Question 1

For a perfectly competitive market,long-run equilibrium is characterized by all of the following but which one?

Accepted Answer

A) P = MR. 
B) P = MC. 
C) P = minimum ATC. 
D) P = maximum ATC. 
A) P = MR. 
B) P = MC. 
C) P = minimum ATC. 
D) P = maximum ATC.

Question 2

Technological improvements cause

Accepted Answer

A) New firms to enter but existing firms to continue producing their old output levels. 
B) Some firms to exit but the remaining firms to produce more output. 
C) Existing firms to produce more output. 
D) Existing firms to continue producing their old output levels but to lower the price of the products. 
A) New firms to enter but existing firms to continue producing their old output levels. 
B) Some firms to exit but the remaining firms to produce more output. 
C) Existing firms to produce more output. 
D) Existing firms to continue producing their old output levels but to lower the price of the products.

Question 3

The entry of firms into a market,ceteris paribus,

Accepted Answer

A) Shifts the market supply curve to the left. 
B) Reduces the economic profit of each firm already in the market. 
C) Decreases the equilibrium output in the market. 
D) Shifts the market demand curve to the left. 
A) Shifts the market supply curve to the left. 
B) Reduces the economic profit of each firm already in the market. 
C) Decreases the equilibrium output in the market. 
D) Shifts the market demand curve to the left.

Question 4

Which of the following is consistent with long-run equilibrium for a perfectly competitive market?

Accepted Answer

A) Average total costs of production are maximized. 
B) Economic profits are positive. 
C) Maximum technical efficiency is achieved. 
D) Average variable costs of production are maximized. 
A) Average total costs of production are maximized. 
B) Economic profits are positive. 
C) Maximum technical efficiency is achieved. 
D) Average variable costs of production are maximized.

Question 5

The profit motive drives entry and exit decisions.

Accepted Answer

A) True 
 B)False

Question 6

Suppose a perfectly competitive firm is experiencing zero economic profits.In an effort to increase profits,the firm decides to initiate an advertising campaign for its product.The most likely short-run result of this campaign,ceteris paribus,would be

Accepted Answer

A) Economic losses for the firm. 
B) The ability to sell more at the existing market price. 
C) The ability to sell more at a lower price. 
D) The ability to sell more at a higher price. 
A) Economic losses for the firm. 
B) The ability to sell more at the existing market price. 
C) The ability to sell more at a lower price. 
D) The ability to sell more at a higher price.

Question 7

Barriers to entry are obstacles that make it difficult or impossible for would-be producers to enter a particular market.

Accepted Answer

A) True 
 B)False

Question 8

Explain how a perfectly competitive market promotes productive efficiency (minimum average costs).

Accepted Answer

If economic profits exist in a competiti

Question 9

As long as an economic profit is available,a perfectly competitive market will continue to attract new entrants.

Accepted Answer

A) True 
 B)False

Question 10

The "$99 iPads" The Economy Tomorrow analysis indicates that the success of the iPad

Accepted Answer

A) Attracted new firms with identical products. 
B) Created new entrants into the tablet market. 
C) Caused exit of firms from the tablet market. 
D) Caused the quality of products to fall. 
A) Attracted new firms with identical products. 
B) Created new entrants into the tablet market. 
C) Caused exit of firms from the tablet market. 
D) Caused the quality of products to fall.

Question 11

Refer to Figure 23.5 for a perfectly competitive firm.If more efficient production techniques were developed in this market,which of the following changes would we expect to occur,ceteris paribus?

Accepted Answer

A) The ATC,MC,and market price would all decrease. 
B) The ATC alone would decrease. 
C) The ATC,MC,and market price would all increase. 
D) The ATC alone would increase. 
A) The ATC,MC,and market price would all decrease. 
B) The ATC alone would decrease. 
C) The ATC,MC,and market price would all increase. 
D) The ATC alone would increase.

Question 12

Profit per unit is maximized when the firm produces the output where

Accepted Answer

A) The ATC is minimized. 
B) MC equals MR. 
C) The MC is minimized. 
D) Demand equals MC. 
A) The ATC is minimized. 
B) MC equals MR. 
C) The MC is minimized. 
D) Demand equals MC.

Question 13

If the products of two firms are homogeneous,then they

Accepted Answer

A) Are perfect substitutes. 
B) Differ from each other. 
C) Must be used together. 
D) Are costless to produce. 
A) Are perfect substitutes. 
B) Differ from each other. 
C) Must be used together. 
D) Are costless to produce.

