Question 1

A perfectly competitive firm that is producing a positive quantity of a good maximizes its economic profit if it produces so that

Accepted Answer

Marginal revenue is the additional revenue earned from selling one more unit of output. Marginal cost is the additional cost incurred from producing one more unit of output. A perfectly competitive firm maximizes its economic profit by producing at the point where marginal revenue equals marginal cost.

Question 2

The break-even point is defined as occurring at an output rate at which

Accepted Answer

The break-even point occurs when total revenue equals total opportunity cost, meaning the business is covering all its costs but not making a profit.

Question 3

When Sidney's Sweaters, Inc. makes exactly zero economic profit, Sidney, the owner

Accepted Answer

When Sidney's Sweaters, Inc. makes zero economic profit, it means that Sidney's income from the business is equal to what he could have earned in his next best alternative. This is because economic profit accounts for both explicit and implicit costs, including opportunity costs.

Question 4

A perfectly competitive firm's economic profit is maximized by producing the amount of output such that

Accepted Answer

Marginal revenue equals marginal cost is the condition for profit maximization in a perfectly competitive market.

Question 5

As long as it does NOT shut down, a perfectly competitive firm earns the maximum profit as long as it operates so that

Accepted Answer

In perfect competition, firms maximize profit by producing where marginal revenue equals marginal cost, as this is the point where the cost of producing an additional unit is exactly covered by the revenue it generates.

Question 6

Charlie's Chimps is a perfectly competitive firm that produces cuddly chimps for children. The market price of a chimp is $10, and Charlie's Chimps produces 100 chimps. The marginal cost of the 100th chimp is $9. Charlie's Chimps

Accepted Answer

The answer of Charlie's Chimps is a perfectly competitive firm...

Question 7

At a firm's break-even point, its

Accepted Answer

At a firm's break-even point, total revenue equals total cost, which includes both fixed and variable costs. Opportunity cost is a component of total cost.

Question 8

-In the above figure, if the milk industry is perfectly competitive, then the firm's marginal revenue curve is represented by

Accepted Answer

The answer of 
-In the above figure, if the milk...

Question 9

As long as it does NOT shut down, a profit-maximizing perfectly competitive firm will

Accepted Answer

In perfect competition, firms are price takers, meaning they have no control over the market price. To maximize profits, they must produce at the point where marginal revenue equals marginal cost.

Question 10

The difference between a perfectly competitive firm's total revenue and its total cost is

Accepted Answer

In a perfectly competitive market, the difference between total revenue and total cost is maximized at the profit-maximizing level of output, where marginal cost equals marginal revenue.

Question 11

A perfectly competitive firm maximizes its profits by producing the amount of output such that

Accepted Answer

MR = MC indicates that the marginal revenue from selling an additional unit of output is equal to the marginal cost of producing that unit. This is the profit-maximizing condition for a perfectly competitive firm.

Question 12

-The above figure shows the total revenue curve for Dizzy Discs. The demand curve for CDs sold by Dizzy Discs

Accepted Answer

The answer of 
-The above figure shows the total revenue...

Question 13

A perfectly competitive firm maximizes its profit by

Accepted Answer

A perfectly competitive firm maximizes its profit by choosing to produce the quantity that sets MC equal to MR.

Question 14

A firm is producing the profit-maximizing amount of output when it is producing where its ________ curve intersects its ________ curve.

Accepted Answer

A firm maximizes profit by producing at the quantity where marginal cost (MC) equals marginal revenue (MR). This is the point where the cost of producing an additional unit equals the revenue it generates.

Question 15

The marginal revenue curve for a perfectly competitive firm is

Accepted Answer

In perfect competition, the marginal revenue curve is a horizontal line because the firm is a price taker and sells each additional unit at the market price.

Question 16

Which of the following characterizes a perfectly competitive market?

Accepted Answer

In a perfectly competitive market, each firm is a price taker and faces a perfectly elastic demand curve for its product, meaning it can sell any quantity at the market price but nothing at a higher price.

Question 17

A perfectly competitive firm maximizes its economic profit when it produces the quantity that sets

Accepted Answer

A perfectly competitive firm maximizes its economic profit by producing the quantity where marginal revenue (MR) equals marginal cost (MC). This is the point where the cost of producing an additional unit is exactly covered by the revenue it generates, ensuring maximum profit.

Question 18

-Based on the table above, what is the marginal revenue of the tenth unit of output?

Accepted Answer

The answer of 
-Based on the table above, what is...

Question 19

For a perfectly competitive firm, as its output increases its marginal revenue ________ and its marginal cost ________.

Accepted Answer

In a perfectly competitive market, the marginal revenue remains constant as it equals the market price, while the marginal cost changes with output level.

Question 20

When the firm produces the quantity that sets marginal revenue equal to marginal cost, a perfectly competitive firm is

Accepted Answer

In a perfectly competitive market, a firm maximizes its profit by producing the quantity where marginal revenue equals marginal cost.

Quiz 12: Perfect Competition