Question 1

The market for fish is perfectly competitive. So, the price elasticity of demand for fish from a single fishing boat

Accepted Answer

A)  is less than the elasticity of demand for fish overall. 
B)  equals the elasticity of demand for fish overall. 
C)  is greater than the elasticity of demand for fish overall. 
D)  is sometimes greater than and sometimes less than the elasticity of demand for fish overall. 
A)  is less than the elasticity of demand for fish overall. 
B)  equals the elasticity of demand for fish overall. 
C)  is greater than the elasticity of demand for fish overall. 
D)  is sometimes greater than and sometimes less than the elasticity of demand for fish overall.

Question 2

In the long-run equilibrium, perfectly competitive firms produce the level of output such that

Accepted Answer

A)  marginal cost is minimized. 
B)  average total cost is minimized. 
C)  marginal cost equals the price. 
D)  Both answers B and C are correct. 
A)  marginal cost is minimized. 
B)  average total cost is minimized. 
C)  marginal cost equals the price. 
D)  Both answers B and C are correct.

Question 3

In the short run, a perfectly competitive firm

Accepted Answer

A)  shuts down if it incurs any economic loss. 
B)  incurs an economic loss if it shuts down. 
C)  does not consider total revenue in its shut down decision. 
D)  can earn a small economic profit while being shut down. 
A)  shuts down if it incurs any economic loss. 
B)  incurs an economic loss if it shuts down. 
C)  does not consider total revenue in its shut down decision. 
D)  can earn a small economic profit while being shut down.

Question 4

-Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy's cost curves. If the market price is 2 cents per page, what is Fast Copy's economic profit?

Accepted Answer

A)  zero 
B)  between 0 and $0.50 per hour 
C)  between $0.51 and $1.00 per hour 
D)  more than $1.00 per hour 
A)  zero 
B)  between 0 and $0.50 per hour 
C)  between $0.51 and $1.00 per hour 
D)  more than $1.00 per hour

Question 5

-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 produces ________ bushels of corn and sells corn at ________ per bushel.

Accepted Answer

A)  250,000; $3.00 
B)  250,000; $2.50 
C)  300,000; $2.50 
D)  200,000; $2.50 
A)  250,000; $3.00 
B)  250,000; $2.50 
C)  300,000; $2.50 
D)  200,000; $2.50

Question 6

What is a perfectly competitive firm's short-run supply curve?

Accepted Answer

A perfectly competitive firm's

Question 7

Explain the process that drives the economic profit to zero in the long run for a perfectly competitive firm.

Accepted Answer

In the long run, new firms enter a perfe

Question 8

-In the above figure, at a price of $8, a perfectly competitive firm produces ________ and it ________.

Accepted Answer

A)  0; incurs an economic loss 
B)  0; makes zero economic profit 
C)  some output; makes zero economic profit 
D)  some output; makes an economic profit 
A)  0; incurs an economic loss 
B)  0; makes zero economic profit 
C)  some output; makes zero economic profit 
D)  some output; makes an economic profit

Question 9

In perfect competition

Accepted Answer

A)  many firms sell slightly different products to many buyers. 
B)  sellers are better informed about the prices than buyers. 
C)  firms face no restrictions on entry into market. 
D)  established firms have advantage over new ones. 
A)  many firms sell slightly different products to many buyers. 
B)  sellers are better informed about the prices than buyers. 
C)  firms face no restrictions on entry into market. 
D)  established firms have advantage over new ones.

Question 10

Charlie's Chimps is a perfectly competitive firm that produces cuddly chimps for children. The market price of a chimp is $10, and Charlie's produces 100 chimps at a marginal cost of $9 a chimp. Charlie's ________.

Accepted Answer

A)  is maximizing its profit 
B)  will maximize its profit if it produces more than 100 chimps 
C)  will maximize its profit if it lowers the price to $9 a chimp 
D)  will maximize its profit if it produces fewer than 100 chimps 
A)  is maximizing its profit 
B)  will maximize its profit if it produces more than 100 chimps 
C)  will maximize its profit if it lowers the price to $9 a chimp 
D)  will maximize its profit if it produces fewer than 100 chimps

Question 11

In a perfectly competitive market, a permanent increase in demand initially brings a higher price, economic

Accepted Answer

A)  loss, and entry into the market. 
B)  loss, and exit from the market. 
C)  profit, and entry into the market. 
D)  profit, and exit from the market. 
A)  loss, and entry into the market. 
B)  loss, and exit from the market. 
C)  profit, and entry into the market. 
D)  profit, and exit from the market.

Question 12

If the donut industry is perfectly competitive and is in long-run equilibrium, then the price of a donut

Accepted Answer

A)  is greater than marginal cost. 
B)  is greater than short-run average cost. 
C)  is greater than long-run average cost. 
D)  equals long-run average cost. 
A)  is greater than marginal cost. 
B)  is greater than short-run average cost. 
C)  is greater than long-run average cost. 
D)  equals long-run average cost.

