Question 1

In a perfectly competitive market that is in long-run equilibrium, a permanent leftward shift in the market demand curve

Accepted Answer

A)  raises the price in the short run. 
B)  raises profits in the short run. 
C)  leads to new firms entering the market in the long run. 
D)  lowers the price at first but then raises it as firms leave the market. 
A)  raises the price in the short run. 
B)  raises profits in the short run. 
C)  leads to new firms entering the market in the long run. 
D)  lowers the price at first but then raises it as firms leave the market.

Question 2

The firms in a perfectly competitive are making an economic profit when new firms enter. The entry shifts the short-run market supply curve ________, the market price ________, and each firm's economic profit ________.

Accepted Answer

A)  leftward; rises; decreases 
B)  rightward; rises; increases 
C)  rightward; falls; decreases 
D)  leftward; falls; decreases 
A)  leftward; rises; decreases 
B)  rightward; rises; increases 
C)  rightward; falls; decreases 
D)  leftward; falls; decreases

Question 3

-The above diagram shows the cost curves for a perfectly competitive wheat farmer. At what price(s) does the wheat farmer earn an economic profit? Earn a normal profit? Incur an economic loss? How many bushels of wheat does the farmer produce if the price is $3 per bushel? If the price is $0.50 per bushel?

Accepted Answer

At any price that exceeds the minimum of

Question 4

In the long-run equilibrium in a perfectly competitive market,

Accepted Answer

A)  the firms make an economic profit. 
B)  the firms' owners make a normal profit. 
C)  the average total cost is maximized. 
D)  marginal cost is at a minimum. 
A)  the firms make an economic profit. 
B)  the firms' owners make a normal profit. 
C)  the average total cost is maximized. 
D)  marginal cost is at a minimum.

Question 5

-Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price of a tattoo is $12, the firm

Accepted Answer

A)  incurs an economic loss, but will not shut down. 
B)  will not shut down in the short run, but will leave the industry in the long run. 
C)  will shut down. 
D)  is breaking even. 
A)  incurs an economic loss, but will not shut down. 
B)  will not shut down in the short run, but will leave the industry in the long run. 
C)  will shut down. 
D)  is breaking even.

Question 6

The firm's short run supply curve is equal to the

Accepted Answer

A)  entire marginal cost curve. 
B)  marginal cost curve above the AVC curve. 
C)  marginal cost curve above the ATC curve. 
D)  marginal cost curve above the AFC curve. 
A)  entire marginal cost curve. 
B)  marginal cost curve above the AVC curve. 
C)  marginal cost curve above the ATC curve. 
D)  marginal cost curve above the AFC curve.

Question 7

In the long-run equilibrium, perfectly competitive firms make zero economic profit because of

Accepted Answer

A)  government regulations. 
B)  the ability of firms to enter and exit. 
C)  inefficient production processes. 
D)  high fixed costs. 
A)  government regulations. 
B)  the ability of firms to enter and exit. 
C)  inefficient production processes. 
D)  high fixed costs.

Question 8

As firms enter a perfectly competitive market, the price

Accepted Answer

A)  falls and the existing firms' economic profits do not change. 
B)  rises and the existing firms' economic profits decrease. 
C)  falls and the existing firms' economic profits decrease. 
D)  falls and the existing firms' economic losses do not change. 
A)  falls and the existing firms' economic profits do not change. 
B)  rises and the existing firms' economic profits decrease. 
C)  falls and the existing firms' economic profits decrease. 
D)  falls and the existing firms' economic losses do not change.

Question 9

What are the requirements for perfect competition?

Accepted Answer

The requirements are: many firms selling

Question 10

For a perfectly competitive firm, price is the same as

Accepted Answer

A)  marginal revenue. 
B)  average variable cost. 
C)  total revenue. 
D)  Both answers A and B are correct. 
A)  marginal revenue. 
B)  average variable cost. 
C)  total revenue. 
D)  Both answers A and B are correct.

Question 11

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $22, the firm will

Accepted Answer

A)  shut down. 
B)  leave the market in the long run. 
C)  stay in the market in the long run. 
D)  incur an economic loss. 
A)  shut down. 
B)  leave the market in the long run. 
C)  stay in the market in the long run. 
D)  incur an economic loss.

Question 12

-In the above table, if the quantity sold by the firm rises from 5 to 6, its marginal revenue is

Accepted Answer

A)  $15. 
B)  $30. 
C)  $75. 
D)  $90. 
A)  $15. 
B)  $30. 
C)  $75. 
D)  $90.

Question 13

-The figure above shows a typical perfectly competitive corn farm, whose marginal cost curve is MC and average total cost curve is ATC. The market is initially in a long-run equilibrium, where the price is $3.00 per bushel. Then, the market demand for corn decreases and, in the short run, the price falls to $2.50 per bushel. In the new short-run equilibrium, the farm

Accepted Answer

A)  incurs an economic loss of between $1 and $40,000. 
B)  receives zero economic profit. 
C)  incurs an economic loss of between $40,001 and $130,000. 
D)  incurs an economic loss of more than $130,001. 
A)  incurs an economic loss of between $1 and $40,000. 
B)  receives zero economic profit. 
C)  incurs an economic loss of between $40,001 and $130,000. 
D)  incurs an economic loss of more than $130,001.

