Question 1

In a perfectly competitive market, in the long run a permanent decrease in the market demand results in a smaller number of firms.

Accepted Answer

A) True 
 B)False

Question 2

-In the above figure, if the price is P1, the firm maximizes its profit by producing

Accepted Answer

A)  nothing. 
B)  where MC equals ATC. 
C)  where MC equals P1. 
D)  where ATC equals P1. 
A)  nothing. 
B)  where MC equals ATC. 
C)  where MC equals P1. 
D)  where ATC equals P1.

Question 3

A perfectly competitive firm's short-run supply curve is

Accepted Answer

A)  its marginal cost curve above the shutdown point. 
B)  its average total cost curve above the minimum of the average variable cost. 
C)  its average variable cost curve above the breakeven point. 
D)  horizontal at the market price. 
A)  its marginal cost curve above the shutdown point. 
B)  its average total cost curve above the minimum of the average variable cost. 
C)  its average variable cost curve above the breakeven point. 
D)  horizontal at the market price.

Question 4

Martha's Cleaning Services is a perfectly competitive firm that currently cleans 30 offices a week and charges $20 per office, which is the going market price. Martha's marginal cost is $15. What should Martha do to increase her economic profit? Clean more offices? Raise her price? Explain your answer.

Accepted Answer

Martha should increase the number of off

Question 5

By producing less, a firm can reduce

Accepted Answer

A)  its fixed costs and its variable costs. 
B)  its fixed costs but not its variable costs. 
C)  its variable costs but not its fixed costs. 
D)  neither its variable costs nor its fixed costs. 
A)  its fixed costs and its variable costs. 
B)  its fixed costs but not its variable costs. 
C)  its variable costs but not its fixed costs. 
D)  neither its variable costs nor its fixed costs.

Question 6

Does a perfectly competitive producer have any incentive to undercut the current market price? Explain your answer

Accepted Answer

A perfectly competitive producer has no

Question 7

At a firm's break-even point, its

Accepted Answer

A)  total revenue equals its total opportunity cost. 
B)  marginal revenue exceeds its marginal cost. 
C)  marginal revenue equals its average variable cost. 
D)  marginal revenue equals its average fixed cost. 
A)  total revenue equals its total opportunity cost. 
B)  marginal revenue exceeds its marginal cost. 
C)  marginal revenue equals its average variable cost. 
D)  marginal revenue equals its average fixed cost.

Question 8

An individual perfectly competitive firm has a supply curve

Accepted Answer

A)  with a positive slope. 
B)  with a negative slope. 
C)  that is parallel to the quantity axis. 
D)  that has a positive slope at lower output levels and a negative slope at higher output levels. 
A)  with a positive slope. 
B)  with a negative slope. 
C)  that is parallel to the quantity axis. 
D)  that has a positive slope at lower output levels and a negative slope at higher output levels.

Question 9

In the short run, a perfectly competitive firm will make an economic profit as long as

Accepted Answer

A)  it maximizes its profit. 
B)  P > AVC. 
C)  P > AFC. 
D)  P > ATC. 
A)  it maximizes its profit. 
B)  P > AVC. 
C)  P > AFC. 
D)  P > ATC.

Question 10

Which of the following is NOT a defining characteristic of perfectly competitive industries?

Accepted Answer

A)  many buyers and sellers 
B)  unrestricted entry and exit 
C)  consumer knowledge about prices charged by each firm 
D)  higher prices being charged for certain name brands 
A)  many buyers and sellers 
B)  unrestricted entry and exit 
C)  consumer knowledge about prices charged by each firm 
D)  higher prices being charged for certain name brands

Question 11

All along the beach in San Diego, California are shops which rent boogie boards by the hour. Tourists perceive that all rental boogie boards are identical, all prices are clearly listed on signs in front of the shops, and there are no restrictions on entry and exit in the boogie board market. What type of market is the boogie board market?

Accepted Answer

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

Question 12

If a perfectly competitive firm finds that it is producing an amount of output such that MR > MC and P > AVC, it will

Accepted Answer

A)  leave the industry. 
B)  decrease its output. 
C)  increase its output. 
D)  not change its behavior. 
A)  leave the industry. 
B)  decrease its output. 
C)  increase its output. 
D)  not change its behavior.

