#### Microeconomics Chapter 8

Which of the following would not help identify market structure?

The price of a good sold in a market

Which of the following is likely to be present in a perfectly competitive market?

Firms producing identical products

Which of the following is not necessarily a characteristic of a perfectly competitive market structure?

Low prices

In a perfectly competitive industry, we are likely to find that _____.

Which of the following firms is most likely to be a perfectly competitive firm?

A farm that grows soybeans

Perfectly competitive firms are price takers because:

each firm is too small compared to the market to be able to affect price.

The demand curve for the output of a perfectly competitive firm is _____.

perfectly elastic

The demand curve facing a perfectly competitive firm is:

a horizontal straight line at the market price.

Adam's Apples, a small firm supplying apples in a perfectly competitive market, decides to cut its production to half this year. Which of the following is likely to occur in this case?

The market price of apples will not be affected.

Suppose Thelma and Louise both sell tomatoes in a perfectly competitive market. If Louise increases
the amount of tomatoes that she sells in the market, _____.

the price at which Thelma sells her output is unaffected

. Suppose the equilibrium price in a perfectly competitive industry is $100 and a firm in the industry charges$112. Which of the following is likely to happen?

The firm will not be able to sell any of its output.

The perfectly competitive firewood market is composed of 1,000 identical consumers and 1,000
identical firms. The table given below shows cost for one representative firm and the demand schedule for
one representative consumer. The equilibrium price in th

$100 The perfectly competitive firewood market is composed of 1,000 identical consumers and 1,000 identical firms. The table given below shows cost for one representative firm and the demand schedule for one representative consumer. The profit-maximizing quant . three cords of wood . The perfectly competitive firewood market is composed of 1,000 identical consumers and 1,000 identical firms. The table given below shows cost for one representative firm and the demand schedule for one representative consumer. The demand curve facing a . horizontal line at a price of$100.

In Connecticut, the market for apples is perfectly competitive. Suppose consumers' tastes change so
that the market demand for apples increases. In this case, the demand curves faced by individual firms
will:

. shift upward.

Which of the following is true of economic profit?

It equals total revenue minus total cost.

Which of the following is true of the total revenue curve of a perfectly competitive firm?

The slope of the curve remains constant slope as output increases.

The following figure shows the total cost and total revenue curves of a firm. The firm maximizes
profit at an output represented by _____.

point c

The shape of the total cost curve between the output levels represented by points a and b in the
following figure reflects _____.

increasing marginal returns

. The table given below shows the output supplied by a firm and its total cost of production. If the
market price is $8.50, the profit-maximizing output and profit are _____. 40 units and$35, respectively

The following table shows the output supplied by a firm and its total cost of production. It represents a
firm in the _____.

. short run because a firm incurs fixed cost

_____ is the change in total cost from producing one more unit of the output.

Marginal cost

The Hound Dog Bus Company contemplates expanding its New Mexico operations by offering services from Raton to Santa Fe. It has estimated that the total cost of the trip will be $400, of which$150
is the fixed cost, which it has already paid. The company

offer this service because the additional revenue exceeds the additional cost of this service.

The Hound Dog Bus Company contemplates expanding its Virginia operations by offering services
from Fairfax to Arlington. The total cost of the trip would be $120, of which$50 is the fixed cost, which
it has already paid. The firm expects to earn $60 in r not offer this service because the marginal revenue is less than the marginal cost For perfectly competitive firms, which of the following correctly shows the relationship among market price (P), average revenue (AR), and marginal revenue (MR)? Price = Average revenue (AR) = Marginal revenue (MR) A perfectly competitive firm's profit per unit of output equals: price minus average total cost. Consider the following figure that shows the demand and the cost curves of a perfectly competitive firm. The firm will earn zero economic profit _____. at a price of P2 Consider the following figure that shows the demand and the cost curves of a perfectly competitive firm. At a market price of P1, the profit-maximizing quantity for the firm is _____. d units of output Consider the following figure that shows the demand and the cost curves of a perfectly competitive firm. If the price-taking firm is currently producing 6 units, it should _____ to maximize profit in the short run. . increase production to 12 units Consider the following figure that shows the demand and the cost curves of a perfectly competitive firm. _____, the firm will shut down in the short run. At a price below P3 In the short run, if a firm shuts down, its loss is equal to: its fixed cost. If a perfectly competitive firm is incurring losses in the short run, it: will continue to operate in the short run if its variable cost is covered. If a manufacturer shuts down in the short run, it must be true that before the shutdown, at all positive output levels, _____. variable cost was greater than total revenue Claude's Copper Clappers sells clappers for$40 each in a perfectly competitive market. At its present
level of output, Claude's marginal cost is $39, average variable cost is$45, and average total cost is \$60.
To improve his profit or loss situation, Cl

shut down.

The significance of the minimum point on the average variable cost curve is that:

. it is the point of indifference between producing at a loss and shutting down.

The price that represents the shutdown point for a perfectly competitive firm corresponds to the
_____.

lowest point on the average variable cost curve

A perfectly competitive firm's short-run supply curve is the same as:

. the portion of its marginal cost curve above the minimum average variable cost.

. Suppose an increase in population increases the demand for automobile repairs in New Haven
County's market for auto repair, which is a perfectly competitive market. Which of the following is true in
the short run?

Auto repair centers may be able to earn an economic profit.

In the long run, the entry of new firms in a competitive industry:

eliminates economic profits