Microeconomics Ch. 12 Test

In a perfectly competitive​ industry, in the long-run equilibrium

the typical firm earns zero profit.

Refer to the diagram to the right which shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.

If the market price is​ $30, the​ firm's profit maximizing output level is

180

Producing where marginal revenue equals marginal cost is equivalent to producing where

total profit is maximized.

Perfect competition is characterized by all of the following except

heavy advertising by individual sellers.

If the market price is​ $25 in a perfectly competitive​ market, the marginal revenue from selling the fifth unit is

$25

Refer to the diagram to the right which shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.

If the market price is​ $30 and if the firm is producing​ output, what is the amount of its total variable​ cost?

$3,960

​If, for a given output​ level, a perfectly competitive​ firm's price is less than its average variable​ cost, then the firm

should shut down.

For a firm in a perfectly competitive​ market, price is

equal to both average revenue and marginal revenue.

Letters are used to represent the terms used to answer this​ question: price ​(P​), quantity of output ​(Q​), total cost ​(TC​) and average total cost ​(ATC​). Which of the following equations is equal to a​ firm's profit?

​(P x Q​) - TC

​Jason, a high-school student mows lawns for families in his neighborhood. The going rate is​ $12 for each lawn-mowing service. Jason would like to charge​ $20 because he believes he has more experience mowing lawns than the many other teenagers who also offer the same service. If the market for lawn mowing services is perfectly​ competitive, what would happen if Jason raised his​ price?

If Jason raises his​ price, he would lose all his customers.

Which of the following is the best example of a perfectly competitive​ firm?

a corn farmer in Illinois

Refer to the diagram to the right. Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity. Identify the area that represents the loss.

P3cbP1

Refer to the diagram to the right which shows cost and demand curves facing a typical firm in a constant-cost perfectly competitive industry.

If the market price is​ $20, what is the amount of the​ firm's profit?

​$6,750

Total revenue at the profit-maximizing level of output is

​$6,000.

A perfectly competitive firm produces​ 3,000 units of a good at a total cost of​ $36,000. The fixed cost of production is​ $20,000. The price of each good is​ $10. Should the firm continue to produce in the short​ run?

​Yes, it should continue to produce because the​ firm's revenues cover the total variable cost of​ $16,000.

If a typical firm in a perfectly competitive industry is earning​ profits, then

new firms will enter in the long run causing market supply to​ increase, market price to​ fall, and profits to decrease.

Refer to the diagram which shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.

If the market price is​ $30, should the firm represented in the diagram continue to stay​ open?

​Yes, because it is covering part of its fixed cost.

Which of the following statements is​ correct?

Economic profit takes into account all costs involved in producing a product.

Refer to the diagram to the right. Suppose the prevailing price is​ $20 and the firm is currently producing​ 1,350 units. In the long run​ equilibrium,

there will be more firms in the industry and total industry output increases.

The​ firm's short-run supply curve is its

marginal cost curve from b and above.

​Ben's Peanut Shoppe suffers a short-run loss. Ben will not choose to shut down if

his Peanut​ Shoppe's total revenue exceeds his variable cost.

​If, for the last unit of a good produced by a perfectly competitive​ firm, MR​ > MC​, then in producing​ it, the firm

added more to total revenue than it added to total costs.

Refer to the diagram to the right which shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.

What is the amount of its total fixed​ cost?

​$2,520

Refer to the diagram which shows cost and demand curves facing a profit-maximizing perfectly competitive firm. If the firm chose to produce at price P1​, the firm would

lose an amount equal to its fixed costs.

At the profit-maximizing output​ level, the firm earns

a profit of​ $2,700.

What is productive​ efficiency?

a situation in which resources are allocated such that goods can be produced at their lowest possible average cost

The total cost at the profit-maximizing output level equals

​$3,300.

Both individual buyers and sellers in perfect competition

have to take the market price as a given.

Refer to the diagram to the right which shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.

If the market price is​ $30 and the firm is producing​ output, what is the amount of the​ firm's profit or​ loss?

loss of​ $1,080

Which of the following describes the difference between the market demand curve for a perfectly competitive industry and the demand curve for a firm in this​ industry?

The market demand curve is downward​ sloping; the​ firm's demand curve is a horizontal line.

An individual seller in perfect competition will not sell at a price lower than the market price because

the seller can sell any quantity she wants at the prevailing market price.

If the market price is​ $25, the average revenue of selling five units is

​$25.