ECO 202 Chapter 23 c9 Exam Solution
• Question 1
1 out of 1 points
The perfectly competitive firm will seek to produce the level of output
... [Show More] for which
Selected Answer: c.
marginal cost equals marginal revenue.
Answers: a.
average variable cost is at a minimum.
b.
average total cost is at a minimum.
c.
marginal cost equals marginal revenue.
d.
average fixed cost is at a minimum.
• Question 2
0 out of 1 points
If an industry advertises, then it
Selected Answer: c.
will surely be able to increase its sales.
Answers: a.
is definitely not a perfectly competitive industry.
b.
may or may not be a perfectly competitive industry.
c.
will surely be able to increase its sales.
d.
is not using its resources wisely.
e.
must be a perfectly competitive industry.
• Question 3
1 out of 1 points
Firm X is producing the quantity of output at which marginal revenue equals marginal cost. It is earning
Selected Answer: d.
There is not enough information to answer the question.
Answers: a.
a positive economic profit.
b.
a normal profit.
c.
an economic loss.
d.
There is not enough information to answer the question.
• Question 4
0 out of 1 points
Exhibit 23-8
Refer to Exhibit 23-8. What is the total variable cost of firm A at the profit-maximizing (or loss-minimizing) level of production?
Selected Answer: a.
$700
Answers: a.
$700
b.
$400
c.
$1,000
d.
$300
• Question 5
1 out of 1 points
Exhibit 23-1
(1) (2) (3)
Price Quantity Sold Marginal Revenue
$12 100
$12 101 (A)
$12 102 (B)
$12 103 (C)
$12 104 (D)
Refer to Exhibit 23-1. The data in this table are relevant to a perfectly competitive firm because
Selected Answer: d.
it doesn't have to lower price to sell additional units of the product.
Answers: a.
its total revenue is different at different levels of quantities sold.
b.
marginal revenue is greater than price.
c.
its total revenue is the same at all levels of quantities sold.
d.
it doesn't have to lower price to sell additional units of the product.
• Question 6
1 out of 1 points
Exhibit 23-4
Refer to Exhibit 23-4. Where can you find the lowest price that will motivate the firm to produce Q1 in the short run?
Selected Answer: c.
at the horizontal line running to "AVC"
Answers: a.
P1
b.
at the horizontal line running to "ATC"
c.
at the horizontal line running to "AVC"
d.
$0
• Question 7
1 out of 1 points
A perfectly competitive market is initially in long-run competitive equilibrium. Then, market demand increases. This causes existing firms in the market to __________ and __________. As a result of the latter, the market supply curve shifts __________.
Selected Answer: c.
produce more output; new firms to enter the market; rightward
Answers: a.
produce more output; some existing firms to exit the market; leftward
b.
produce less output; new firms to enter the market; rightward
c.
produce more output; new firms to enter the market; rightward
d.
expand their plant size; some existing firms to exit the market; leftward
e.
none of the above
• Question 8
1 out of 1 points
Exhibit 23-1
(1) (2) (3)
Price Quantity Sold Marginal Revenue
$12 100
$12 101 (A)
$12 102 (B)
$12 103 (C)
$12 104 (D)
Refer to Exhibit 23-1. The marginal revenue curve represented by the information in this table is
Selected Answer: c.
horizontal.
Answers: a.
vertical.
b.
downward-sloping.
c.
horizontal.
d.
upward-sloping.
• Question 9
1 out of 1 points
In a perfectly competitive market, if a resource that one firm utilizes is superior to resources used by other firms, and, as a result, lowers unit costs for the firm, that firm is likely to earn __________ in the short run. In time, however, the firm's __________ curve will rise to reflect the superior-quality of the resource it employs and the firm will then earn __________.
Selected Answer: b.
positive economic profit; ATC; normal profit
Answers: a.
normal profit; ATC; positive economic profit
b.
positive economic profit; ATC; normal profit
c.
positive economic profit; marginal revenue; zero profit
d.
losses; ATC; positive economic profit
e.
none of the above
• Question 10
1 out of 1 points
A perfectly competitive market is initially in long-run competitive equilibrium. Then, market demand increases. As a result,
Selected Answer: e.
a and b
Answers: a.
the marginal revenue curve for each firm shifts upward.
b.
the demand curve for each firm shifts upward.
c.
marginal cost for each firm falls.
d.
average total cost for each firm rises.
e.
a and b
• Question 11
1 out of 1 points
Which of the assumptions below assures us that economic profit will be zero in long-run equilibrium for perfectly competitive firms?
Selected Answer: c.
easy entry and exit
Answers: a.
too few buyers
b.
buyers and sellers having all relevant information
c.
easy entry and exit
d.
smallness of firms with respect to the market
e.
firms producing heterogeneous goods
• Question 12
1 out of 1 points
In a perfectly competitive market, the market demand curve is perfectly elastic.
Selected Answer: False
Answers: True
False
• Question 13
1 out of 1 points
A constant-cost industry has a long-run (industry) supply curve that is
Selected Answer: a.
horizontal.
