Sample Exam/Chapter 12
Use the following to answer question 1:
Figure: Game-Day Shirts
1. (Figure: Game-Day Shirts) Rick is one of 10 vendors who sell game-day T-shirts at
football games in a perfectly competitive market. His costs are identical to the costs of
the other 9 vendors. When the industry is in long-run equilibrium, the price of each shirt
will be _____, and the total quantity supplied will be _____.
A) $11; 220
B) $14; 240
C) $9; 200
D) $6; 0
2. If firms are making positive economic profits in the short run, then in the long run:
A) firms will enter the industry.
B) industry output will rise and the price will rise.
C) firms will leave the industry.
D) the short-run industry supply curve will shift leftward.
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Use the following to answer question 3:
3. (Table: Total Cost for a Perfectly Competitive Firm) Look at the table Total Cost for a
Perfectly Competitive Firm. In the short run, the firm will produce, but at a loss, if the
price is:
A) $3.50.
B) $2.00.
C) $4.50.
D) $2.50.
4. A firm produces at the output level at which its average total costs are minimized. At
this output level, its average total costs are equal to all of the following EXCEPT:
A) AVC.
B) price.
C) MC.
D) MR.
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Use the following to answer question 5:
5. (Table: Total Cost and Output) Look at the table Total Cost and Output, which
describes Sergei's total costs for his perfectly competitive all-natural ice cream firm. If
the market price of a tub of ice cream is $35, how many tubs of ice cream will Sergei
produce in the short run?
A) 3
B) 4
C) 2
D) 1
6. An assumption of the model of perfect competition is:
A) difficult entry and exit.
B) cooperation and interdependence between sellers.
C) identical goods.
D) few buyers and sellers.
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Use the following to answer question 7:
Figure: The Perfectly Competitive Firm
7. (Figure: Perfectly Competitive Firm) Look at the figure The Perfectly Competitive
Firm. The figure shows a perfectly competitive firm that faces demand curve d and
maximizes profit. Given the market price, the firm's total cost per day is:
A) $600.
B) $1,200.
C) $475.
D) $900.
Use the following to answer question 8:
Figure: Short-Run Costs
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8. (Figure: Short-Run Costs) Look at the figure Short-Run Costs. This firm's short-run
supply curve begins at quantity:
A) R.
B) S.
C) T.
D) Q.
9. A perfectly competitive industry with constant costs initially operates in long-run
equilibrium. When demand increases:
A) in the long run and the short run, prices and profits will be higher than before the
demand increase.
B) in the long run and the short run, prices and profits will be lower than before the
demand increase.
C) in the short run, prices and profits will be higher, but in the long run, price will fall
back to its original level and firms will again earn zero economic profit.
D) in the short run, prices and profits will fall, but in the long run, price will rise back
to its initial level, as will profits.
Use the following to answer question 10:
10. (Table: Cherry Farm) Look at the table Cherry Farm. If all cherry farms are the same
size, how much will each farm produce in long-run equilibrium?
A) 5 pounds
B) 7 pounds
C) 4 pounds
D) 0 pounds
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11. If a perfectly competitive firm sells 300 units of output at $1 per unit, its marginal
revenue is:
A) $1.
B) $300.
C) less than $1.
D) more than $1 but less than $300.
Use the following to answer question 12:
Figure: Revenues, Costs, and Profits for Tomato Producers III
12. (Figure: Revenues, Costs, and Profits for Tomato Producers III) Look at the figure
Revenues, Costs, and Profits for Tomato Producers III. The market for tomatoes is
perfectly competitive. If market price of a bushel of tomatoes is $18, in the short run the
farmer's profit-maximizing output is _____ bushels.
A) 3
B) 4
C) 5
D) 2
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Use the following to answer question 13:
Figure: The Profit-Maximizing Firm in the Short Run
13. (Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The ProfitMaximizing Firm. O is the _____ curve.
A) MC
B) ATC
C) AVC
D) MR
Use the following to answer question 14:
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14. (Table: Variable Costs for Lawns) Look at the table Variable Costs for Lawns. During
the summer, Alex runs a lawn-mowing service, and lawn-mowing is a perfectly
competitive industry. His only fixed cost is $1,000 for the mower. His variable costs
include fuel, his time, and mower parts. If the price for mowing a lawn is $70, how
much is Alex's profit at the profit-maximizing output?
A) $700
B) $3,500
C) $1,700
D) –$300
15. Perfectly competitive firms will:
A) increase output up to the point that the marginal benefit of an additional unit of
output is equal to the marginal cost.
B) maximize total revenue by using the marginal decision rule.
C) always attempt to minimize average variable cost.
D) increase output up to the point that the marginal benefit of an additional unit of
output is greater than the marginal cost.
Use the following to answer question 16:
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16. (Table: Total Cost for a Perfectly Competitive Firm) Look at the table Total Cost for a
Perfectly Competitive Firm. The firm will produce at a profit in the short run if the price
is at least:
A) $3.47.
B) $4.26.
C) $2.53.
D) $2.07.
Use the following to answer question 17:
17. (Table: Variable Costs for Lawns) Look at the table Variable Costs for Lawns. During
the summer, Alex runs a lawn-mowing service in a perfectly competitive industry. His
only fixed cost is $1,000 for the mower. His variable costs include fuel, his time, and
mower parts. What is Alex's break-even price?
A) $50.00
B) $100.00
C) $27.50
D) $10.00
Use the following to answer question 18:
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18. (Table: Short-Run Supply Curve) Look at the table Short-Run Supply Curve. The table
lists three supply points for a perfectly competitive firm operating in the short run. If the
industry is composed of 120 identical firms, a price of _____ and a quantity of _____
will be a point on the short-run industry supply curve.
A) $960; 3,840
B) $10; 4,800
C) $1,200; 40
D) $5; 1,650
19. The perfectly competitive model assumes all of the following EXCEPT:
A) a standardized product.
B) a great number of buyers.
C) that firms attempt to maximize their total revenue.
D) easy entry to and exit from the market.
Use the following to answer question 20:
Figure: The Perfectly Competitive Firm II
20. (Figure: The Perfectly Competitive Firm II) Look at the figure The Perfectly
Competitive Firm II. If this firm's MR curve is MR2, then this firm's optimal output is
_____ units of output and its economic profit will be _____.
A) Q4; negative
B) Q1; positive
C) Q2; negative
D) Q3; positive
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Use the following to answer question 21:
Figure: A Perfectly Competitive Firm in the Short Run
21. (Figure: A Perfectly Competitive Firm in the Short Run) Look at the figure A Perfectly
Competitive Firm in the Short Run. The firm's short-run supply curve is the:
A) rising part of the MC curve beginning at the point at which the firm starts earning
economic profit.
B) MC curve below point P.
C) rising part of the MC curve beginning at point W.
D) entire MC curve.
22. The break-even price for a perfectly competitive firm is equal to:
A) the minimum value of average total cost.
B) the average fixed cost at the given output level.
C) the minimum value of average variable cost.
D) the marginal revenue, provided that marginal revenue is equal to marginal cost.
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Use the following to answer question 23:
23. (Table: Total Cost and Output) Look at the table Total Cost and Output, which
describes Sergei's total costs for his perfectly competitive all-natural ice cream firm. If
the market price of a tub of ice cream is $67.50, how much is Sergei's total cost at the
profit-maximizing output?
A) $170.00
B) $135.00
C) $67.50
D) $270.00
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Answer Key
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
A
A
A
A
A
C
A
D
C
C
A
C
C
A
A
B
A
B
C
C
C
A
A
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