Economics

Stephen L. Slavin

Chapter 21 Profit, Loss, and Perfect Competition - all with Video Answers

Educators

Chapter Questions

Problem 1

Circle the letter that corresponds to the best answer.
A firm with explicit costs of $\$ 2,000,000$, no implicit costs, and total revenue of $\$ 3,000,000$ would have (LO2)
a) zero economic profit
b) zero accounting profit
c) an accounting profit and an economic profit of $\$ 1,000,000$
d) a higher economic profit than an accounting profit
e) a higher accounting profit than economic profit

Ramzi Deek

Numerade Educator

00:28

Problem 2

In Figure 1, at which output is the firm operating most efficiently? (LO7)
a) 30
c) 46
b) 39
d) 50

Carson Merrill

Numerade Educator

02:01

Problem 3

The marginal cost curve intersects the ATC curve at its (LO5)
a) minimum point, which is the break-even point
b) maximum point, which is the break-even point
c) minimum point, which is the shut-down point
d) maximum point, which is the shut-down point

Lauren Shelton

Numerade Educator

01:07

Problem 4

A profit-maximizing firm will increase production when ( $\mathrm{LO3})$
a) price is less than marginal cost
b) price equals marginal cost
c) price exceeds marginal revenue
d) price exceeds marginal cost

Carson Merrill

Numerade Educator

03:48

Problem 5

The lowest point on a firm's short-run supply curve is at the (LO6)
a) break-even point
b) shut-down point
c) most profitable output point
d) lowest point on the marginal cost curve

Jiapeng Guo

Numerade Educator

02:02

Problem 6

A firm will operate at that output where $\mathrm{MC}$ equals
MR (LO3)
a) only when it is maximizing its profits
b) only when it is minimizing its losses
c) both when it is maximizing its profits and when it is minimizing its losses
d) neither when it is maximizing its profits nor minimizing its losses

Prashant Bana

Numerade Educator

01:13

Problem 7

When marginal cost is rising but is less than average total cost, we are definitely below the
( LO3)
a) shut-down point
b) break-even point
c) maximum profit point

Lauren Shelton

Numerade Educator

08:55

Problem 8

Which statement is true? (LO2)
a) Accounting profits are greater than economic profits.
b) Economic profits are greater than accounting profits.
c) Accounting profits are equal to economic profits.

Mohan Jain

Numerade Educator

03:11

Problem 9

Statement 1: Price is equal to total revenue divided by output. Statement 2: A firm never maximizes profits. (LO3)
a) Statement 1 is true, and statement 2 is false.
b) Statement 2 is true, and statement 1 is false.
c) Both statements are true.
d) Both statements are false.

Jennifer Stoner

Numerade Educator

01:07

Problem 10

If a firm is producing a level of output at which that output's marginal cost is less than the price of the good, (LO3)
a) it is producing too much to maximize its profits
b) it is probably maximizing its profits
c) higher profits could be obtained with increased production
d) none of the above

Carson Merrill

Numerade Educator

03:29

Problem 11

The firm's long-run supply curve runs along its curve. (LO6)
a) $\mathrm{ATC}$
c) $\mathrm{MC}$
b) AVC
d) MR

Jonathan Tapiwa

Numerade Educator

03:48

Problem 12

A firm will operate at that output at which $M C=M R$ (LO1,6)
a) only in the short run
b) only in the long run
c) in both the short run and the long run
d) in neither the short run nor the long run

Jiapeng Guo

Numerade Educator

03:51

Problem 13

At an output of $5, \mathrm{MC}=\$ 49$ and ATC $=\$ 52$. At an output of $6, \mathrm{MC}=\$ 59$ and ATC $=\$ 53$. At the breakeven point, ATC is (LO6)
a) above $\$ 53$
b) $\$ 53$
c) between $\$ 52$ and $\$ 53$
d) $\$ 52$
e) less than $\$ 52$

Willis James

Numerade Educator

01:45

Problem 14

Statement 1: The firm's short-run supply curve runs up the marginal cost curve from the shut-down point to the break-even point.
Statement 2: The firm will not accept a price below the break-even point in the short run. (LO6)
a) Statement 1 is true, and statement 2 is false.
b) Statement 2 is true, and statement 1 is false.
c) Both statements are true.
d) Both statements are false.

Sujita Thavva

Numerade Educator

01:06

Problem 15

A business firm is in the short run
(LO6)
a) virtually all the time
d) rarely
b) most of the time
e) never
c) occasionally

Liuxi Sun

Numerade Educator

03:48

Problem 16

If the price is between the shut-down point and the break-even point, the firm is in the
(LO6)
a) short run making a profit
b) short run taking a loss
c) long run making a profit
d) long run taking a loss

Jiapeng Guo

Numerade Educator

02:02

Problem 17

The most efficient output of a firm is located
(LO1, 7)
a) at the shut-down point
b) at the break-even point
c) where $\mathrm{MC}=\mathrm{MR}$
d) when the vertical distance between AVC and ATC is at a maximum

Prashant Bana

Numerade Educator

05:17

Problem 18

Which one of these markets would definitely not be perfectly competitive? (LO4)
a) Foreign currency
b) Wheat
c) HDTVs
d) The New York Stock Exchange

Brandon Miskanic

Numerade Educator

02:20

Problem 19

Perfect competition is (LO4)
a) the prevalent form of competition in the United States
b) the only form of competition in the United States
c) found occasionally
d) probably impossible to find

