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Figure 12-2 Figure 12-2 -Refer to Figure 12-2.What is the amount of profit if the firm produces Q<sub>2</sub><sub> </sub>units? A) It is equal to the vertical distance c to g. B) It is equal to the vertical distance c to Q<sub>2</sub>. C) It is equal to the vertical distance g to Q<sub>2</sub>. D) It is equal to the vertical distance c to g multiplied by Q<sub>2</sub> units. -Refer to Figure 12-2.What is the amount of profit if the firm produces Q2 units?


A) It is equal to the vertical distance c to g.
B) It is equal to the vertical distance c to Q2.
C) It is equal to the vertical distance g to Q2.
D) It is equal to the vertical distance c to g multiplied by Q2 units.

E) B) and D)
F) B) and C)

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Which of the following is not a characteristic of a perfectly competitive market structure?


A) There are a very large number of firms that are small compared to the market.
B) All firms sell identical products.
C) There are no restrictions to entry by new firms.
D) There are restrictions on exit of firms.

E) A) and D)
F) None of the above

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Table 12-1 Table 12-1 Table 12-1 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 12-1.What is the fixed cost of production? A) $0 B) $500 C) $1,000 D) It cannot be determined. Table 12-1 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 12-1.What is the fixed cost of production?


A) $0
B) $500
C) $1,000
D) It cannot be determined.

E) A) and C)
F) All of the above

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Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

A) True
B) False

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Table 12-4 Table 12-4 Table 12-4 shows the short-run cost data of a perfectly competitive firm. Assume that output can only be increased in batches of 20 units. -Refer to Table 12-4.If the market price is $45,the firm A) earn a profit of $3,600. B) will suffer a loss of $200. C) will break even. D) will earn profit of $1,040. Table 12-4 shows the short-run cost data of a perfectly competitive firm. Assume that output can only be increased in batches of 20 units. -Refer to Table 12-4.If the market price is $45,the firm


A) earn a profit of $3,600.
B) will suffer a loss of $200.
C) will break even.
D) will earn profit of $1,040.

E) A) and B)
F) None of the above

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In a perfectly competitive market the term "price taker" applies to


A) sellers and buyers.
B) firms but not buyers.
C) buyers but not sellers.
D) only the smallest sellers and buyers.

E) B) and C)
F) A) and B)

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After an increase in demand in a constant-cost industry,firms will find themselves with higher average cost curves.

A) True
B) False

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What is allocative efficiency?


A) It refers to a situation in which resources are allocated to their highest profit use.
B) It refers to a situation in which resources are allocated such that goods can be produced at their lowest possible average cost.
C) It refers to a situation in which resources are allocated such that the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it.
D) It refers to a situation in which resources are allocated fairly to all consumers in a society.

E) All of the above
F) None of the above

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In the long run,a firm in a perfectly competitive industry will supply output only if its total revenue covers its


A) explicit plus its implicit costs.
B) fixed costs.
C) implicit costs.
D) explicit costs.

E) B) and C)
F) A) and D)

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Which of the following statements is true?


A) A long-run competitive equilibrium can only be achieved in constant-cost industries.
B) When an industry achieves a long-run competitive equilibrium, industry output will not change in the future.
C) A long-run competitive equilibrium outcome is not economically efficient.
D) When an industry reaches a long-run competitive equilibrium, the typical firm in the industry breaks even.

E) A) and B)
F) A) and C)

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Which of the following is not a characteristic of a monopolistically competitive market structure?


A) There is a large number of independently acting small sellers.
B) All sellers sell products that are differentiated.
C) There are low barriers to entry of new firms.
D) Each firm must react to actions of other firms.

E) None of the above
F) A) and D)

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Figure 12-5 Figure 12-5 Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 12-5.If the market price is $20,what is the firm's profit-maximizing output? A) 750 units B) 1,100 units C) 1,350 units D) 1,800 units Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 12-5.If the market price is $20,what is the firm's profit-maximizing output?


