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Figure 9-6 Figure 9-6 Figure 9-6 shows cost and demand curves facing a profit-maximizing,perfectly competitive firm. -Refer to Figure 9-6.At price P<sub>4</sub>,the firm would produce A) Q<sub>3</sub> units. B) Q<sub>4</sub> units. C) Q<sub>5</sub> units. D) Q<sub>6</sub> units. Figure 9-6 shows cost and demand curves facing a profit-maximizing,perfectly competitive firm. -Refer to Figure 9-6.At price P4,the firm would produce


A) Q3 units.
B) Q4 units.
C) Q5 units.
D) Q6 units.

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Which of the following is a characteristic of an oligopolistic market structure?


A) There are few dominant sellers.
B) Each firm sells a unique product.
C) It is easy for new firms to enter the industry.
D) Each firm need not react to the actions of rivals.

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Assume that the medical screening industry is perfectly competitive.Consider a typical firm that is making short-run losses.Suppose the medical screening industry runs an effective advertising campaign which convinces a large number of people that yearly CT scans are critical for good health.How will this affect a typical firm that remains in the industry?


A) The firm's supply curve shifts right and its marginal revenue curve shifts upwards as the market price rises and ultimately the firm starts making profits.
B) The firm's marginal revenue curve and average cost curve shift upwards in response to the increase in market price and advertising expenditure.The firm increases output until it starts breaking even.
C) The marginal revenue curve shifts upwards,the firm's output increases along its marginal cost curve,it expands production and eventually starts making profits.
D) The marginal revenue curve shifts upwards,the firm's output increases along its marginal cost curve,it expands production until it breaks even.

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A perfectly competitive firm earns a profit when price is


A) equal to minimum average total cost.
B) above minimum average total cost.
C) equal to minimum average variable cost.
D) equal to minimum average fixed cost.

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If,in a perfectly competitive industry,the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost,then


A) firms are breaking even.
B) new firms are attracted to the industry.
C) existing firms will exit the industry.
D) market supply will remain constant.

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Figure 9-5 Figure 9-5 Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost,perfectly competitive industry. -Refer to Figure 9-5.If the market price is $20,what is the amount of the firm's profit? A) $5,400 B) $6,750 C) $8,100 D) $16,200 Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost,perfectly competitive industry. -Refer to Figure 9-5.If the market price is $20,what is the amount of the firm's profit?


A) $5,400
B) $6,750
C) $8,100
D) $16,200

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Table 9-1 Table 9-1 Table 9-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases.Assume that output can only be increased in batches of 100 units. -Refer to Table 9-1.If the market price of each camera case is $8,what is the firm's total revenue? A) $2,400 B) $3,200 C) $4000 D) $4,800 Table 9-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases.Assume that output can only be increased in batches of 100 units. -Refer to Table 9-1.If the market price of each camera case is $8,what is the firm's total revenue?


A) $2,400
B) $3,200
C) $4000
D) $4,800

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Figure 9-2 Figure 9-2 -Refer to Figure 9-2.The firm breaks even at an output level of A) Q<sub>1</sub> units. B) Q<sub>2</sub> units. C) Q<sub>3</sub> units. D) Q<sub>4</sub> units. -Refer to Figure 9-2.The firm breaks even at an output level of


A) Q1 units.
B) Q2 units.
C) Q3 units.
D) Q4 units.

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The demand curve for an individual seller's product in perfect competition is


A) the same as market demand.
B) downward sloping.
C) vertical.
D) horizontal.

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


A) added more to total costs than it added to total revenue.
B) added more to total revenue than it added to total cost.
C) is maximizing marginal profit.
D) has minimized its losses.

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A perfectly competitive firm's supply curve is its


A) marginal cost curve.
B) marginal cost curve above its minimum average total cost.
C) marginal cost curve above its minimum average variable cost.
D) marginal cost curve above its minimum average fixed cost.

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An increase in demand for U.S.farm exports will ________ the market prices for these exports and ________ economic profit in these markets.


