Assignment:
1. Long-run competitive equilibrium requires all of the following except
A. Economic profits are zero.
B. Marginal revenue is greater than marginal cost.
C . Price is equal to marginal cost.
D. Firms do not have an incentive to change plant size.
2. Economists observed a sharp increase in the demand for pencils, and later they observed that prices fell back to their original level. Based on this information it appears that pencil production
A is giving way to pens and other ink-based markers.
B is constant-cost industy.
C is a decreasing-cost industry.
D is perfectly inelastic.
3. Frank's Fertilizer is one of many firms that produces an agricultural product that is sold in a perfectly competitive market. The market is initially in long-run equilibrium. Suppose that due to a recent trade agreement there are now more buyers.
A. Frank's Fertilizer and other firms will produce more output.
B. The marginal revenue curve and the demand curve for each firm will shift upward.
C. The marginal cost for each firm will fall.
D. Firms will exit the industry because of the higher prices
4. Consider the following data: equilibrium price = $10, quantity of output produced = 1,000 units, average total cost = $8, and average variable cost $5. Given this, total revenue is - - - - - , total cost is - - - - -, and fixed cost is - - - - -.
A $6,000; $8,000; $1,000
B $9,000; $7,000; $8,000
C $10,000; $8,000; $3,000
D $9,000; $8,000; $6,000
5. 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?
A. Shut down in the short run, because it is taking a loss of $200.
B. Continue to produce in the short run, because price is greater than average variable cost.
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 firms are always stuck with having to produce in the short run.
6. Landisview Farm Market (LFM) is open only during the Spring and Summer. During the Fall and Winter, when they are closed, they still pay rent on land, taxes, and some utilities. As a perfectly competitive firm, LFM
A. incurs more losses by staying open during the Fall and Winter than by closing.
B. is making a poor decision, because they will incur fewer losses by remaining open during the Fall and Winter.
C. has no tax burden.
D. is able to influence the price of its products by closing during the non-growing season.
7. For a perfectly competitive firm, the long-run competitive equilibrium is such that P = SRATC, because if P > SRATC then
A. losses in the industry would cause some existing firms to exit the industry.
B. positive economic profit would attract firms to the industry in order to obtain the profits.
C. firms would not be producing the quantity of output at which MR = MC
D. firms would not be covering total fixed costs.
E. none of the above
8. In long-run competitive equilibrium SRATC = LRATC, because if SRATC > LRATC (at the quantity of output at which MR = MC) firms would
A. have an incentive to change their plant size to produce their current output.
B. not be covering their total fixed costs.
C. not be covering their total variable costs.
D. a and b
E. b and c
9. Refer to the table. What is the gain in profit from producing 46 units of the product rather than producing 42 units?
|
(1)
Price
|
(2)
Quantity Sold
|
(3)
Total Cost
|
|
$12
|
40
|
$374
|
|
$12
|
41
|
$376
|
|
$12
|
42
|
$380
|
|
$12
|
43
|
$385
|
|
$12
|
44
|
$390
|
|
$12
|
45
|
$400
|
|
$12
|
46
|
$412
|
|
$12
|
47
|
$425
|
10. The perfectly competitive firm will seek to produce the output level for which
A. average variable cost is at a minimum.
B. average total cost is at a minimum.
C. average fixed cost is at a minimum.
D. marginal cost equals marginal revenue.
11. Marginal revenue is
A. total revenue divided by the quantity of output.
B. total profit minus total costs.
C. the change in total output brought about by using an additional unit of a variable input.
D. the change in total revenue brought about by selling an additional unit of the good.
E. the change in total revenue minus the change in total costs.
12. Refer to the table. The dollar amount that goes in blank B is $-----
|
(1)
Price
|
(2)
Quantity Sold
|
(3)
Marginal Revenue
|
|
$14
|
100
|
|
|
$14
|
101
|
A
|
|
$14
|
102
|
B
|
|
$14
|
103
|
C
|
|
$14
|
104
|
D
|
13. Refer to the table. What quantity of output (i.e., how many units) would the profit-maximizing firm produce?
|
(1)
Price
|
(2)
Quantity Sold
|
(3)
Total Cost
|
|
$12
|
40
|
$374
|
|
$12
|
41
|
$376
|
|
$12
|
42
|
$380
|
|
$12
|
43
|
$385
|
|
$12
|
44
|
$390
|
|
$12
|
45
|
$400
|
|
$12
|
46
|
$412
|
|
$12
|
47
|
$425
|
14. In the theory of perfect competition,
A. the market demand curve is horizontal.
B. the single firm's demand curve is horizontal.
C. the single firm's demand curve is downward sloping.
D. the market demand curve is downward sloping.
E. b and d
15. Suppose a firm is producing 1254 units per day, and total revenue is $1505 per day. Average fixed cost is $1.25 per unit, and average total cost is $1.75 per unit. In the short run should this firm continue to operate, or shut down?
A. Continue to operate
B. Shut down
16. 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?
A. Shut down in the short run, because it is taking a loss of $200.
B. Continue to produce in the short run, because price is greater than average variable cost.
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 firms are always stuck with having to produce in the short run.
17. The perfectly competitive firm's short-run supply curve is the
A. upward-sloping portion of its average total cost curve.
B. horizontal portion of its marginal revenue curve.
C. portion of its average variable cost curve that lies above the average fixed cost curve.
D. upward-sloping portion of its marginal cost curve.
E. portion of its marginal cost curve that lies above its average variable cost curve.
18. A firm is currently producing and selling 5000 units and earning total revenue equal to $21000. Total variable cost is $5000, and total fixed cost is $10000. Should this firm continue to operate or shut down?
A. Continue to operate and earn a profit
B. Shut down
C. Continue to operate and incur a loss
Attachment:- Perfect Competition.rar