Perfectly Competitive Markets - AP Microeconomics
Card 0 of 1056
The following question is based on this table:
What is the total variable cost of producing five goods?
The following question is based on this table:
What is the total variable cost of producing five goods?
Variable costs associated with production are costs that change in proportion to the level of production. By contrast, fixed costs are costs that are not dependent on production level. Fixed costs and variable costs make up a good's total cost of production.
In this case, the total cost of producing zero units is 12. The total variable cost of producing zero units is 0, which means that 12 must be the fixed cost associated with producing this good.
The total cost of producing 5 units is 33. Since total costs subtracted by fixed costs equals its variable costs, the variable cost of producing 5 units must be 21.
Variable costs associated with production are costs that change in proportion to the level of production. By contrast, fixed costs are costs that are not dependent on production level. Fixed costs and variable costs make up a good's total cost of production.
In this case, the total cost of producing zero units is 12. The total variable cost of producing zero units is 0, which means that 12 must be the fixed cost associated with producing this good.
The total cost of producing 5 units is 33. Since total costs subtracted by fixed costs equals its variable costs, the variable cost of producing 5 units must be 21.
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A minimum wage for coal miners will likely result in:
A minimum wage for coal miners will likely result in:
Imposing a minimum wage usually causes a price floor in the market. Thus, the labor market for coal miners will likely see a surplus, which typically occurs when there is a price floor. The price will be higher than the equilibrium, which means that the labor supply will be greater than demand.
Imposing a minimum wage usually causes a price floor in the market. Thus, the labor market for coal miners will likely see a surplus, which typically occurs when there is a price floor. The price will be higher than the equilibrium, which means that the labor supply will be greater than demand.
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If the total product of labor increases at an increasing rate, _________ .
If the total product of labor increases at an increasing rate, _________ .
Marginal product of labor describes how the total product of labor changes when more labor is hired. If the total product of labor is rising as labor increases, then the marginal product of labor must be increasing.
Marginal product of labor describes how the total product of labor changes when more labor is hired. If the total product of labor is rising as labor increases, then the marginal product of labor must be increasing.
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The following question will refer to this table:
What is the marginal product of the fourth unit of labor?
The following question will refer to this table:
What is the marginal product of the fourth unit of labor?
The marginal product of labor is the change in output that results from an additional unit of labor. In this case, the marginal product of the fourth unit of labor would be the difference between the total output of production with four units of labor and the total output of production with three units of labor, which is 5 units.
The marginal product of labor is the change in output that results from an additional unit of labor. In this case, the marginal product of the fourth unit of labor would be the difference between the total output of production with four units of labor and the total output of production with three units of labor, which is 5 units.
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A perfectly competitive firm produces at its profit maximizing level. At this point, the marginal product of labor is 7 units per hour and wages are $14 per hour. Which of the following is true?
A perfectly competitive firm produces at its profit maximizing level. At this point, the marginal product of labor is 7 units per hour and wages are $14 per hour. Which of the following is true?
To maximize profits, a perfectly competitive firm will hire until its marginal revenue of labor equals its marginal cost of labor. The marginal cost of labor equals the wage rate, which is $14 per hour.
The marginal revenue of labor is the marginal product of labor multiplied by the price of the good. Since the marginal product at the profit maximizing level is 7 units per hour, the market price of the good must be $2 (7 units multiplied by $2 equals $14).
To maximize profits, a perfectly competitive firm will hire until its marginal revenue of labor equals its marginal cost of labor. The marginal cost of labor equals the wage rate, which is $14 per hour.
The marginal revenue of labor is the marginal product of labor multiplied by the price of the good. Since the marginal product at the profit maximizing level is 7 units per hour, the market price of the good must be $2 (7 units multiplied by $2 equals $14).
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Energy can be generated using either coal or natural gas as an input. If the supply of coal is interrupted, what are the most likely effects on the price and quantity of natural gas traded on the open market? Assume a perfectly competitive market with no government policy intervention.
Energy can be generated using either coal or natural gas as an input. If the supply of coal is interrupted, what are the most likely effects on the price and quantity of natural gas traded on the open market? Assume a perfectly competitive market with no government policy intervention.
Coal and natural gas are substitutes for each other based on the description given in the question. Therefore, an interruption in the supply of coal will lead to an increase in the demand for natural gas. This will increase both the price and quantity of natural gas.
Coal and natural gas are substitutes for each other based on the description given in the question. Therefore, an interruption in the supply of coal will lead to an increase in the demand for natural gas. This will increase both the price and quantity of natural gas.
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Which of the following pairs of goods are most likely NOT complementary goods?
Which of the following pairs of goods are most likely NOT complementary goods?
Some, or even many, people may love both music and art, but that does not suggest that music books and artwork are regularly purchased together. The other examples are goods that clearly work better together.
Some, or even many, people may love both music and art, but that does not suggest that music books and artwork are regularly purchased together. The other examples are goods that clearly work better together.