A) increase;decrease
B) decrease;increase
C) increase;increase
D) decrease;decrease

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Table 9-1 Table 9-1 Table 9-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases.Assume that output can only be increased in batches of 100 units. -Refer to Table 9-1.If the market price of each camera case is $8 and the firm maximizes profit,what is the amount of the firm's profit or loss? A) $0 (it breaks even) B) loss of $1,000 C) profit of $440 D) loss of $440 Table 9-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases.Assume that output can only be increased in batches of 100 units. -Refer to Table 9-1.If the market price of each camera case is $8 and the firm maximizes profit,what is the amount of the firm's profit or loss?


A) $0 (it breaks even)
B) loss of $1,000
C) profit of $440
D) loss of $440

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Both individual buyers and sellers in perfect competition


A) can influence the market price by their own individual actions.
B) can influence the market price by joining with a few of their competitors.
C) have to take the market price as a given.
D) have the market price dictated to them by government.

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Figure 9-9 Figure 9-9 -Refer to Figure 9-9.Suppose the prevailing price is P<sub>1</sub> and the firm is currently producing its loss-minimizing quantity.In the long-run equilibrium, A) there will be fewer firms in the industry and total industry output decreases. B) there will be more firms in the industry and total industry output increases. C) there will be fewer firms in the industry but total industry output increases. D) there will be more firms in the industry and total industry output remains constant. -Refer to Figure 9-9.Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity.In the long-run equilibrium,


A) there will be fewer firms in the industry and total industry output decreases.
B) there will be more firms in the industry and total industry output increases.
C) there will be fewer firms in the industry but total industry output increases.
D) there will be more firms in the industry and total industry output remains constant.

Correct Answer

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The perfectly competitive market structure benefits consumers because


A) firms do not produce goods at the lowest possible price in the long run.
B) firms are forced by competitive pressure to be as efficient as possible.
C) firms add a much smaller markup over average cost than firms in any other type of market structure.
D) firms produce high quality goods at low prices.

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Which of the following is not true for a firm in perfect competition?


A) Profit equals total revenue minus total cost.
B) Price equals average revenue.
C) Average revenue is greater than marginal revenue.
D) Marginal revenue equals the change in total revenue from selling one more unit.

Correct Answer

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Figure 9-5 Figure 9-5 Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost,perfectly competitive industry. -Refer to Figure 9-5.If the firm's fixed cost increases by $1,000 due to a new environmental regulation,what happens in the diagram above? A) All the cost curves shift upward. B) Only the average variable cost and average total cost curves shift upward;marginal cost is not affected. C) Only the average total cost curve shifts upward;the marginal cost and average variable cost curves are not affected. D) None of the curves shifts;only the fixed cost curve,which is not shown here,is affected. Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost,perfectly competitive industry. -Refer to Figure 9-5.If the firm's fixed cost increases by $1,000 due to a new environmental regulation,what happens in the diagram above?


A) All the cost curves shift upward.
B) Only the average variable cost and average total cost curves shift upward;marginal cost is not affected.
C) Only the average total cost curve shifts upward;the marginal cost and average variable cost curves are not affected.
D) None of the curves shifts;only the fixed cost curve,which is not shown here,is affected.

Correct Answer

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Figure 9-5 Figure 9-5 Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost,perfectly competitive industry. -Refer to Figure 9-5.The figure shows the cost structure of a firm in a perfectly competitive market.If the firm's fixed cost increases by $1,000 due to a new environmental regulation,what happens to its profit-maximizing output level? A) It increases. B) It decreases. C) It remains the same. D) It could increase,decrease or remain constant,depending on whether the firm is able to cut costs somewhere else. Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost,perfectly competitive industry. -Refer to Figure 9-5.The figure shows the cost structure of a firm in a perfectly competitive market.If the firm's fixed cost increases by $1,000 due to a new environmental regulation,what happens to its profit-maximizing output level?


A) It increases.
B) It decreases.
C) It remains the same.
D) It could increase,decrease or remain constant,depending on whether the firm is able to cut costs somewhere else.

Correct Answer

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A perfectly competitive firm's horizontal demand curve implies that the firm does not have to lower its price to sell more output.

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