1The economic term "perfect mobility" refers to: Multiple Choice The number of buyers in the marketThe number of sellers in the marketThe ability of firms to move whenever there is an opportunity for

1The economic term "perfect mobility" refers to:

Multiple Choice

• The number of buyers in the market
• The number of sellers in the market
• The ability of firms to move whenever there is an opportunity for profit
• The type of identical product
• 2 n a situation where there is perfect competition, what happens?

Multiple Choice

• Many barriers to entry exist
• A firm must have a license to conduct the business
• No barriers to entry exist and hundreds of firms can enter or leave the business as long as it has the money to do so
• There is no mobility

3 Are there any industries that are examples of truly perfect competition?

Multiple Choice

• Yes, most economists agree that banking is a good example of a perfectly competitive industry
• No, most economists can not come up with a good example of truly perfect competition
• Transportation is a good example of a perfect competition
• All industries are examples of perfect competition

4  The economic term used to describe the low point on the firm's average variable cost curve.  If price is below this point, the firm will shut down in the short run:

Multiple Choice

• Shut-Down Point
• Profit point
• Break-even point
• Perfect point

5  A firm's total profit is defined as:

Multiple Choice

• Total revenue - Total cost
• Total Revenue + Total Cost
• Output multiplied by price
• The price of an item  minus the cost of the item

6  An economic term used to describe the low point on the firm's average total cost curve.  If the price is below this point, the firm will go out of business in the long run:

Multiple Choice

marginal cost

• break-even point
• efficiency
• shut down point

7  Output (units)    Price       Total Revenue         Marginal Revenue

      5                         $500

      6                        $500

Complete the chart.  Then answer the following questions:

For 6 units of output, what is total revenue and marginal revenue?

Multiple Choice

For 6 units of output total revenue is $3,000

For 6 units of output marginal revenue is $500

For 6 units of output total revenue is $2,500 

For 6 units of output marginal revenue is $1000

For 6 units of output total revenue is $2,500

For 6 units of output marginal revenue is $100

For 6 units of output total revenue is $ 500 

For 6 units of output marginal revenue is $200

8   Output       Price    Total Revenue   Total Cost      Average Total Cost     Profit

          5           1250                                    2,500  

Using marginal analysis, compute total revenue, average total cost and profit for 5 units of output

Multiple Choice

Revenue is 1,250  

Average total cost is 50

Profit is 1,250

Revenue is 6,250

Average total cost is 150

Profit is 3,700

Revenue is $6,250 

Average total cost is 500

Profit  is $3,750

Revenue is 1,255

Profit is a negative amount

9  The loss minimization point for a firm is the quantity

Multiple Choice

• consistent with the minimum point on the average total cost curve.
• consistent with the minimum point on the average variable cost curve.
• at which marginal cost equals marginal revenue.
• at which total revenue is maximized.

10  A firm will maximize its profits or minimize its loss at the output where:

Multiple Choice

• MC (marginal cost) = MR (marginal revenue) and MC is rising
• Marginal revenue (MR)  is less than marginal cost  (MC)
• By producing the most output
• By raising costs

11   When a firm is operating at peak efficiency it is at the

Multiple Choice

• shutdown point.
• break-even point.
• between the shutdown and break-even points.

12   The profit-maximizing perfect competitor will produce at that output at which

Multiple Choice

• marginal cost equals marginal revenue.
• total revenue is maximized.
• average total profit is maximized.

13  A firm that is operating at peak efficiency is

Multiple Choice

• making a profit in the short run.
• taking a loss in the short run.
• operating at the minimum point of its ATC curve.
• taking a loss in the long run.

14   To maximize profits, a firm should produce output up to the point where

Multiple Choice

• marginal revenue equals marginal cost.
• price equals marginal revenue.
• the gap between the demand curve and the ATC is the greatest.
• None of these is true.

15  In a situation where perfect competition exists:

Multiple Choice

• the buyer has no reason to prefer one seller to another because the product is standardized
• the buyer can choose from a variety of different products
• the product is not identical so the buyer will purchase the product because of its unique features
• the buyer does not perfect knowledge of the prices

16  A firm will go out of business if price is below

Multiple Choice

• marginal cost.
• marginal revenue.
• average total cost.
• average fixed cost.

17  In the long run, if the price is below average total cost, the firm will

Multiple Choice

• go out of business.
• stay in business.
• temporarily shut down.
• None of these is true.

18  A return above implicit and explicit costs is called

Multiple Choice

• accounting profit.
• economic profit.
• opportunity cost.
• total revenue.