Question 13

In perfect competition, the price of the product is determined where the market

Accepted Answer

A)  elasticity of supply equals the market elasticity of demand. 
B)  supply curve and market demand curve intersect. 
C)  average variable cost equals the market average total cost. 
D)  fixed cost is zero. 
A)  elasticity of supply equals the market elasticity of demand. 
B)  supply curve and market demand curve intersect. 
C)  average variable cost equals the market average total cost. 
D)  fixed cost is zero.

Question 14

A perfectly competitive firm is definitely making an economic profit when

Accepted Answer

A)  MR = MC. 
B)  P = ATC. 
C)  P  ATC. 
A)  MR = MC. 
B)  P = ATC. 
C)  P  ATC.

Question 15

Suppose firms in a perfectly competitive market are incurring an economic loss. As firms exit, the price ________ and the economic loss of the surviving firms ________.

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 16

Total economic profit is

Accepted Answer

A)  total revenue minus total opportunity cost. 
B)  total revenue divided by total cost. 
C)  marginal revenue minus marginal cost. 
D)  marginal revenue divided by marginal cost. 
A)  total revenue minus total opportunity cost. 
B)  total revenue divided by total cost. 
C)  marginal revenue minus marginal cost. 
D)  marginal revenue divided by marginal cost.

Question 17

If a perfectly competitive firm manufacturing chairs produces 100 more chairs, what happens to the market price of a chair?

Accepted Answer

The price will not change. Any one perfe

Question 18

When a perfectly competitive market is in its long-run equilibrium, the fact that the firms make zero economic profit will

Accepted Answer

A)  encourage new firms to enter the market. 
B)  cause existing firms to shut down. 
C)  cause existing firms to leave the market. 
D)  mean that the firms' owners earn a normal return. 
A)  encourage new firms to enter the market. 
B)  cause existing firms to shut down. 
C)  cause existing firms to leave the market. 
D)  mean that the firms' owners earn a normal return.

Question 19

Suppose a farmer raising beef is making a normal profit. Then, because of a scare about mad cow disease, the demand for beef decreases drastically. What happens to the profits of the beef farmer in the short run and in the long run?

Accepted Answer

In the short run, the fall in beef price

Question 20

In the long run, a perfectly competitive firm can

Accepted Answer

A)  only make an economic profit. 
B)  only make zero economic profit. 
C)  only incur an economic loss. 
D)  make an economic profit, make zero economic profit, or incur an economic loss. 
A)  only make an economic profit. 
B)  only make zero economic profit. 
C)  only incur an economic loss. 
D)  make an economic profit, make zero economic profit, or incur an economic loss.

Exam 12: Perfect Competition

In a perfectly competitive market, in the long run a permanent decrease in the market demand results in a smaller number of firms.

-In the above figure, if the price is P1, the firm maximizes its profit by producing

A perfectly competitive firm's short-run supply curve is

By producing less, a firm can reduce

Does a perfectly competitive producer have any incentive to undercut the current market price? Explain your answer

At a firm's break-even point, its

An individual perfectly competitive firm has a supply curve

In the short run, a perfectly competitive firm will make an economic profit as long as

Which of the following is NOT a defining characteristic of perfectly competitive industries?

If a perfectly competitive firm finds that it is producing an amount of output such that MR > MC and P > AVC, it will

In perfect competition, the price of the product is determined where the market

A perfectly competitive firm is definitely making an economic profit when

Suppose firms in a perfectly competitive market are incurring an economic loss. As firms exit, the price ________ and the economic loss of the surviving firms ________.

Total economic profit is

If a perfectly competitive firm manufacturing chairs produces 100 more chairs, what happens to the market price of a chair?

When a perfectly competitive market is in its long-run equilibrium, the fact that the firms make zero economic profit will

Suppose a farmer raising beef is making a normal profit. Then, because of a scare about mad cow disease, the demand for beef decreases drastically. What happens to the profits of the beef farmer in the short run and in the long run?

In the long run, a perfectly competitive firm can

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, if the price is P₁, the firm maximizes its profit by producing

Suppose firms in a perfectly competitive market are incurring an economic loss. As firms exit, the price and the economic loss of the surviving firms .