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Iron ore is an important input in steelmaking. If the cost of iron ore increases, what are the likely effects on the equilibrium price and quantity in the market for steel? Assume a perfectly competitive market.
Iron ore is an important input in steelmaking. If the cost of iron ore increases, what are the likely effects on the equilibrium price and quantity in the market for steel? Assume a perfectly competitive market.
An increase in the cost of iron ore will make steel production more expensive.
Because production costs increase, steelmakers will be less willing to produce steel at any given price. Therefore, the market price of steel will increase, and less steel will be traded on the market.
An increase in the cost of iron ore will make steel production more expensive.
Because production costs increase, steelmakers will be less willing to produce steel at any given price. Therefore, the market price of steel will increase, and less steel will be traded on the market.
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Which of the following scenarios will result in an increase in the market price for iron ore?
Which of the following scenarios will result in an increase in the market price for iron ore?
We need to choose the scenario that results in a higher equilibrium price. This will result from an increase in demand and a decrease in supply. Only one answer choice matches this scenario. The other choices create a lower equilibrium price or an ambiguous change.
We need to choose the scenario that results in a higher equilibrium price. This will result from an increase in demand and a decrease in supply. Only one answer choice matches this scenario. The other choices create a lower equilibrium price or an ambiguous change.
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Which of the following is NOT a characteristic of a perfectly competitive market?
Which of the following is NOT a characteristic of a perfectly competitive market?
Perfectly competitive markets are characterized by their LACK of entry and exit barriers, which makes it easy for firms to enter or leave the market as conditions change.
Perfectly competitive markets are characterized by their LACK of entry and exit barriers, which makes it easy for firms to enter or leave the market as conditions change.
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The following are characteristics of a perfectly competitive market. Among these, which is most clearly lacking in the market for used cars?
The following are characteristics of a perfectly competitive market. Among these, which is most clearly lacking in the market for used cars?
Although few real-life markets meet the characteristics of perfect competition exactly, the lack of perfect (or even equal) information about the goods being traded stands out in the used car market. When dealing in used cars, the seller typically has much more information about the quality of the car than the buyer.
The other answers more or less fit the perfect competition model. There are many buyers and sellers, the property rights of the buyer and seller are well defined, there are limited returns to scale (i.e. small used car sellers have not been competed out of existence), and factors of production (labor, land) can be put to other uses.
Although few real-life markets meet the characteristics of perfect competition exactly, the lack of perfect (or even equal) information about the goods being traded stands out in the used car market. When dealing in used cars, the seller typically has much more information about the quality of the car than the buyer.
The other answers more or less fit the perfect competition model. There are many buyers and sellers, the property rights of the buyer and seller are well defined, there are limited returns to scale (i.e. small used car sellers have not been competed out of existence), and factors of production (labor, land) can be put to other uses.
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A food safety issue causes a temporary halt in the production of hot dogs at a significant number of firms. What is the expected effect on the equilibrium price and quantity for hot dog buns, assuming a perfectly competitive marketplace?
A food safety issue causes a temporary halt in the production of hot dogs at a significant number of firms. What is the expected effect on the equilibrium price and quantity for hot dog buns, assuming a perfectly competitive marketplace?
Hot dogs and hot dog buns are a model pair of complementary goods. Few people buy one without buying the other. You can graph the situation described using supply and demand curves for each market.
In the hot dog market, a significant decrease in supply will result in an inward shift of the supply curve which results in a higher price and fewer hot dogs being bought and sold.
The resulting effect in the market for hot dog buns, with fewer hot dogs being sold, is an inward shift in the demand curve, which results in a decrease in both the market price and quantity sold of hot dog buns.
Hot dogs and hot dog buns are a model pair of complementary goods. Few people buy one without buying the other. You can graph the situation described using supply and demand curves for each market.
In the hot dog market, a significant decrease in supply will result in an inward shift of the supply curve which results in a higher price and fewer hot dogs being bought and sold.
The resulting effect in the market for hot dog buns, with fewer hot dogs being sold, is an inward shift in the demand curve, which results in a decrease in both the market price and quantity sold of hot dog buns.
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Which of the following breakdowns in the rules of perfect competition is likely to result in a market externality?
Which of the following breakdowns in the rules of perfect competition is likely to result in a market externality?
Among the available choices, only poorly defined property rights is likely to result in an externality. For example, poorly defined intellectual property rights could result in firms not reaping the full benefit of their research and development and therefore doing less than is socially optimal.
Among the available choices, only poorly defined property rights is likely to result in an externality. For example, poorly defined intellectual property rights could result in firms not reaping the full benefit of their research and development and therefore doing less than is socially optimal.
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If there is a bumper crop in cotton the same year that it becomes very fashionable and consumers begin to demand it over other fabrics, what is the likely effect on the market price and quantity traded?
If there is a bumper crop in cotton the same year that it becomes very fashionable and consumers begin to demand it over other fabrics, what is the likely effect on the market price and quantity traded?