A) 750 units
B) 1,100 units
C) 1,350 units
D) 1,800 units

E) A) and B)
F) B) and D)

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When a perfectly competitive firm finds that its market price is below its minimum average variable cost,it will sell


A) the output where marginal revenue equals marginal cost.
B) any positive output the entrepreneur decides upon because all of it can be sold.
C) nothing at all; the firm shuts down.
D) the output where average total cost equals price.

E) A) and B)
F) B) and C)

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Werner & Sons is a manufacturer of three-ring binders operating in a perfectly competitive industry.Table 12-5 shows the firm's cost schedule. Table 12-5 Werner & Sons is a manufacturer of three-ring binders operating in a perfectly competitive industry.Table 12-5 shows the firm's cost schedule. Table 12-5 Use the table to answer the following questions. a.Complete Table 12-5 by filling in the blank cells. b.Werner is selling in a perfectly competitive market at a price of $40.What is the profit maximizing or loss-minimizing output? c.Calculate the firm's profit or loss. d.Should the firm continue to produce in the short run? Explain. e.If the firm's fixed costs were $30 higher what would be the profit-maximizing output level in the short run? Indicate whether the output level will increase,decrease or remain unchanged compared to your answer in b. f.Suppose fixed cost remains at $76.If the price of three-ring binders falls to $20 what is the profit-maximizing or loss-minimizing output? g.Calculate the profit or loss.Should the firm continue to produce in the short run? Explain your answer. h. Suppose the fixed cost remains at $76.What price corresponds to the shut-down point? i.Suppose the fixed cost remains at $76.What price corresponds to the break-even point? Use the table to answer the following questions. a.Complete Table 12-5 by filling in the blank cells. b.Werner is selling in a perfectly competitive market at a price of $40.What is the profit maximizing or loss-minimizing output? c.Calculate the firm's profit or loss. d.Should the firm continue to produce in the short run? Explain. e.If the firm's fixed costs were $30 higher what would be the profit-maximizing output level in the short run? Indicate whether the output level will increase,decrease or remain unchanged compared to your answer in b. f.Suppose fixed cost remains at $76.If the price of three-ring binders falls to $20 what is the profit-maximizing or loss-minimizing output? g.Calculate the profit or loss.Should the firm continue to produce in the short run? Explain your answer. h. Suppose the fixed cost remains at $76.What price corresponds to the shut-down point? i.Suppose the fixed cost remains at $76.What price corresponds to the break-even point?

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a.
blured image b.Quantity = 8 units.
c.Profit = $5...

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


A) a corn farmer in Illinois
B) a Taco Bell restaurant
C) the Ford Motor Company
D) the United Parcel Service (UPS)

E) B) and D)
F) A) and C)

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Both buyers and sellers are price takers in a perfectly competitive market because


A) the price is determined by government intervention and dictated to buyers and sellers.
B) each buyer and seller knows it is illegal to conspire to affect price.
C) both buyers and sellers in a perfectly competitive market are concerned for the welfare of others.
D) each buyer and seller is too small relative to others to independently affect the market price.

E) B) and C)
F) B) and D)

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In the short run,if price falls below a firm's minimum average total cost,the firm should shut down.

A) True
B) False

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In early 2007,Pioneer and JVC,two Japanese electronics firms,each announced that their profits were going to be lower than expected because they both had to cut prices for LCD and plasma television sets.Which of the following could explain why these firms did not simply raise their prices and increase their profits?


A) The move to cut prices is probably just a temporary one to gain market share. In the long run the firms will raise prices and be able to increase their profits.
B) Most likely, intense competition between these two major producers probably pushed prices down. Thereafter, each feared that it would lose its customers to the other if it raised its prices.
C) In perfect competition, prices are determined by the market and firms will keep lowering prices until there are no profits to be earned.
D) The firms are still making profits, just not as high as expected so there is room to lower prices until one can force the other out of business.

E) B) and D)
F) A) and B)

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In a graph with output on the horizontal axis and total revenue on the vertical axis,what is the shape of the total revenue curve for a perfectly competitive seller?


A) U-shaped
B) inverted U-shaped
C) a horizontal line
D) a ray from the origin

E) C) and D)
F) All of the above

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What is meant by the term "long-run competitive equilibrium?

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Long-run competitive equilibri...

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