Question 1

Entry of new firms into a perfectly competitive market raises the product's price.

Accepted Answer

A) True 
 B)False

Question 2

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $15, 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)  make an economic profit. 
A)  shut down. 
B)  leave the market in the long run. 
C)  stay in the market in the long run. 
D)  make an economic profit.

Question 3

As perfectly competitive firms leave a market because they are incurring an economic loss, the price of the good ________ and the economic loss of each remaining firm ________.

Accepted Answer

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

Question 4

If the price of its product falls below the minimum point on the AVC curve, the best a perfectly competitive firm can do is to

Accepted Answer

A)  keep producing and incur an economic loss equal to its total variable cost. 
B)  keep producing and incur an economic loss equal to its total fixed cost. 
C)  shut down and incur an economic loss equal to its total variable cost. 
D)  shut down and incur an economic loss equal to its total fixed cost. 
A)  keep producing and incur an economic loss equal to its total variable cost. 
B)  keep producing and incur an economic loss equal to its total fixed cost. 
C)  shut down and incur an economic loss equal to its total variable cost. 
D)  shut down and incur an economic loss equal to its total fixed cost.

Question 5

When Sidney's Sweaters, Inc. makes exactly zero economic profit, Sidney, the owner,

Accepted Answer

A)  is taking a loss. 
B)  will shut down in the short run. 
C)  makes an income equal to his best alternative forgone income. 
D)  will boost output. 
A)  is taking a loss. 
B)  will shut down in the short run. 
C)  makes an income equal to his best alternative forgone income. 
D)  will boost output.

Question 6

In the long run, a perfectly competitive firm makes zero economic profit. What incentive does the firm have to stay in business if it is making zero economic profit?

Accepted Answer

Zero economic profits do not mean no pro

Question 7

The market for maple syrup is perfectly competitive. Suppose that the market is in long-run equilibrium when the market demand for maple syrup increases. After the demand increases, a typical firm will

Accepted Answer

A)  make zero economic profit. 
B)  make an economic profit. 
C)  incur an economic loss. 
D)  exit the market. 
A)  make zero economic profit. 
B)  make an economic profit. 
C)  incur an economic loss. 
D)  exit the market.

Question 8

In the long run, the economic profit of a firm in a perfectly competitive market

Accepted Answer

A)  will be above zero. 
B)  will be below zero. 
C)  will equal zero. 
D)  can be above, below, or equal to zero. 
A)  will be above zero. 
B)  will be below zero. 
C)  will equal zero. 
D)  can be above, below, or equal to zero.

Question 9

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

Accepted Answer

If the demand for wheat decreases, the p

Question 10

A perfectly competitive firm maximizes its profit by producing the output at which its marginal cost equals its

Accepted Answer

A)  marginal revenue. 
B)  average total cost. 
C)  average variable cost. 
D)  average fixed cost. 
A)  marginal revenue. 
B)  average total cost. 
C)  average variable cost. 
D)  average fixed cost.

Question 11

-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 profit maximizing level of output?

Accepted Answer

A)  16 pages per hour 
B)  32 pages per hour 
C)  48 pages per hour 
D)  64 pages per hour 
A)  16 pages per hour 
B)  32 pages per hour 
C)  48 pages per hour 
D)  64 pages per hour

Question 12

When do new firms enter a perfectly competitive market? When does entry stop?

Accepted Answer

New firms enter a perfectly competitive

Question 13

-Sue's Sea Shells by the Sea Shore is a perfectly competitive firm selling sea shells at the market price of $2 per dozen. Sue's Sea Shells by the Sea Shore has fixed costs of $40 per day and a variable cost schedule in the table above. Based on this information, we can expect the number of firms in the sea shell market to

Accepted Answer

A)  decrease. 
B)  increase. 
C)  remain constant. 
D)  It is impossible to say. 
A)  decrease. 
B)  increase. 
C)  remain constant. 
D)  It is impossible to say.

Question 14

-The figure above shows a typical perfectly competitive corn farm, whose marginal cost curve is MC and average total cost curve is ATC. Assuming there are no changes in technology, in the long run the lowest possible price for corn is ________ per bushel.

