Micro Unit 4 Right answers review

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Which of the following best describes a perfectly competitive market?

Many small firmsl producing a homogeneous product and facing no significant barriers to entry.

Which of the following are characteristics of a perfectly competitive industry?

New firms can enter the industry easily, there is no product differentiation, and the demand curve of and individual firm in the industry is perfectly elastic.

Whic of the following statements is true about a firm that sells its output in a perfectly competitive market

the firm will earn zero economic profits in long-run equilibrium

In the short run in perfect competition, the industry's demand curve and firm's demand curve have which of the following slopes?

Industry's Demand Curve - Downward sloping
Firm's Demand Curve - horizontal

If you owned a small farm, which of the following would be a fixed cost?

harvesting equipment

Refer to the above diagram. The position of these five curves in relation to one another reflects:

economies and diseconomies of scale

If marginal cost is:

rising, then average total cost could be either falling or rising

In the above diagram the range of diminishing marginal returns is:


Refer to the above diagram. This firm's average fixed costs are

the vertical distance between AVC and ATC

Which of the following is the firm's marginal cost of producinng the 4th unit of output?


Which of the following is the firm's average total cost of producing 3 units of output?


Which of the following is the firm's average fixed cost of producing 2 units of output?


A firm doubles all of its inputs and finds that it has more than doubled its output. This situation is an example of

Increasing returns to scale

Suppose that the license paid by each business to operate in a city increases from $400 per year to $500 per year. What effect will this increase have on a firm's short-run cost?

Marginal Cost - No Effect
Average Total Cost - Increase
AVerage Variable Cost - No effect

Under which of the following circumstances is a firm experiencing economies of scale?

The firm doubles its inputs and output triples

Which of the following is true about a firm's average variable cost?

it will equal average total cost when fixed costs are zero

Which of the following factors can cause a firm's cost curve to shift upward?

an increase in wages

According to the table above, which shows the costs of production for a firm, the average total cost of producing 3 units of output is :


The law of diminishing returns indicates that

as extra units of a variable resource are added to a fixed resource, the extra or marginal product will decline beyond some point

Refer to the above cost data. Total fixed cost is


Refer to the above cost data. The total cost of 5 units of output is:


Refer to the above cost data. The total cost of 4 units of output is


Refer to the above cost data. If the firm closed down and produced zero units of output, its total cost would be


Refer to the above cost data. The marginal cost of the 5th unit of output is


When a perfectly competitive firm sells additional units of output, its total revenue will

increase at a constant rate

Barney's Bait Company can sell all the lures it produces at the market price of $14. On the basis of the cost information in the table above, how many lures should the bait company make?


Marginal revenue is the change in revenue that results from a one-unit increase in the

output level

which of the following statements has to be true in a perfectly competitive market?

a firm's marginal revenue equals price

In the short run, if the product price of a perfectly competitive firm is less than the minimus average variable cost, the firm will

lose more by continuing to produce than by shutting down

Whic of the following statements is true of perfectly competitive firms in long-run equilibrium?

average total cost is at a minimum

In a perfectly competitive market, an individual farmer intending to increase her revenue decides to increase the price of her crop by 20% As a result, her total revenue will

increase by 20%

Whic of the following is true in a perfectly competitive industry is earning zero economic profits in the long run?

the resources invested in this industry are earning at least as high a return as they would in any alternative use

In the diagram above, if the marginal revenue is equal to P1, all of the following statements are true except:

the firm will increase production in the long run

In most cases, the supply curve for a perfectly competitive industry can be described as which of the following

more elastic in the long run than in the short run

A farmer produces peppers in a perfectly competitve market. If the price falls, in the short run, the farmer should

continue to produce only if the new price covers average variable costs.

Whic of the following is ture if a perfectly competitve market is in long-run equilibrium?

marginal revenue is equal to average total cost

Given the cost and demand schedules depicted above, if the firm increase output from q1 to q2, it would

experience a decline in profits

At a market price of $7, the profit-maximizing rate of output will result in

normal profits

If the market price is $11, how many widgets should this profit-maximizing firm produce?


The average total cost to the firm of producing 2 units of output is


If the product price is $85, how many units of output must the firm produce in order to maximize profits?


The diagram above shows a perfectly competitive firm's short-run cost curves. If the price of the output increases from $8 to $10, the profit-maximizing firm will

increase output to 18 units because this is the output at which price equals marginal cost.

The vertical distance CF represents the

average fixed cost of producing Q1 units of output

If the marginal revenue is equal to P1, all of the foloowing statements are true except

the firm will increase production in the long run

Assume that a competitive industry producing a normal good is in long-run equilibrium. If average consumer income decreases, which of the following changes will occur?

Short-run Price - Increase
Short-run Industry Output - Increase
Movement of Firms - enter

In a perfectly competitive industry, the market price of the product is $12. A firm produces at a level of output where average total cost is $16, marginal cost is $16, and average variable cost is $8. To maximize its profit, the firm should

decrease output but keep producing

A perfectly competitive firm, earning economic profits, produces and sells 100 units of output at a price of $20 per unit. If its marginal cost of increasing output to a rate of 101 units is $18, which of the following statements is correct

the total profit from selling 101 units is $2 greater than the total profit from selling 100 units

If a perfectly competitive firm wishes to maximize profits and is producing where price exceeds both marginal cost and average variable cost, then the firm is

producing too little output

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