Kaylee Mcclellan

Numerade Educator

03:23

Problem 20

Under perfect competition, (LO4)
a) many firms have some influence over price
b) a few firms have influence over price
c) no firm has any influence over price

Yohan Jeong

Numerade Educator

00:46

Problem 21

Under perfect competition, there are
(LO4)
a) many firms producing an identical product
b) a few firms producing an identical product
c) many firms producing a differentiated product
d) a few firms producing a differentiated product

Oluwadamilola Ameobi

Numerade Educator

03:23

Problem 22

The perfect competitor is
(LO4)
a) a price maker rather than a price taker
b) a price taker rather than a price maker
c) a price taker and a price maker
d) neither a price maker or a price taker

Yohan Jeong

Numerade Educator

06:18

Problem 23

The determination of whether two products are identical (LO4)
a) is done by market research
b) takes place in the minds of the buyers
c) is done by the government
d) is done by the sellers

Tommy Nguyen

Numerade Educator

07:22

Problem 24

The perfect competitor's demand curve is
(LO4)
a) always horizontal
b) always vertical
c) sometimes horizontal
d) sometimes vertical

Jonathan Tapiwa

Numerade Educator

03:11

Problem 25

Which statement about the perfect competitor is true? (LO4)
a) She may charge a little below market price to get more customers.
b) She may charge a little above market price to imply that her product is superior.
c) She will always charge the market price.
d) None of these statements is true.

Jennifer Stoner

Numerade Educator

05:23

Problem 26

Each of the following is a characteristic of perfect competition except ( $\mathrm{O} 4)$
a) many firms
b) identical products
c) perfect mobility
d) varying prices charged by different firms

Manasvee Singh

Numerade Educator

03:48

Problem 27

In the short run the perfect competitor will probably
(LO5)
a) make a profit or break even
b) take a loss or break even
c) make a profit or take a loss

Jiapeng Guo

Numerade Educator

03:30

Problem 28

In the long run the perfect competitor will
- (LO5)
a) make a profit
b) break even
c) take a loss

Pavitr Ahuja

Numerade Educator

01:58

Problem 29

Under perfect competition profits are always zero in the long run. (LO5)
a) accounting
b) economic
c) both economic and accounting
d) neither accounting or economic
Use the choices below to answer questions 30 and 31 .
a) in the long run making a profit
b) in the long run breaking even
c) in the long run taking a loss
d) in the short run making a profit
e) in the short run breaking even
f) in the short run taking a loss

Jennifer Stoner

Numerade Educator

02:20

Problem 30

Figure 2 shows the perfect competitor

Kaylee Mcclellan

Numerade Educator

02:20

Problem 31

Figure 3 shows the perfect competitor

Kaylee Mcclellan

Numerade Educator

03:24

Problem 32

The perfect competitor's demand and marginal revenue curves are $(\mathrm{LO5})$
a) identical only in the long run
b) identical only in the short run
c) never identical
d) always identical

Aanand Shah

Numerade Educator

02:32

Problem 33

The most efficient output (LO7)
a) is always equal to the most profitable output for the perfect competitor
b) is never equal to the most profitable output for the perfect competitor
c) is equal to the most profitable output for the perfect competitor only in the long run
d) is equal to the most profitable output for the perfect competitor only in the short run

Suman Saurav Thakur

Numerade Educator

02:39

Problem 34

Total profit
(LO3)
a) is the rectangle bounded by EFJI
b) is the rectangle bounded by EFGH
c) is the rectangle bounded by HGJI
d) cannot be found on this graph

Kumar Vaibhav

Numerade Educator

03:18

Problem 35

Output $(\mathrm{LO3})$
a) is $\mathrm{OK}$
b) is $\mathrm{OL}$
c) is OM
d) cannot be found on this graph

Selena Armstrong

Numerade Educator

04:07

Problem 36

Profit per unit is ( $\mathrm{LO3})$
a) $\mathrm{MF}$
d) $\mathrm{FJ}$
b) $\mathrm{MG}$
e) GJ
c) $\mathrm{MJ}$
(LO7)

Smita Praharaj

Numerade Educator

01:12

Problem 37

The firm's a) is OK
b) is OL
c) is OM
d) cannot be determined on this graph

Anna Jones

Numerade Educator

02:59

Problem 38

Statement I: The advent of the Internet has brought "perfect knowledge" closer to reality.
Statement II: The cost of businesses buying their supplies online is convenient, but they generally pay more than they would if they used customary channels. (LO3)
a) Statement I is true, and statement II is false.
b) Statement II is true, and statement I is false.
c) Both statements are true.
d) Both statements are false.

Goutam Chand

Numerade Educator

02:59

Problem 39

Statement I: No firm will stay in business more than one year if it is losing large sums of money. Statement II: Many dot-coms have lost money in the short run. (LO3)
a) Statement $\mathrm{I}$ is true, and statement II is false.
b) Statement II is true, and statement $I$ is false.
c) Both statements are true.
d) Both statements are false.

Goutam Chand

Numerade Educator

02:43

Problem 40

When an industry is in long-run equilibrium economic profits are and will be entering or leaving the industry. (LO5)
a) zero, some
b) zero, none
c) positive, some
d) positive, none

Natalie Britton

Numerade Educator

01:54

Problem 41

If a perfectly competitive firm sells 10 units of output at a price of $\$ 10$ per unit, its marginal revenue per unit is (LO1)
a) $\$ 1$
d) more than $\$ 1$, but less
b) $\$ 10$ than $\$ 10$
c) $\$ 100$
e) more than $\$ 10$, but less than $\$ 100$

Breanna Ollech

Numerade Educator