23. In the perfectly competitive model, what kind of products
are all firms assumed to be producing?
a.
identical products
b.
differentiated products
c.
well-advertised products
d.
unique products
27. Under what circumstance will a firm in a perfectly
competitive industry expand output?
a.
when marginal cost is less than marginal revenue
b.
when marginal revenue is less than average revenue
c.
when marginal revenue is less than average total cost
d.
when marginal cost is less than average total cost
28. What is marginal revenue for a perfectly competitive firm
equal to?
a.
the addition to total cost from producing one more unit of
output
b.
marginal cost at all levels of output
c.
average total cost at all levels of output
d.
average revenue at all levels of output
31. Makena runs a small fruit and vegetable stand in a large
community that has many such stands. Her weekly total revenue
equals $3000. Her weekly total cost of running the stand equals
$2500, consisting of $2000 of variable costs and $500 of fixed
costs. What would an economist likely advise Makena to do?
a.
Keep the stand open for a while longer because she is covering
all of her variable costs and some of her fixed costs.
b.
Keep the stand open for a while longer because she is covering
all of her fixed costs and some of her variable costs.
c.
Shut down as quickly as possible to minimize her losses.
d.
Keep the stand open because it is generating an economic
profit.
32. Makena runs a small fruit and vegetable stand in a large
community that has many such stands. Her weekly total revenue
equals $1800. Her weekly total cost of running the stand equals
$2500, consisting of $2000 of variable costs and $500 of fixed
costs. What would an economist likely advise Makena to do?
a.
Keep the stand open for a while longer because she is covering
all of her variable costs and some of her fixed costs.
b.
Keep the stand open because it is generating an economic
profit.
c.
Keep the stand open for a while longer because she is covering
all of her fixed costs and some of her variable costs.
d.
Shut down as quickly as possible to minimize her losses.
35. For a perfectly competitive firm, which of the following
does average revenue NOT equal?
a.
total revenue divided by the number of units sold
b.
marginal cost at all levels of output
c.
price at all levels of output
d.
marginal revenue at all levels of output
36. Which of the following most closely resembles a perfectly
competitive market?
a.
the clothing industry
b.
the corn market
c.
the hotel industry
d.
landscaping services
37. Economic losses caused several firms to leave the car
parts business in Ontario. Though prices have risen, why are firms
still leaving the industry?
a.
Firms are still generating economic losses.
b.
Economic profits have decreased because of the exit of
existing firms.
c.
Economic profits exist, but they are NOT as high as in other
industries.
d.
Economic profits are zero and firms will NOT stay in the
industry if they are NOT earning an economic profit.
FIGURE 8-7
38. Refer to Figure 8-7. When the market price equals P4, what
output should the firm produce?
a.
Q5, operating at a loss
b.
Q4, earning an economic profit
c.
Q5, earning a normal profit
d.
Q4, operating at a loss
TABLE 8-1
Revenue and Cost Data for a Perfectly Competitive Firm
Daily Output
Price
Total Revenue
TFC
TVC
TC
Profit
0
$30
$0
V
$0
$40
–$40
1
$30
$30
$40
$12
W
–$22
2
X
$60
$40
Y
$68
–$8
3
$30
$90
$40
$45
$85
Z
39. Refer to Table 8-1. What is the AFC of producing two units
of output?
a.
$0
b.
$20
c.
$40
d.
$80
FIGURE 8-8
49. Refer to Figure 8-8. How many units of output will a
profit-maximizing firm in a perfectly competitive industry produce
if the market price equals $10?
a.
200
b.
450
c.
650
d.
800
57. Maria owns a farm and sells soya beans in a perfectly
competitive market. When should her profit-maximizing, price-taking
farm cease production of soya beans?
a.
when the farm is making a loss
b.
when the farm is earning zero economic profit
c.
when the price is less than minimum average variable
cost
d.
when the price is less than minimum average fixed cost
58. What is the shape of the long-run industry supply curve in
a perfectly competitive industry largely determined by?
a.
the shape of the average fixed cost curve
b.
the price of inputs as the industry expands
c.
the shape of the short-run industry supply curve
d.
the price elasticity of market demand
59. What type of industry is described by the term “perfect
competition”?
a.
an industry in which numerous price-taking firms produce
identical products
b.
an industry in which a few price-taking firms produce
identical products
c.
an industry in which firms are price takers and compete for
market share by varying the qualitative characteristics of
products
d.
an industry in which numerous firms are price makers and
produce identical products
60. Which of the following is most likely a price taker?
a.
an Alberta corn farmer
b.
a tax accountant
c.
a wedding photographer
d.
a car dealership in Charlottetown, PEI
FIGURE 8-5
The figure below shows the price, marginal cost, and average
cost curves of a perfectly competitive firm.
63. Refer to Figure 8-5. How many units of output per day
should the firm produce if it wants to maximize its profits (i.e.,
minimize its losses)?
a.
0
b.
30
c.
80
d.
100