Chapter 6: Perfectly Competitive Supply PDF

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(Microeconomics - Chapter 6: Perfectly Competitive Supply) a set of 56 Perfectly Competitive Supply Practice Questions for exams and quizzes (with answers)...

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Chapter5- PerfectlyCompetitiveSupply PracticeQuestions

MULTIPLECHOICE.Choosetheonealternativethatbestcompletesthestatementoranswersthequestion. 1)

A rational seller will sell another unit of output: A) whenever the seller is earning a profit. B) if the seller can charge more than the equilibrium price. C) as long as the quantity demanded is greater than zero.

1)

. 2)

Which of the following best explains why you are more likely to see a poor person than a wealthy person picking up aluminum cans to sell? A) Wealthy people are more aware of diseases transmitted through litter than are poor people. B) Wealthy people are more concerned about their public image than are poor people. C) Wealthy people do not care about the environment.

2)

. 3)

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below:

What is John's opportunity cost of cleaning windows for an hour? A) $2 B) $14 C) $8

1

3)

4)

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below:

The first hour John spends cleaning windows costs him ________ that he could have earned in the grocery store. A) $2 B) $18 D) $14

2

4)

5)

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below:

Should John spend a third hour cleaning windows? . because the additional amount he would earn is $6, which is better than earning nothing. C) Yes, because the additional amount he would earn is $14, which is greater than his opportunity cost of $7. D) Yes, because he would earn $28. B) Yes,

3

5)

6)

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below:

What is the lowest price per window that would induce John to spend at least one hour per day cleaning windows? A) $2 B) $7 C) $3

4

6)

7)

John is trying to decide how to divide his time between his job as a stocker in the local grocery store, which pays $7 per hour for as many hours as he chooses to work, and cleaning windows for the businesses downtown. He makes $2 for every window he cleans. John is indifferent between the two tasks, and the number of windows he can clean depends on how many hours he spends cleaning in a day, as shown in the table below:

What is the lowest price per window that John would be willing to accept to spend 4 hours per day cleaning windows? A) $7 C) $2 D) $11

5

7)

8)

For a given seller, the figure below shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. What is this seller's reservation price for the 250 th unit?

B) $14

C)

6

$8

D) $2

8)

9)

For a given seller, the below above shows the relationship between the number of units produced and the opportunity cost of producing an additional unit of output. As the market price of this good increases, the quantity produced by this seller will ________.

A) stay B) stay

9)

the same the same until the price rises above $6 per unit, and then it will increase

D) decrease 10) A

seller's supply curve shows the seller's:

10)

B) willingness

to pay for an additional unit of output at each quantity. profit from producing an additional unit of output at each quantity. D) hourly wage for producing an additional unit of output at each quantity. C)

11) Individual supply

curves generally slope ________ because ________. A) upward; profits increase with quantity B) downward; sellers become more efficient with practice C) downward; inputs are cheaper when purchased in high volume

11)

12) The primary

12)

objective of most private firms is to: A) maximize output. B) maximize revenue. C) minimize cost.

7

of the following is NOT a characteristic of a perfectly competitive market? A) Buyers and sellers are well-informed. B) There are many sellers, each of which sells only a small fraction of the total quantity exchanged. C) Sellers can easily buy and sell the productive resources needed to enter the market.

13) Which

13)

14) Last year,

14)

Casey grew fresh vegetables, which she sold at her local farmers market, but this year, Casey did not plant any vegetables and went to work at a bank instead. If Casey's decision to change careers did not affect the price of vegetables at the farmers market, then this suggests that: A) the demand for vegetables increased this year. B) the market demand for vegetables is perfectly inelastic. D) the demand

15) A

for vegetables did not change.

price-taker faces a demand curve that is: sloping. C) vertical at the market price.