Question 14

The short-run supply curve for a perfectly competitive firm is its marginal cost curve above the minimum point on the

Accepted Answer

A)  average fixed cost curve. 
B)  average variable cost curve. 
C)  average total cost curve. 
D)  demand curve. 
A)  average fixed cost curve. 
B)  average variable cost curve. 
C)  average total cost curve. 
D)  demand curve.

Question 15

Individual firms in perfectly competitive industries are price takers because

Accepted Answer

A)  the government sets all prices. 
B)  buyers set prices. 
C)  firms decide together on the best price to charge. 
D)  each individual firm is too small to affect the market price. 
A)  the government sets all prices. 
B)  buyers set prices. 
C)  firms decide together on the best price to charge. 
D)  each individual firm is too small to affect the market price.

Question 16

Suppose that newspaper companies are now required to use recycled paper, which is more expensive than new paper. Which of the following is most likely to result if the newspaper industry is highly competitive?

Accepted Answer

A)  The firms' costs rise, resulting in positive economic profit in the short run and, hence, the industry supply curve shifts rightward in the long run. 
B)  The firms' costs rise, resulting in economic losses in the short run and, hence, the industry supply curve shifts rightward in the long run. 
C)  The firms' costs rise, resulting in economic losses in the short run and, hence, the industry supply curve shifts leftward in the long run. 
D)  The industry supply curve shifts leftward in the short run, causing permanent long-run economic losses. 
A)  The firms' costs rise, resulting in positive economic profit in the short run and, hence, the industry supply curve shifts rightward in the long run. 
B)  The firms' costs rise, resulting in economic losses in the short run and, hence, the industry supply curve shifts rightward in the long run. 
C)  The firms' costs rise, resulting in economic losses in the short run and, hence, the industry supply curve shifts leftward in the long run. 
D)  The industry supply curve shifts leftward in the short run, causing permanent long-run economic losses.

Question 17

A perfectly competitive firm's short-run supply curve is the same as its

Accepted Answer

A)  ATC curve. 
B)  MR curve. 
C)  AVC curve. 
D)  MC curve above the minimum of the AVC curve. 
A)  ATC curve. 
B)  MR curve. 
C)  AVC curve. 
D)  MC curve above the minimum of the AVC curve.

Question 18

Ellen's Painting Services is a perfectly competitive firm that currently paints 10 houses a month and charges $100 per house, which is the going market price. Ellen's marginal cost is positively related with the quantity of service she provides and is currently $120. What should Ellen do to increase her economic profit? Paint more houses? Raise her price? Explain your answer.

Accepted Answer

Ellen should decrease the number of hous

Question 19

Fresno County, California is the largest agricultural producing county in the country and almonds are an important crop with more than 99,000 acres harvested. Each acre produces about a ton of almonds and sold at a price of $4300 a ton. The Sagardia Brothers grew 600 acres of almonds that year. In what type of market does the Sagardia Brother operate?

Accepted Answer

A)  Perfect Competition 
B)  Monopoly 
C)  Oligopoly 
D)  Monopolistic Competition 
A)  Perfect Competition 
B)  Monopoly 
C)  Oligopoly 
D)  Monopolistic Competition

Question 20

-In the above figure, if the price is $4 per unit, how many units will a profit maximizing perfectly competitive firm produce?

Accepted Answer

A)  0 
B)  5 
C)  20 
D)  30 
A)  0 
B)  5 
C)  20 
D)  30

Exam 12: Perfect Competition

In a perfectly competitive market that is in long-run equilibrium, a permanent leftward shift in the market demand curve

The firms in a perfectly competitive are making an economic profit when new firms enter. The entry shifts the short-run market supply curve ________, the market price ________, and each firm's economic profit ________.

In the long-run equilibrium in a perfectly competitive market,

-Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price of a tattoo is $12, the firm

The firm's short run supply curve is equal to the

In the long-run equilibrium, perfectly competitive firms make zero economic profit because of

As firms enter a perfectly competitive market, the price

What are the requirements for perfect competition?

For a perfectly competitive firm, price is the same as

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $22, the firm will

-In the above table, if the quantity sold by the firm rises from 5 to 6, its marginal revenue is

The short-run supply curve for a perfectly competitive firm is its marginal cost curve above the minimum point on the

Individual firms in perfectly competitive industries are price takers because

Suppose that newspaper companies are now required to use recycled paper, which is more expensive than new paper. Which of the following is most likely to result if the newspaper industry is highly competitive?

A perfectly competitive firm's short-run supply curve is the same as its

-In the above figure, if the price is $4 per unit, how many units will a profit maximizing perfectly competitive firm produce?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

The firms in a perfectly competitive are making an economic profit when new firms enter. The entry shifts the short-run market supply curve , the market price , and each firm's economic profit .