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1

A perfectly competitive firm always makes zero economic profit:
A)in the long run.
B)in the long run but never in the short run.
C)in the short run.
D)in neither the short nor the long run.
2

Suppose there are 100 firms in a perfectly competitive market and each maximizes profit at 120 units of output when market price is $5.00 per unit. One of the points on the market supply curve must be at:
A)price = $5 and quantity supplied = 220.
B)price = $5 and quantity supplied = 12,000.
C)price = $1000 and quantity supplied = 220.
D)price = $1000 and quantity supplied = 12,000.
3

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Refer to the graph above. If market price is currently $50 per unit, this perfectly competitive firm will maximize profit by producing:
A)45 units of output.
B)65 units of output.
C)85 units of output.
D)between 55 and 65 units of output.
4

There is no incentive for firms to enter or leave an industry when:
A)firms are earning zero economic profit.
B)accounting profits are zero.
C)firms are earning excess profits.
D)firms are sustaining economic losses.
5

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/olc/dl/107057/Image121.gif','popWin', 'width=375,height=298,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (2.0K)</a>

Refer to the graph above. The supply curve for this perfectly competitive firm is the segment of the:
A)average total cost curve above point D.
B)marginal cost curve above point C.
C)average variable cost curve above point C.
D)marginal cost curve above point B.
6

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/olc/dl/107057/Image122.gif','popWin', 'width=359,height=344,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (3.0K)</a>

Refer to the graph above. Assuming the firm produces where marginal revenue equals marginal cost, per unit profit will be:
A)$50.
B)$100.
C)$150.
D)$200.
7

If the long-run market supply curve is perfectly elastic, a rise in demand would cause the final equilibrium to be:
A)at the same price but a higher output.
B)at a lower price but the same output.
C)at a lower price and a higher output.
D)at the same price and the same output.
8

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/olc/dl/107057/Image123.gif','popWin', 'width=379,height=336,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (3.0K)</a>

Refer to the graph above. If market price increases from $50 per unit to $60 per unit, a profit-maximizing perfectly competitive firm will:
A)increase output from 65 to 75.
B)decrease output from 75 to 65.
C)continue to produce the same level of output.
D)produce 85 units of output.
9

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/olc/dl/107057/Image124.gif','popWin', 'width=405,height=309,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (3.0K)</a>

Refer to the graph above. If the firm is producing 450 units of output, profit is equal to:
A)$130.
B)-$175.
C)$0.
D)$175.
10

<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/olc/dl/107057/Image125.gif','popWin', 'width=385,height=307,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (3.0K)</a>

Refer to the graph above. If the price of the product is $4:
A)new firms will enter the industry.
B)firms will exit the industry.
C)the industry will be in long-run equilibrium.
D)firms will incur economic losses of approximately $160 per day.