Chpt. 11 Review Essay

1859 Words Mar 23rd, 2014 8 Pages
Review of Chapter 11 Econ 101 Sections 1 & 4

This is for you exam preparation. Answers are on the last two pages.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) In a perfectly competitive market that is in long-run equilibrium, a permanent leftward shift in the market demand curve will cause
A) firms to leave the industry in the long run.
B) profits to fall in the short run.
C) the price to fall in the short run.
D) all of the above

[pic]

2) In the above figure, if the price is $4 per unit, how many units will a profit maximizing perfectly competitive firm produce?
A) 20 B) 0 C) 5 D) 30

3) In the long run, perfectly competitive firms earn zero
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[pic]

7) In the above figure, if the price is $16 per unit, the profit maximizing perfectly competitive firm will
A) earn an economic profit. B) shut down.
C) earn a normal profit. D) incur an economic loss but continue to operate.

8) In a perfectly competitive market in the short run, as the market demand increases, the firms ________ their output and their profit ________.
A) decrease; decreases B) increase; increases
C) increase; decreases D) decrease; increases

9) In the short run, which of the following can occur in a perfectly competitive market?
A) Firms can earn an economic profit.
B) Firms can charge a price above the market price.
C) Firms can enter or exit the industry.
D) Firms can adjust the size of their plant.

10) If the market price of a perfectly competitive firm's product is below its average variable cost, then the firm's
A) marginal revenue is zero.
B) total revenue if it stayed open would be less than its total variable costs.
C) total revenue if it stayed open is less than its total cost but greater than its total fixed costs.
D) total revenue is as large as possible.

11) When marginal revenue equals marginal cost, the firm is
A) establishing its shutdown point. B) maximizing its profit.
C) maximizing its revenues. D) setting price.

12) External costs are
A) the costs of working outdoors.
B) not an obstacle to an efficient use of resources.
C) costs of production not borne by the

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