15)

A) downward

16) One implication

. D) upward

sloping.

of the shape of the demand curve facing a perfectly competitive firm

16)

is that: A) the market would be unable to reach a new equilibrium if demand changed. . if the firm increases its price above the market price, it will earn higher revenue. D) if the firm decreases its price below the market price, it will earn higher revenue. C)

17) The short run

is best defined as: or less. B) the period of time between quarterly accounting reports. C) a period of time sufficiently short that all factors of production are variable.

17)

A) one year

. 18) A

fixed factor of production: A) is common in large firms but rare in small firms. B) is fixed in the long run but variable in the short run. C) is fixed in both the short run and the long run. .

19) The long

run is best defined as: A) the period of time between annual accounting reports. B) one year or more. C) a period of time sufficiently long that at least one factor of production is fixed.

8

18)

19)

20) According

to the law of diminishing returns, when some factors of production are fixed, in order to increase production by a given amount, a firm will eventually need to add successively: A) constant quantities of the variable factors of production. B) larger and larger quantities of the fixed factor of production. . D) smaller and smaller quantities of the variable factors of production.

20)

21) One reason

21)

that variable factors of production tend to show diminishing returns in the short run is that: A) capital equipment is often idle in the short run. . the cost of employing additional resources increases as firms employ more of those resources. D) large firms cannot effectively manage their resources. C)

22) Suppose 30

employee-hours can produce 50 units of output. Assuming the law of diminishing marginal returns is present, to produce 100 units of output would require: . B) fewer than 30 additional employee-hours. C) an additional 30 employee-hours. D) a total of 60 or fewer employee-hours.

22)

23) Refer

23)

to the figure below. To increase output from 33 to 66 units requires ________ extra employee-hours; to increase output from 66 to 99 units requires ________ extra employee-hours.

A) 1; 1

B) 2; 4

C)

9

2; 1

24) The table below

describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour.

What is the total cost of making 6 calls an hour? A) $30 C) $60

24)

D) $40

25) Marginal cost is

calculated as: A) the change in output divided by the change in total costs. B) total revenue minus total costs. C) the percentage change in total costs divided by the percentage change in output.

25)

26) If

a production process exhibits diminishing returns, then as output rises: A) total fixed cost will eventually increase.

26)

C)

total revenue will eventually decrease. decrease.

D) average total cost will eventually

10

27) The table below

describes the relationship between the number of workers hired by a call center each hour and the number of calls the call center can make each hour. The call center has only 1 telephone. The telephone costs the firm $5/hour (regardless of how many calls are made), and each worker is paid $10 per hour.

27)

Given the information in the table above, what is the call center's marginal cost when it goes from making 6 to 16 calls an hour? A) $10 B) 50 cents D) $20 28) Assume that each

day a firm uses 13 employee-hours and an office to produce 100 units of output. The price of each unit output is $5, the hourly wage rate is $10, and rent on the office is $200 per day. Each day the firm earns a ________ of ________. B) loss; $200 C) profit; $370 D) loss; $170

11

28)

29) Suppose a firm uses

workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day.

29)

This firm's fixed cost each day is:

B) $64

C)

$14

D) $66

30) Suppose a firm uses

workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day.

When the firm uses 9 employee-hours, it's total variable cost each day is: A) $84 B) $30 C) $56

12

30)

31) Suppose a firm uses

workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day.

31)

When the firm uses 9 employee-hours, its total revenue each day is: A) $18. B) $160. C) $120. 32) Suppose a firm uses

workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day.

When the firm uses 9 employee-hours, it earns a daily ________ of ________. A) loss; $64 B) profit; $114 C) loss; $114

13

32)

33) Suppose a firm uses

workers and office space to produce output. The firm is locked into a year-long lease on its office space, but it can easily vary the number of employee-hours it uses each day. The table below describes the relationship between the number of employee-hours the firm uses each day and the firm's daily output. Each unit of output sells for $2, the hourly wage rate is $14, and the rent on the office space is $50 per day.

33)

What is the marginal cost of production between 80 and 120 units of output each day? A) $70 B) $14 D) $1.40 34) Refer

to the figure below. If the market for doughnuts is perfectly competitive, then assuming this firm can earn enough revenue to cover its variable cost, it should produce:

A) the quantity B) 50

of doughnuts at which average total cost is minimized. doughnuts per day.

