibrium is reached, there
are more firms in the market
If perfectly competitive firms are making an economic profit, the economic profit
attracts entry by more firms, which lowers the price
For a perfectly competitive rancher in Wyoming, if the price does not change, an economic profit could turn into economic loss if the
average total cost curve shifts upward
For a perfectly competitive sugar producer in Haiti, a short-run economic profit will occur if the price of each ton of sugar sold is
greater than the average total cost of producing sugar
Shama is producing candles in a perfectly competitive market. When she produces 500 candles, her total cost is $250. If she produces one additional candle, her total cost increases to $260. In order to maximize her profit, she should produce the additional candle
if the market price for a candle is $12
If a struggling perfectly competitive furniture store in Detroit shuts down, it incurs an economic loss equal to its
total fixed cost
If a perfectly competitive wheat farmer is maximizing its profit and then increases its output, the farmer's
total revenue increases, but total cost rises by more so that the farmer's total profit decreases
Technological change
usually requires an investment in a new plant
If a firm in a perfectly competitive market faces an equilibrium price of $5, its marginal revenue
will also be $5
The above figure shows a perfectly competitive firm. If the market price is $5 per unit, the firm
will definitely shut down to minimize its losses
The above figure shows a perfectly competitive firm. If the market price is $15 per unit, the firm
will stay open to produce and will incur and economic loss
The above figure illustrates perfectly competitive firm. Curve C represents the
ATC curve
The above table has a total revenue and total cost schedule for Omar, a perfectly competitive grower of rutabagas. When Omar maximizes his profit, Omar's profit equals
$16
The firm in the figure above has a total cost equal to
$5.14 * 7
Based on the figure above, when the firm maximizes its profit, it produces ______ cans per day.
10
The above table has the total revenue and total cost schedule for Omar, a perfectly competitive grower of rutabagas. When Omar produces 2 bushels of rutabagas, his total profit equals
-$8
If demand for a seller's product is perfectly elastic, which of the following is true? 1. the firm will sell no output if it sets the price its product above the market price 2. there are many perfect substitutes for the seller's product 3. the firm will sell no output if it sets the price its product below the marker price
1 & 2
In a perfectly competitive industry, 1. entry by new firms shifts the market supply curve rightward 2. exit by existing firms shifts the market supply curve leftward 3. at all times existing firms make only zero economic profit
1 & 2
A requirement of perfect competition is that 1. many firms sells an identical product to many buyers 2. there are no restrictions on entry into (or exit from) the market, and established firms have no advantage over new firms 3. sellers and buyers are well informed about prices
1, 2, & 3
Technology reduces the average cost of production, so in the long run 1. perfectly competitive firms produce at a lower average cost 2. the market price of the good falls 3. firms with older plans either exit the market or adopt the new technology
1, 2, & 3
For a perfectly competitive firm, profit is maximized at the output level where 1. total revenue exceeds total cost by the largest amount 2. marginal revenue equals marginal cost 3. price equals marginal cost
1, 2, &3
Use the figure above to answer this question. Figure _____ shows a short-run equilibrium in good times because the firm makes a _____
A; economic profit
Use the figure above to answer this question. Consider a perfectly competitive firm in a short run equilibrium. Figure ____ shows a firm in bad times because the firm makes a ______
A; economic loss of $4 per unit if the firm decides to operate
The above figure illustrates a perfectly competitive firm. Curve B represents the
MC curve
Alice, Bud, and Celia can produce rubber bands in a perfectly competitive market. If they enter the market, the minimum average total cost for a bundle of rubber bands, for the three of them is $2, $3, and $4 respectively. If the market price is $2.10 per bundle, then
Only Alice will enter the market
When one firm sells a good or service that has no close substitutes and a barrier blocks the entry of new firms, what type of market is this?
Only monopoly
In a market undergoing technological change, firms that
adopt the new technology temporarily make an economic profit
If it does not shut down, a perfectly competitive firm produces where marginal cost is equal to the marginal revenue
always to maximize its profit
A perfectly competitive firm should shut down in the short-run if price falls below the minimum of
average variable cost
Perfect competition ______ an efficient outcome because
both A and B are correct Achieves; total surplus is max. achieves; MB = MC
Perfect competition is characterized by all of the following EXCEPT
considerable advertising by individual firms
When firms in a perfectly competitive market incur economic losses, exit by some firms means the market supply will
decrease
A perfectly competitive firm is producing at the quantity where marginal cost is $6 and average total cost is $4. The price of the good is $5. To maximize its profit the firm should
decrease its output
Suppose the firm's marginal cost of producing a can increases by $1 per can. Then, based on the figure above, the firm would
decreases the amount of cans it produces but not to zero cans
A permanent decrease in demand definitely
decreases the number of firms in the industry
The market demand curve in a perfectly competitive market is _____ and the demand curve for a perfectly competitive firm's output is ______
downward sloping; horizontal
In a perfectly competitive market, a ______ occurs because ______
efficient outcome; total surplus is maximized
If firms in a perfectly competitive market are incurring economic losses, then as time passes firms ______ and the market _______
exit; supply curve shifts leftward
Which of the following is the best example of a perfectly competitive market?
