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- Multiple ChoicePlease save your changes before editing any questions.
The individual price-taking firm faces …
(more than one answer is correct)
A perfectly inelastic demand curve
A horizontal demand curve
A perfectly elastic demand curve
A vertical demand curve
- Multiple ChoicePlease save your changes before editing any questions.
Over the long run, which of the following statements is true about profit-maximizing firms in a perfectly competitive market?
Economic profits are zero
Economic profits are negative
Economic profits are positive
Accounting profits are zero
- Multiple ChoicePlease save your changes before editing any questions.
Suppose that at price P1, motorcycle manufacturers are making positive economic
profits. Assuming the market in motorcycles is perfectly competitive, which of
the following will occur in the long run?
The supply curve will shift to the right
The demand curve will shift to the right
Price will rise
Price will remain constant
Marginal costs will increase
- Multiple ChoicePlease save your changes before editing any questions.
Suppose now that motorcycle producers are making economic losses. Which of
the following will happen in the long run?
(more than one is correct)
Competitive pressures will drive economic profits toward zero
Some firms will exit the market
The supply curve will shift to the right
The price of motorcycles will rise
- Multiple ChoicePlease save your changes before editing any questions.
Suppose that competitive pressures drive the price of motorcycles downward.
Which of the following statements is an accurate description of the situation that
results?
Revenues and profits are reduced
Revenues fall, while profits remain constant
The supply curve shifts to the left
Marginal cost rises
The demand curve shifts to the right
- Multiple ChoicePlease save your changes before editing any questions.
In the figure, by increasing its output from Q1 toQ2, the firm
increases its profit
increases its marginal revenue
reduces its marginal revenue
decreases its profit
- Multiple ChoicePlease save your changes before editing any questions.
In the figure, by increasing its output from Q2 to Q3, the firm
increases its marginal revenue
reduces its marginal revenue
decreases its profit
increases its profit
- Multiple ChoicePlease save your changes before editing any questions.
The figure illustrates a firm's total revenue and total cost curves. Which one of the following statements is FALSE?
At output Q1 the firm makes zero economic profit
At an output above Q3 the firm incurs an economic loss
Economic profit is the vertical distance between the total revenue curve and the total cost
curve
At output Q2 the firm incurs an economic loss
- Multiple ChoicePlease save your changes before editing any questions.
The feature of the figure that indicates that the firm is a perfectly competitive firm is the
fact that the total cost and total revenue curves are farthest apart at output is Q2
shape of the total revenue curve
fact that the total cost and total revenue curves cross twice
shape of the total cost curve
- Multiple ChoicePlease save your changes before editing any questions.
In the figure, the firm is making an economic loss at
point a
points b and d
points a, b, and d
point c
- Multiple ChoicePlease save your changes before editing any questions.
In the figure, the firm is breaking even at points
a and d
b and d
c and d
a and c
- Multiple ChoicePlease save your changes before editing any questions.
In the figure, when the firm produces output corresponding to point c, the firm's marginal
cost
is less than its marginal revenue
equals its average revenue
exceeds its marginal revenue
equals its marginal revenue
- Multiple ChoicePlease save your changes before editing any questions.
A perfectly competitive firm maximizes its profit by producing the output at which its marginal cost equals its
average variable cost
marginal revenue
average total cost
average fixed cost
- Multiple ChoicePlease save your changes before editing any questions.
A firm will expand the amount of output it produces as long as its
average total revenue exceeds its average variable cost
marginal revenue exceeds its marginal cost
marginal cost exceeds its marginal revenue
average total revenue exceeds its average total cost
- Multiple ChoicePlease save your changes before editing any questions.
A perfectly competitive firm is producing at the point where its marginal cost equals its marginal
revenue. If the firm boosts its output, its total revenue will ________ and its profit will ________.
fall; fall
fall; rise
rise; rise
rise; fall
- Multiple ChoicePlease save your changes before editing any questions.
The costs incurred even when no output is produced are called
fixed costs
external costs
variable costs
marginal costs
- Multiple ChoicePlease save your changes before editing any questions.
The owners definitely will shut down a perfectly competitive firm if the price of its good falls below its minimum
average marginal cost
wage rate
average variable cost
average total cost
- Multiple ChoicePlease save your changes before editing any questions.
A firm that shuts down and produces no output incurs a loss equal to its
marginal costs
total fixed costs
total variable costs
marginal revenue