Answers: a.
horizontal.
b.
upward sloping.
c.
U-shaped.
d.
downward sloping.
• Question 14
1 out of 1 points
For a perfectly competitive firm, MR = MC at 250 units of output. At 250 units, ATC is greater than AVC. It necessarily follows that
Selected Answer: e.
none of the above
Answers: a.
the firm should shut down its operation.
b.
the marginal cost curve must have an upward-sloping portion and a downward-sloping portion.
c.
the firm should continue to produce.
d.
b and c
e.
none of the above
• Question 15
1 out of 1 points
There are 200 firms in a perfectly competitive industry. Half of the firms supply 100 units at $3 per unit and the other half of the firms supply 130 units at $3 per unit. One point on the market supply curve is
Selected Answer: a.
23,000 units at $3.
Answers: a.
23,000 units at $3.
b.
10,000 units at $3.
c.
13,000 units at $3.
d.
23,000 units at $6.
e.
none of the above
• Question 16
1 out of 1 points
Consider the following data: equilibrium price = $10, quantity of output produced = 100 units, average total cost = $13, and average variable cost = $7. What will the firm do and why?
Selected Answer: d.
Continue to produce in the short run, because price is greater than average variable cost.
Answers: a.
Continue to produce in the short run, because firms are always stuck with having to produce in the short run.
b.
Shut down in the short run, because it is taking a loss of $200.
c.
Shut down in the short run, because average variable cost is less than average total cost.
d.
Continue to produce in the short run, because price is greater than average variable cost.
• Question 17
1 out of 1 points
At the quantity of output for which total revenue equals total cost,
Selected Answer: b.
economic profit is zero.
Answers: a.
cost is maximized.
b.
economic profit is zero.
c.
cost is minimized.
d.
profit is maximized.
e.
quantity is minimized.
• Question 18
1 out of 1 points
When the government imposes taxes on firms that are earning high profits, there could be an unintended effect of reducing the supply of goods in that market compared to what the supply would be if the profits were not taxed.
Selected Answer: True
Answers: True
False
• Question 19
1 out of 1 points
If firms are earning zero economic profits, they must be producing at an output level at which
Selected Answer: b.
price equals average total cost.
Answers: a.
price equals marginal cost.
b.
price equals average total cost.
c.
price equals average variable cost.
d.
marginal revenue equals marginal cost.
e.
none of the above
• Question 20
1 out of 1 points
Assume a constant-cost industry that is initially in long-run competitive equilibrium. An increase in demand will cause a(n) __________ in prices and profits, and as a result, firms will __________ the industry, causing the market supply curve to shift __________, which, in turn, will eventually cause the equilibrium price to be __________ before.
Selected Answer: e.
increase; enter; rightward; the same as
Answers: a.
increase; enter; rightward; higher than
b.
decrease; exit; leftward; lower than
c.
decrease; exit; rightward; higher than
d.
increase; exit; leftward; lower than
e.
increase; enter; rightward; the same as
• Question 21
1 out of 1 points
In long-run competitive equilibrium, firms
Selected Answer: b.
have no incentive to make any changes.
Answers: a.
earn positive economic profits.
b.
have no incentive to make any changes.
c.
earn losses on some units of the good they produce and sell.
d.
do not produce the quantity of output at which MR = MC.
e.
b and c
• Question 22
1 out of 1 points
A firm that is a price taker will not sell any of its product for less than the equilibrium price because
Selected Answer: b.
it can sell all it can produce at the equilibrium price.
Answers: a.
it is against the law to do this.
b.
it can sell all it can produce at the equilibrium price.
c.
this would invite competition from outside the market and end up reducing the profits of the firm.
d.
this would be breaking the cartel agreement that price-taker firms often enter into.
e.
none of the above
• Question 23
1 out of 1 points
Equilibrium price is $10 in a perfectly competitive market. For a perfectly competitive firm, MR = MC at 233 units of output. At 233 units, ATC is $12, and AVC is $9. The best policy for this firm is to __________ in the short run. Also, total fixed cost equals __________ for this firm.
Selected Answer: a.
continue to produce; $699
Answers: a.
continue to produce; $699
b.
shut down; $2,796
c.
shut down; $699
d.
continue to produce; $3
e.
continue to produce; $2,796
• Question 24
1 out of 1 points
For a perfectly competitive firm,
Selected Answer: e.
none of the above
Answers: a.
price equals marginal revenue only for the first unit of the good produced and sold.
b.
only at a lower price can more units of a good be sold.
c.
demand is perfectly inelastic.
d.
a and b
e.
none of the above
• Question 25
1 out of 1 points
Exhibit 23-8
Refer to Exhibit 23-8. What is the total fixed cost of firm A at the profit-maximizing (or loss-minimizing) level of output?
Selected Answer: e.
$300
Answers: a.
$3
b.
There is not enough information provided to answer this question.
c.
$90
d.
$400
e.
$300 [Show Less]