farming
The above figure shows three possible average total cost curves. If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC2 each produces 40 units, and the market price of the good is $20 per unit, then
firms will enter the industry and the number of firms increases
The marginal revenue curve for a perfectly competitive firm is
horizontal
Based on the figure above, if the firm produces 7 cans per day, the firm _____ maximizing its profit and is _____
is; incurring an economic loss
If concerns about mad-cow disease impose economic losses on the perfectly competitive cattle ranchers, exit by the ranchers combined with no further changes in the demand for beef will force the price of beef to
increase
Suppose the price of a can was $5.14. In this case, to maximize profit, the firm illustrated in the figure above would
increase its production and would make economic profit
Based on the figure above, the price of a can is $8; if the price increased to $12, then the firm would
increase the amount of cans it produces
As a perfectly competitive firm's output increases, its total revenue _____ and its total cost ____
increases increases
Suppose a perfectly competitive market is in a short-run equilibrium. If some firms exit the market, the profit of the remaining firms _______; if some firms enter the market, the profit of each existing firm _______.
increases; decreases
The firm in the figure above is _____ that is equal to ______
incurring an economic loss ; ($5.14 - $3.00)*7
Computer memory chips are produced on wafers, each wafer having many separate chips that are separated and sold. The above table shows costs for a perfectly competitive producer of computer memory chips. If the market price of a wafer is $2,400 dollars, the firm is
incurring an economic loss of $2,000 an hour
The firm in the figure above is ____ that is equal to _____.
incurring an economic loss; ($5.14-$3.00)*7
For a perfectly competitive firm, the price of its good is equal to the firm's marginal revenue because
individual perfectly competitive firms cannot influence the market price by changing their output
In a perfect competition, marginal revenue
is equal to the market price
The figure above shows a perfectly competitive firm. If the market price was $15, the firm
is making an economic profit
The above figure shows a perfectly competitive firm. If the market price is $10, the firm
is making zero economic profit
Peter's Pencils is a perfectly competitive company producing pencils. Suppose Peter is producing 1,000 pencils an hour. If the total cost of 1,000 pencils is $500, the market price per pencil is $2, and the marginal cost is $2, then Peter
is maximizing his profit and is making an economic profit
Based on the figure above, if the firm produces 7 cans per day, the firm ____ maximizing its profit and is _____.
is; incurring an economic loss
We know that a perfectly competitive firm is a price taker because
its demand curve is horizontal
During the winter, theme parks in Orlando close earlier than in the summer. The reason the theme parks close early during the winter is because during that season the marginal revenue from staying open later is ____ the marginal cost
less than
If Henry, a perfectly competitive lime grower in Southern California, can sell his limes at a price greater than his average total cost, Henry will
make an economic profit
In the long run, a perfectly competitive firm will
make zero economic profit
In the long run, a firm in a perfectly competitive market will
make zero economic profit, so that its owners earn a normal profit
If a perfectly competitive firm's average total cost is less than the price, then the firm
makes an economic profit
The firm in the figure above is _____ that is equal to _____
making an economic profit; ($8.00-$5.10)*10
In a perfectly competitive industry, when a firm is producing so that its total revenue equals its total cost, the firm is
making zero economic profit
The characteristics that describe a perfectly competitive industry include
many firms selling an identical product
One part of a perfectly competitive trout farm's supply curve is its
marginal cost curve above the shutdown point
For a perfectly competitive syrup producer whose average total cost curve does not change, an economic profit could turn into an economic loss if the
market demand for syrup decreases
If perfectly competitive firms are making an economic profit, then
new firms will enter that market
If perfectly competitive lawn care firms are making an economic profit, then
new firms will enter the industry
When firms in a perfectly competitive market are earning an economic profit, in the long run
new firms will enter the market
In which market structure does one firm sell a good or service with no close substitutes and there is a barrier blocking the entry of new firms?
only monopoly
The four market types are
perfect competition monopoly monopolistic competition oligopoly
Because perfectly competitive firms are price takers, each firm faces a demand that is
perfectly elastic
Cynthia is an Oklahoma wheat farmer. The demand for her wheat is
perfectly elastic
Suppose a perfectly competitive market is in short-run equilibrium. Firms that are incurring a _______ economic loss ______
persistent; exit the industry and shift the market supply curve leftward
Bill owns a lawn-care company in Windermere, Florida. Florida, whose cost curves are illustrated in the above figure. The market equilibrium price in this perfectly competitive equals $32 per lawn mowed. If Bill's average total cost curve is ATC, his total economic _____ equals ______.
profit $480/week
For a syrup producer in central Vermont, profit is maximized at the level of output for which total
revenue exceeds total cost by the largest amount
A perfectly competitive market arises when
the market demand is very large relative to the output of one seller
Consider a short-run equilibrium in a perfectly competitive market. Suppose that the firms' average total cost and marginal cost schedules differ. In the short-run,
some firms might incur an economic loss, but still produce output
If firms in a perfectly competitive industry are earning an economic profit and new firms enter the industry, then
the existing firms' economic profit decreases
A large number of sellers all selling an identical product implies which of the following?
the inability of any seller to change the price of the product
