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Multiple Choice: This Activity Contains 20 Questions

Product homogeneity. Price taking. Free entry and exit. All of the above. There is no simple rule or indicator of perfect competition. A firm will shut down if price is less than average total cost.

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214 views

Multiple Choice: This Activity Contains 20 Questions

Product homogeneity. Price taking. Free entry and exit. All of the above. There is no simple rule or indicator of perfect competition. A firm will shut down if price is less than average total cost.

Uploaded by

mas_999
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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Multiple Choice

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Chapter 8

Study Guide

Multiple Choice

Multiple Choice
This activity contains 20 questions.

Which of the following is a basic assumption of the model of perfect competition?


Product homogeneity. Price taking. Free entry and exit. All of the above.

Which of the following is sufficient for an industry to approximate perfect competition?


The existence of many firms. A highly elastic market demand curve. Lack of explicit collusion in setting prices. None of the above. There is no simple rule or indicator of perfect competition.

Suppose that TC = 20 + 10Q + Q2 for a firm in a competitive market and that output, Q, sells for a price, P, of $90. How much output will the firm produce to maximize profit?
90 40 0 20

Suppose that TC = 20 + 10Q + Q2 for a firm in a competitive market. What is the minimum price necessary for this firm to produce any output?
greater than 12 greater than 10 any positive price greater than 20

Suppose that TVC = 100Q 18Q2 + 2Q3 and that TFC = 50. If price, P, equals 100, the firm's maximum profit is
146. 600. 0. 196.

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Multiple Choice

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In what instance will a firm will shut down if price is less than average total cost?
Never. Always. When there are no sunk costs. When price is also less than average fixed cost.

Suppose that short-run MC = 10 + 2Q for an individual firm in a competitive market. If there are 100 identical firms in this market, then the short-run supply curve can be written as
P = 10 + 0.02Q. P = 10 + 200Q. P = 1000 + 2Q. P = 1000 + 200Q.

If a perfectly competitive, profit-maximizing firm produces a level of output for which P < MC, the firm will
decrease output. shut down. maintain its current level of production. increase output.

If a perfectly competitive firm realizes that ATC> P>AVC, the firm will

earn zero economic profit. operate at a loss in the short run. select a level of output where P > MC. shut down in the short run.

The response of a firm to an increase in input prices in the short run will be to
do nothing. increase output to increase revenue. reduce output as marginal cost rises. maintain output constant but change the mix of inputs.

If market supply is relatively elastic in the short run, marginal costs


remain constant as output increases. increase rapidly in response to increases in output.

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Multiple Choice

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are zero. increase slowly in response to increases in output.

Producer surplus can be defined as the difference between


revenue and total cost. revenue and total fixed cost. revenue and total variable cost. Price and marginal cost.

Suppose that for the individual firm in a competitive market, LRAC = 100 20Q + 2Q2 . If this is a constant cost industry and demand can be represented as P = 100 0.1Q, how much output will the individual firm produce at long-run equilibrium?
5 units 50 units 0 units 1 unit

To find the long run level of output that maximizes profit, we look for the equality of:
long run marginal cost and price. long run average total cost and long run marginal cost. long run average total cost and long run average variable cost. short run costs and long run costs.

When a firm earns zero economic profit,


the firm is earning a competitive return on its money. the firm is performing adequately and should stay in business. the firm is earning normal profit. All of the above.

In the long run, if a perfectly competitive firm does not maximize profit, then that firm
will definitely exit the industry. can still produce at minimum average cost. can still earn some economic profit. will have to settle for zero economic profit.

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Multiple Choice

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If input prices increase as an industry expands, then the long-run supply curve will be
vertical. horizontal. positively sloped. negatively sloped.

Accounting profit can be positive when economic profit is zero. Why?


Because a firm has a patent that other firms don't have. Because resource costs are based on historical values rather than current market value. Because opportunity costs are ignored. All of the above.

The amount that firms are willing to pay for an input less the minimum amount necessary to obtain it is called
opportunity cost. economic rent. producer surplus. economic profit.

Which of the following statements about the industry's long-run supply curve is correct?
In a constant cost industry, the long-run supply elasticity is infinitely large. A constant cost industry has a horizontal long-run supply curve. If inputs are more widely available, the long run market supply curve will be more elastic. All of the above.

Answer choices in this exercise appear in a different order each time the page is loaded.

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