Week 5 ~ Exam 1 on 12, & 14 (Answers)

SMC -ECON 1: Principles of Microeconomics Week 5 ~ Exam 1 on 12, & 14 Question 1 1. Marginal Cost curve always interests the minimum points of: ● average cost and average variable cost curves Correct! ● none of the answers given is correct ● average cost and average fixed cost curves ● total product and total profit curves ● total cost and total variable cost curves Question 2 2. Short run total cost curve of a perfectly competitive curve: ● begins at the point where the firm's total fixed cost is Correct! ● decreases initially before rising after a minimum point is reached ● begins at the point of zero or origin ● decreases as output expands ● none of the answers given is correct Question 3 3. Given the following annual data of a hypothetical coffee business: total revenue is $300,000; employee wages $100,000; raw materials $25,000; yearly interests to bank is $15,000. Jon, the business owner, would have to sacrifice a full-time job that would have paid him $100,000 as well as rent he would have received $35,000 had he decided to work for someone else. Based on the financial data as presented above, this perfectly competitive's firm is earning an economic profits of $ ______; consequently, more firms are expected to ____ until in the long run, the d curve is tangent to the lowest point of its ____. ● -25,000 ; exit ; ATC ● 175,000 ; enter ; ATC ● 175,000 ; enter ; MC ● 25,000 ; enter ; ATC Correct! ● 25,000 ; enter ; MC Question 4 4. The firm will earn a positive economic profit if the market price is higher than ____ and it should shut down if the market price is below ____. ● ATC ; AVC Correct! ● TVC ; TC ● none of the answers given is correct ● AVC ; ATC ● TC ; TVC

Question 5 5. Which of the following does not describe a perfectly competitive market? ● easy to enter and exit ● each firm is a price taker ● homogeneous products ● product differentiation exists Correct! ● long run economic profit does not exist Question 6 6. In a perfectly competitive market, the price level is determined by: ● market demand and market supply Correct! ● market power of the 15 largest firms in the industry ● total market supply of the industry ● any one of the answers is correct. ● the collective actions of consumers Question 7 7. A perfectly competitive firm's demand curve is always ____ whereas the market demand curve is always ____. ● perfectly elastic ; downward sloping Correct! ● elastic ; inelastic ● perfectly inelastic ; perfectly elastic ● downward sloping ; downward sloping ● perfectly inelastic ; downward sloping Question 8 8. A perfectly competitive firm's demand curve is always equal to: ● MR = AR = P Correct! ● MR = MC = P = AR ● MR only ● AR only ● none of the answers given is correct Question 9 9. Which one(s) of the following characteristics describe a perfectly competitive firm equilibrium in the long run? 1. the firm's economic profits must be zero. 2. the firm's demand curve must be tangent to its lowest ATC curve 3. the firm's accounting profits must be zero. 4. In the long run, MC = MR = d = AR = ATC 5. In the long run, MC = MR = d = AR = ATC at the lowest point

13. The perfectly competitive firm ____ earning a profit; and its profit / loss is ____. ● is ; $1000 Correct! ● is not ; $1000 ● is ; $1800 ● is not ; $2000 ● is ; $2000 Question 14 14. Refer to the diagram in #13 above. The perfectly competitive firm's TC is ____. ● $4200 ● $1500 ● $3000 ● cannot be computed based on information provided ● $2000 Correct! Question 15 15. Demand, average revenue, marginal revenue, and price level must always be the same for any perfectly competitive firm; whereas average revenue and price level are always true for ALL firms. True or False? ● False ● No answer text provided. ● No answer text provided. ● True Correct!