Question 14

The market supply curve in a perfectly competitive market is usually

Accepted Answer

A) Downward-sloping. 
B) Horizontal. 
C) Vertical. 
D) Upward-sloping. 
A) Downward-sloping. 
B) Horizontal. 
C) Vertical. 
D) Upward-sloping.

Question 15

Patents are a barrier to entry.

Accepted Answer

A) True 
 B)False

Question 16

In a competitive market,economic profits will

Accepted Answer

A) Cause existing firms to expand production. 
B) Potentially last a long time. 
C) Cause new firms to leave the market. 
D) Not be possible,even in the short run. 
A) Cause existing firms to expand production. 
B) Potentially last a long time. 
C) Cause new firms to leave the market. 
D) Not be possible,even in the short run.

Question 17

If a firm finds that its marginal cost is greater than its price,it

Accepted Answer

A) Should reduce production. 
B) Is maximizing its profit. 
C) Should increase production. 
D) Is maximizing its total revenue. 
A) Should reduce production. 
B) Is maximizing its profit. 
C) Should increase production. 
D) Is maximizing its total revenue.

Question 18

Refer to Figure 23.1.If the market price equaled $10,in the short run this firm should

Accepted Answer

A) Raise the price. 
B) Produce with an economic loss. 
C) Shut down. 
D) Produce where the ATC is at a minimum. 
A) Raise the price. 
B) Produce with an economic loss. 
C) Shut down. 
D) Produce where the ATC is at a minimum.

Question 19

Which of the following characterizes a firm that is in long-run perfectly competitive equilibrium where profits are maximized?

Accepted Answer

A) Price equals minimum ATC. 
B) Positive economic profit. 
C) Price equals marginal cost. 
D) Price exceeds marginal cost. 
A) Price equals minimum ATC. 
B) Positive economic profit. 
C) Price equals marginal cost. 
D) Price exceeds marginal cost.

Question 20

In a competitive market where firms are earning economic losses,which of the following should be expected as the industry moves to long-run equilibrium,ceteris paribus?

Accepted Answer

A) A higher price and more firms. 
B) A higher price and fewer firms. 
C) A lower price and more firms. 
D) A lower price and fewer firms. 
A) A higher price and more firms. 
B) A higher price and fewer firms. 
C) A lower price and more firms. 
D) A lower price and fewer firms.

Exam 23: Competitive Markets

For a perfectly competitive market,long-run equilibrium is characterized by all of the following but which one?

Technological improvements cause

The entry of firms into a market,ceteris paribus,

Which of the following is consistent with long-run equilibrium for a perfectly competitive market?

The profit motive drives entry and exit decisions.

Suppose a perfectly competitive firm is experiencing zero economic profits.In an effort to increase profits,the firm decides to initiate an advertising campaign for its product.The most likely short-run result of this campaign,ceteris paribus,would be

Barriers to entry are obstacles that make it difficult or impossible for would-be producers to enter a particular market.

Explain how a perfectly competitive market promotes productive efficiency (minimum average costs).

As long as an economic profit is available,a perfectly competitive market will continue to attract new entrants.

The "$99 iPads" The Economy Tomorrow analysis indicates that the success of the iPad

Refer to Figure 23.5 for a perfectly competitive firm.If more efficient production techniques were developed in this market,which of the following changes would we expect to occur,ceteris paribus?

Profit per unit is maximized when the firm produces the output where

If the products of two firms are homogeneous,then they

The market supply curve in a perfectly competitive market is usually

Patents are a barrier to entry.

In a competitive market,economic profits will

If a firm finds that its marginal cost is greater than its price,it

Refer to Figure 23.1.If the market price equaled $10,in the short run this firm should

Which of the following characterizes a firm that is in long-run perfectly competitive equilibrium where profits are maximized?

In a competitive market where firms are earning economic losses,which of the following should be expected as the industry moves to long-run equilibrium,ceteris paribus?

Economics: the Core Issues

The Useconomy: a Global View

Supply and Demand

The Role of Government

National Income Accounting

Unemployment

Inflation

The Business Cycle

Aggregate Demand

Self-Adjustment or Instability

Fiscal Policy

Deficits and Debt

Money and Banks

The Federal Reserve System

Monetary Policy

Supply-Side Policy: Short-Run Options

Growth and Productivity: Long-Run Possibilities

Theory Versus Reality

Consumer Choice

Elasticity

The Costs of Production

The Competitive Firm

Monopoly

Oligopoly

Monopolistic Competition

Natural Monopolies: Deregulation

Environmental Protection

The Farm Problem

The Labor Market

Labor Unions

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Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

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