Question 13

-In the above figure, at any price between $8 per unit to $12 per unit, how many units will a profit-maximizing perfectly competitive firm produce?

Accepted Answer

A)  None, because the producer will never choose to operate at a loss. 
B)  Less than 20 because this will reduce marginal cost. 
C)  Between 20 and 30, because variable costs are covered so the firm's losses will be minimized by producing rather than shutting down. 
D)  More than 30, because variable costs are covered so that the producer can earn economic profits. 
A)  None, because the producer will never choose to operate at a loss. 
B)  Less than 20 because this will reduce marginal cost. 
C)  Between 20 and 30, because variable costs are covered so the firm's losses will be minimized by producing rather than shutting down. 
D)  More than 30, because variable costs are covered so that the producer can earn economic profits.

Question 14

-The market for milk is perfectly competitive. There are 1,000 farms in the industry and the relationship between a typical farm's output and total costs is the same as in Problem 2. The market demand schedule for milk is shown in the table above.
a) What is a typical farm's supply schedule and what is the market supply schedule?
b) What is the market price? What quantity of milk is sold?
c) What is the output produced by each farm? What type of profit or loss is made by each farm?
d) Do farms enter or exit the market?

Accepted Answer

@#IMG-DLM& a) A typical farm's supply schedule is

Question 15

In the long run, if firms in a perfectly competitive market are incurring economic losses, then

Accepted Answer

A)  new firms will enter the market and the price will rise. 
B)  some firms will leave the market and the price will fall. 
C)  some firms will leave the market and the price will rise. 
D)  new firms will enter the market and the price will fall. 
A)  new firms will enter the market and the price will rise. 
B)  some firms will leave the market and the price will fall. 
C)  some firms will leave the market and the price will rise. 
D)  new firms will enter the market and the price will fall.

Question 16

In the long run, perfectly competitive firms make zero economic profit (their owners earn a normal profit) because

Accepted Answer

A)  any economic profit would attract newcomers to the industry. 
B)  the firms are incompetent. 
C)  any economic loss would increase the demand for the good, thereby raising its price. 
D)  there are many buyers and sellers. 
A)  any economic profit would attract newcomers to the industry. 
B)  the firms are incompetent. 
C)  any economic loss would increase the demand for the good, thereby raising its price. 
D)  there are many buyers and sellers.

Question 17

The demand for a product produced in a perfectly competitive market permanently increases. In the short run, the price

Accepted Answer

A)  rises and each firm produces less output. 
B)  rises and each firm produces more output. 
C)  does not change as new firms enter the industry. 
D)  does not change because each firm produces more output. 
A)  rises and each firm produces less output. 
B)  rises and each firm produces more output. 
C)  does not change as new firms enter the industry. 
D)  does not change because each firm produces more output.

Question 18

Why are perfectly competitive ranchers in Montana price takers?

Accepted Answer

Because one farmer's beef is identical t

Question 19

In the short run, a perfectly competitive firm NEVER

Accepted Answer

A)  earns an economic profit. 
B)  incurs a loss greater than its total fixed costs. 
C)  produces where MR = MC. 
D)  earns a normal profit. 
A)  earns an economic profit. 
B)  incurs a loss greater than its total fixed costs. 
C)  produces where MR = MC. 
D)  earns a normal profit.

Question 20

If the price received by a perfectly competitive firm is less than its average variable cost, what will the firm do in the short run? Why?

Accepted Answer

If the price is less than the average va

Exam 12: Perfect Competition

The market for fish is perfectly competitive. So, the price elasticity of demand for fish from a single fishing boat

In the long-run equilibrium, perfectly competitive firms produce the level of output such that

In the short run, a perfectly competitive firm

-Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy's cost curves. If the market price is 2 cents per page, what is Fast Copy's economic profit?

What is a perfectly competitive firm's short-run supply curve?

Explain the process that drives the economic profit to zero in the long run for a perfectly competitive firm.

-In the above figure, at a price of $8, a perfectly competitive firm produces ________ and it ________.

In perfect competition

Charlie's Chimps is a perfectly competitive firm that produces cuddly chimps for children. The market price of a chimp is $10, and Charlie's produces 100 chimps at a marginal cost of $9 a chimp. Charlie's ________.

In a perfectly competitive market, a permanent increase in demand initially brings a higher price, economic

If the donut industry is perfectly competitive and is in long-run equilibrium, then the price of a donut

-In the above figure, at any price between $8 per unit to $12 per unit, how many units will a profit-maximizing perfectly competitive firm produce?

In the long run, if firms in a perfectly competitive market are incurring economic losses, then

In the long run, perfectly competitive firms make zero economic profit (their owners earn a normal profit) because

The demand for a product produced in a perfectly competitive market permanently increases. In the short run, the price

Why are perfectly competitive ranchers in Montana price takers?

In the short run, a perfectly competitive firm NEVER

If the price received by a perfectly competitive firm is less than its average variable cost, what will the firm do in the short run? Why?

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

-In the above figure, at a price of $8, a perfectly competitive firm produces and it .