Accepted Answer

A)  $2.50 
B)  $2.00 
C)  $3.00 
D)  $3.50 
A)  $2.50 
B)  $2.00 
C)  $3.00 
D)  $3.50

Question 15

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. What would happen if the Sagardia Brothers priced their almonds at $4500 a ton?

Accepted Answer

A)  Profits will be higher than when they sell them at the lower price. 
B)  The quantity sold will be higher. 
C)  They will not sell any almonds. 
D)  They will sell fewer almonds, but profits will be higher. 
A)  Profits will be higher than when they sell them at the lower price. 
B)  The quantity sold will be higher. 
C)  They will not sell any almonds. 
D)  They will sell fewer almonds, but profits will be higher.

Question 16

A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue will ________ and its profit will ________.

Accepted Answer

A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall 
A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall

Question 17

Which of the following is a defining characteristic of a perfectly competitive market?

Accepted Answer

A)  advertisements by well-known celebrities 
B)  persistent economic profits in the long run 
C)  no restrictions on entry into the industry 
D)  higher prices being charged for certain name brands 
A)  advertisements by well-known celebrities 
B)  persistent economic profits in the long run 
C)  no restrictions on entry into the industry 
D)  higher prices being charged for certain name brands

Question 18

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 firms leaving the market in the long run. 
D)  raises the price at first but then returns it to its original level in the long run. 
A)  raises the price in the short run. 
B)  raises profits in the short run. 
C)  leads to firms leaving the market in the long run. 
D)  raises the price at first but then returns it to its original level in the long run.

Question 19

-Given the total cost and total revenue curves in the above figure, what are the output levels at which the perfect competitor will incur economic losses?

Accepted Answer

A)  below 80,000 bushels 
B)  from 30,000 to 80,000 bushels 
C)  below 30,000 bushels and over 80,000 bushels 
D)  at 30,000 bushels and at 80,000 bushels 
A)  below 80,000 bushels 
B)  from 30,000 to 80,000 bushels 
C)  below 30,000 bushels and over 80,000 bushels 
D)  at 30,000 bushels and at 80,000 bushels

Question 20

-Acme is a perfectly competitive firm. It has the cost schedules given in the above table and has a fixed cost of $12.00. The price of Acme's product is $14.20. What is Acme's most profitable amount of output? What is Acme's total economic profit or loss?

Accepted Answer

The profit maximizing level of output is

Exam 12: Perfect Competition

Entry of new firms into a perfectly competitive market raises the product's price.

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $15, the firm will

As perfectly competitive firms leave a market because they are incurring an economic loss, the price of the good ________ and the economic loss of each remaining firm ________.

If the price of its product falls below the minimum point on the AVC curve, the best a perfectly competitive firm can do is to

When Sidney's Sweaters, Inc. makes exactly zero economic profit, Sidney, the owner,

In the long run, a perfectly competitive firm makes zero economic profit. What incentive does the firm have to stay in business if it is making zero economic profit?

The market for maple syrup is perfectly competitive. Suppose that the market is in long-run equilibrium when the market demand for maple syrup increases. After the demand increases, a typical firm will

In the long run, the economic profit of a firm in a perfectly competitive market

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

A perfectly competitive firm maximizes its profit by producing the output at which its marginal cost equals its

-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 profit maximizing level of output?

When do new firms enter a perfectly competitive market? When does entry stop?

-The figure above shows a typical perfectly competitive corn farm, whose marginal cost curve is MC and average total cost curve is ATC. Assuming there are no changes in technology, in the long run the lowest possible price for corn is ________ per bushel.

A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue will ________ and its profit will ________.

Which of the following is a defining characteristic of a perfectly competitive market?

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

-Given the total cost and total revenue curves in the above figure, what are the output levels at which the perfect competitor will incur economic losses?

-Acme is a perfectly competitive firm. It has the cost schedules given in the above table and has a fixed cost of $12.00. The price of Acme's product is $14.20. What is Acme's most profitable amount of output? What is Acme's total economic profit or loss?

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

As perfectly competitive firms leave a market because they are incurring an economic loss, the price of the good and the economic loss of each remaining firm .

A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue will and its profit will .