Graph supply and demand curves to represent the market for cotton. The changes described would result in an outward shift of both the supply and demand curves. The new equilibrium would clearly have an increase in the quantity traded, but the equilibrium price would depend on the slope of the curves. Therefore, without more information, the effect on the market price is indeterminate.
Graph supply and demand curves to represent the market for cotton. The changes described would result in an outward shift of both the supply and demand curves. The new equilibrium would clearly have an increase in the quantity traded, but the equilibrium price would depend on the slope of the curves. Therefore, without more information, the effect on the market price is indeterminate.
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Which of these actions most obviously produces a positive externality?
Which of these actions most obviously produces a positive externality?
Keeping your yard clean and maintained is a positive quality that residents and visitors in your neighborhood will also benefit from. Some of the other answers are also positive, but they only have a private benefits, not public ones.
Keeping your yard clean and maintained is a positive quality that residents and visitors in your neighborhood will also benefit from. Some of the other answers are also positive, but they only have a private benefits, not public ones.
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Which of these actions most obviously produces a negative externality?
Which of these actions most obviously produces a negative externality?
Trashing your room really only affects you. Only littering, which affects the general public, is clearly a negative externality.
Trashing your room really only affects you. Only littering, which affects the general public, is clearly a negative externality.
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Reference this chart for the question below:
Output Total Cost ($) 1 10 2 15 3 19 4 24 5 30 6 38 7 49
The marginal cost of producing the 7th unit of output is:
Reference this chart for the question below:
| Output | Total Cost ($) |
|---|---|
| 1 | 10 |
| 2 | 15 |
| 3 | 19 |
| 4 | 24 |
| 5 | 30 |
| 6 | 38 |
| 7 | 49 |
The marginal cost of producing the 7th unit of output is:
The total cost of producing 7 units is $49. Since the total cost of producing 6 units is $38, the marginal cost of producing the 7th unit must be $11.
The total cost of producing 7 units is $49. Since the total cost of producing 6 units is $38, the marginal cost of producing the 7th unit must be $11.
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Reference this chart for the question below:
Output Total Cost ($) 1 10 2 15 3 19 4 24 5 30 6 38 7 49
If the market is perfectly competitive, and the market price of the good is $6, how many units should this supplier produce and sell on the market?
Reference this chart for the question below:
| Output | Total Cost ($) |
|---|---|
| 1 | 10 |
| 2 | 15 |
| 3 | 19 |
| 4 | 24 |
| 5 | 30 |
| 6 | 38 |
| 7 | 49 |
If the market is perfectly competitive, and the market price of the good is $6, how many units should this supplier produce and sell on the market?
Marginal revenue equals marginal cost at $6 for the 5th unit produced. Total revenue equals total cost at both the 4th and 5th unit, but this is not the determining factor.
Marginal revenue equals marginal cost at $6 for the 5th unit produced. Total revenue equals total cost at both the 4th and 5th unit, but this is not the determining factor.
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Sugar can be refined from either sugar cane or sugar beets. Which of the following would result in an increase in the market price of sugar cane, assuming perfect competition?
Sugar can be refined from either sugar cane or sugar beets. Which of the following would result in an increase in the market price of sugar cane, assuming perfect competition?
A sugar beet crop failure would result in an inward shift of the supply curve in the market for sugar beets, resulting in a higher equilibrium price.
Since sugar beets and sugar cane are substitutes, this would result in greater demand for sugar cane, which would result in a higher price for sugar cane as well.
A sugar beet crop failure would result in an inward shift of the supply curve in the market for sugar beets, resulting in a higher equilibrium price.
Since sugar beets and sugar cane are substitutes, this would result in greater demand for sugar cane, which would result in a higher price for sugar cane as well.
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Sugar can be refined from either sugar cane or sugar beets. If there is a larger-than-expected harvest in BOTH sugar cane and sugar beets, what is the effect on the equilibrium price and quantity in the market for sugar cane?
Sugar can be refined from either sugar cane or sugar beets. If there is a larger-than-expected harvest in BOTH sugar cane and sugar beets, what is the effect on the equilibrium price and quantity in the market for sugar cane?
First, an increase in the supply of sugar beet results in a lower market price, and therefore lower demand for sugar cane, since they are substitutes. This translates into a lower market price and lower quantity traded for sugar cane.
Second, the increased supply of sugar cane would result in a lower market price and higher quantity traded in sugar cane. Therefore, the market price would definitely decrease, but the direction of the change in quantity cannot be determined.
First, an increase in the supply of sugar beet results in a lower market price, and therefore lower demand for sugar cane, since they are substitutes. This translates into a lower market price and lower quantity traded for sugar cane.
Second, the increased supply of sugar cane would result in a lower market price and higher quantity traded in sugar cane. Therefore, the market price would definitely decrease, but the direction of the change in quantity cannot be determined.
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