If the price of a product is $30 and its marginal cost is $15:

resources are being underallocated to the product

resources are being over allocated to the product

the firm is producing an optimal amount

the firm is allocatively efficient

A firm in perfect competition is _______ in the short run and ________ in the long run.

allocatively efficient, allocatively efficient & productively efficient

productively efficient, allocatively efficient

allocatively efficient, productively efficient

productively efficient, productively efficient & allocatively efficient

Firms earn zero economic profit or normal profit only in the

long run and price is = to minimum ATC

short run and price is = to minimum ATC

long run and price is = to minimum AVC

short run and price is = to minimum AVC

Economies of scale are associated with

high start up costs, that when spread over a larger volume provides a lower average cost per unit.

high start up costs, that when spread over a larger volume provides a higher average cost per unit.

low start up costs and high revenues.

low start up costs and low revenues.

When graphing the cost curves, marginal costs will intersect average total costs and average variable costs

when average fixed costs are zero

are the production costs of making one more product

are the additional costs of making one more product

are the supplemental costs of making one more product

Assume that a profit-maximizing, perfectly competitive firm has economic losses in the short run. If the firm continues to produce and sell its goods, then which of the following must be true?

The firm is covering all of its variable costs but not all of its fixed costs of production.

The firm is covering all of its fixed and variable costs of production.

The firm is covering all of its fixed costs but not all of its variable costs of production.

The firm must have raised the price of its goods in order to minimize its losses.

For a perfectly competitive firm producing the profit-maximizing quantity, the average total cost is $10 and the average variable cost is $8. If the market price for its product is $10, which of the following is true for the firm?

It is earning zero economic profit and will remain in business.

It is sustaining a loss and should shut down.

It will temporarily shut down until price rises.

The firm is earning positive economic profit.

All of the following are essential characteristics of a perfectly competitive industry EXCEPT:

There are barriers to entry into and exit from the industry.

All products produced by the firms in the industry are homogeneous.

All firms in the industry are price takers.

Price is equal to marginal revenue for every firm in the industry.

An entrepreneur has earned enough total revenue to cover her accounting costs, but economic losses are being incurred. What must be true?

Her accounting profits are less than her implicit costs

Her accounting costs are larger than her economic costs

Her implicit costs are less than her accounting costs

Her accounting profits are greater than her economic costs

As output of a firm increases, the difference between the firm’s average total cost and its average variable cost gets smaller because the firm’s

average fixed cost is decreasing

marginal product of labor is decreasing

Suppose that a firm begins to hire workers for a newly completed plant with a fixed amount of machinery. As the firm hires additional workers, one would expect the marginal product to:

rise initially, but eventually fall

fall initially, but eventually rise

rise consistently due to diminishing returns

rise consistently due to the advantages of specialization

Assume a firm is in perfect competition and the market is in long-run equilibrium. The government gives a lump-sum subsidy to each firm producing in the industry. What will happen to the firm's quantity in the short run?

It would stay the same because a lump sum subsidy does not change a firm's marginal costs.

It would increase due to the due to a decrease in marginal costs.

It would increase due to the decrease in ATC.

It would decrease as more firms enter in the short run.

Assume a firm is in perfect competition and the market is in long-run equilibrium. The government gives a lump-sum subsidy to each firm producing in the industry. What will happen to the market price and quantity in the long run?

In the long run the market price will decrease and market quantity will increase as more firms enter due to the subsidy.

In the long run the market price and quantity will stay the same as its original price quantity

In the long run the market price will increase and market quantity will decrease as more firms enter due to the subsidy.

In the long run market price will remain constant and market quantity will increase as more firms enter due to the subsidy.

The above figure shows a perfectly competitive firm. If the market price is $15, the firm

is making zero economic profit.

might shut down but more information is needed about the AVC .

A perfectly competitive firm is earning an economic profit when total fixed costs increase. Assuming the firm does not shut down, in the short run the firm will

continue producing the same quantity as before but will make less economic profit.

produce more output so the extra revenue will cover the increased costs.

produce less output to decrease total costs.

continue producing the same quantity as before and continue making the same economic profit as before.

AP Unit III Micro Review

Quiz

•

Social Studies

•

9th - 12th Grade

•

Practice Problem

•

Medium

Used 25+ times

FREE Resource

40 questions

Show all answers

1.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

The shutdown point for a firm in perfect competition is when

p = mc

p = minimum ATC

p = minimum AVC

p = mr

2.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

If a firm in perfect competition tried to raise prices its revenue would

decrease

increase

decrease to $0

decrease by an indeterminate amount

3.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

If Mark wants to sell his corn at a local farmer's market, he must be aware that the product is standardized and that he will have no control over the price. The market structure he is MOST likely participating in is

monopolistic competition

oligopoly

perfect competition

monopoly

4.

MULTIPLE CHOICE QUESTION

45 sec • 1 pt

The demand curve for a firm in perfect competition is

relatively elastic and has a coefficient greater than 1

relatively inelastic and has a coefficient less than 1

perfectly inelastic and has a coefficient of 0

perfectly elastic and has a coefficient of infinity

5.

MULTIPLE CHOICE QUESTION

20 sec • 1 pt

Under perfect competition,

products are similar but not identical.

numerous restrictions prevent firms from entering the market.

no seller can sell a product above the prevailing market price.

a single seller can affect price.

6.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

In the short run firms in perfect competition are taking a loss. Now assume that the market now adjust to its long run equilibrium. Which of following will occur?

Market Price Increases Firm Price Decreases

Market Quantity Decreases Firm Quantity Increases

Market Quantity Decreases Firm Price Decreases

Market Quantity Increases Firm Quantity Decreases

7.

MULTIPLE CHOICE QUESTION

30 sec • 1 pt

Profits will be maximized when a firm produces the quantity at which

MR = minimum ATC

MR = MC

MC = minimum ATC

P = minimum AVC

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AP Unit III Micro Review

40 questions

The shutdown point for a firm in perfect competition is when

If a firm in perfect competition tried to raise prices its revenue would

If Mark wants to sell his corn at a local farmer's market, he must be aware that the product is standardized and that he will have no control over the price. The market structure he is MOST likely participating in is

The demand curve for a firm in perfect competition is

Under perfect competition,

In the short run firms in perfect competition are taking a loss. Now assume that the market now adjust to its long run equilibrium. Which of following will occur?

Profits will be maximized when a firm produces the quantity at which

If the price of a product is $30 and its marginal cost is $15:

A firm in perfect competition is _ in the short run and __ in the long run.

This is the easiest market structure to enter because of low barriers to entry and the number of producers.

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