D) the quantity

of doughnuts at which average total cost equals the market price.

14

34)

35) Refer

to the figure below. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 10 cents, then this firm:

A) should

shut down in the long run. .

B) should

shut down. an economic loss.

D) will earn

36) Refer

to the figure below. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 25 cents, then this firm should:

. C)

35)

B) produce 50

shut down.

D) produce 90

15

doughnuts. doughnuts.

36)

37) Refer

to the figure below. If the market for doughnuts is perfectly competitive, and the price of a doughnut is 25 cents, then at this firm's profit maximizing level of output, the firm will earn an economic ________ of ________ per day.

A) profit; $80

B) loss; $10

C)

loss; $80

38) A

profit-maximizing firm will shut down if, at the firm's profit maximizing level of output, its total revenue is ________ A) less than its average variable cost. B) less than its average total cost. D) less than its total cost. .

39) If

37)

a firm shuts down in the short run, then its:

38)

39)

A) profit will equal zero.

. total revenue and total cost will fall to zero. D) economic loss will equal its variable costs. C)

40) Fred

runs a fishing lodge, and has a very profitable business during the summer. In the fall, the number of guests at the lodge starts to decline. Fred should keep the lodge open: B) only

during those months in which his total revenue exceeds his variable cost. only during those months in which his total revenue exceeds his fixed cost. D) all year because his summer profits offset any losses he might have in the winter. C)

16

40)

41) Suppose Sarah

owns a small company that makes wedding cakes. The table below shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day.

41)

If the market for wedding cakes is perfectly competitive, and wedding cakes sell for $95 each, then Sarah should produce ________ cakes per day. A) 5 B) 0 C) 6 42) Suppose Sarah

owns a small company that makes wedding cakes. The table below shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day.

If the market for wedding cakes is perfectly competitive, and wedding cakes sell for $95 each, then at her profit-maximizing level of output, Sarah will earn a ________ of ________ per day. A) loss; $100 B) profit; $285 C) profit; $15 17

42)

43) In

general, perfectly competitive firms maximize profit if they produce a level of output at which: A) average cost equals price. B) total cost is minimized. D) average cost is minimized. .

43)

44) A

44)

profit-maximizing firm will only produce a positive amount of output if: . B) its total revenue is greater than its fixed cost. C) its total revenue is greater than its total cost. D) its total revenue equals its total cost.

45) Refer

to the figure below. If this firm is a price taker, then when the price of each unit of output is $30, this firm's profit-maximizing level of output is ________.

B) 60

C)

18

30

D) 100

45)

46) Refer

to the figure below. If this firm is a price taker, then when the price of each unit of output is $30, this firm's total revenue at its profit-maximizing level of output is ________.

A) $3,000

C)

$900

D) $1,800

47) Refer

to the figure below. If this firm is a price taker, then when the price of each unit of output is $30, this firm's total cost at its profit-maximizing level of output is ________.

B) $1,200

C)

19

$900

46)

D) $2,700

47)

48) Refer

to the figure below. If this firm is a price taker, then when the price of each unit of output is $30, how much profit does this firm earn at its profit-maximizing level of output?

A) $1,600

B) $1,200

C)

$500

49) Refer

to the figure below. If this firm is a price taker, then when the price of each unit if output is $15, what is this firm's profit-maximizing level of output?

B) 80

C)

20

48)

45

D) 0

49)

50) Refer

to the figure below. If this firm is a price taker and the price of each unit of output is $15, then at this firm's profit-maximizing level of output, it will earn a ________ of ________.

B) loss; $900

C)

51) Refer

loss; $300

D) profit; $180

to the figure below. If this firm is a price taker and the price of each unit of output is $10, then this firm should:

B) produce 45

units of output. raise its price to increase its revenue. D) lower its output to decrease its marginal cost....