Question 1

If two products are homogeneous,then they

Accepted Answer

A) Are identical. 
B) Differ from each other. 
C) Must be used together. 
D) Are similar to each other. 
A) Are identical. 
B) Differ from each other. 
C) Must be used together. 
D) Are similar to each other.

Question 2

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

Accepted Answer

A) Differentiated products. 
B) Price below marginal revenue. 
C) A large number of firms. 
D) Significant barriers to entry. 
A) Differentiated products. 
B) Price below marginal revenue. 
C) A large number of firms. 
D) Significant barriers to entry.

Question 3

In which of the following cases would a firm enter a market?

Accepted Answer

A) P > short-run ATC. B) P long-run ATC. D) P < long-run ATC. A) P > short-run ATC. B) P long-run ATC. D) P < long-run ATC.

Question 4

The entry of firms into a market

Accepted Answer

A) Increases the equilibrium price. 
B) Reduces the profits of existing firms in the market. 
C) Shifts the market supply curve to the left. 
D) Shifts the market demand curve to the left. 
A) Increases the equilibrium price. 
B) Reduces the profits of existing firms in the market. 
C) Shifts the market supply curve to the left. 
D) Shifts the market demand curve to the left.

Question 5

If the firm in Figure 23.4 raised the price of its product above $4,the firm would

Accepted Answer

A) Increase its profits. 
B) Reduce its total revenue to zero. 
C) Increase its total revenue but not its profits because costs would increase. 
D) Not affect revenues but increase profits because costs would decrease. 
A) Increase its profits. 
B) Reduce its total revenue to zero. 
C) Increase its total revenue but not its profits because costs would increase. 
D) Not affect revenues but increase profits because costs would decrease.

Question 6

Perfect information is a necessary condition of perfect competition.

Accepted Answer

A) True 
 B)False

Question 7

In which of the following cases would entry and exit cease?

Accepted Answer

A) P > short-run ATC. B) P = long-run ATC. C) P > long-run ATC. D) P < long-run ATC. A) P > short-run ATC. B) P = long-run ATC. C) P > long-run ATC. D) P < long-run ATC.

Question 8

The equilibrium price in a competitive market

Accepted Answer

A) Ensures that anyone who wants the good can get it. 
B) Is the price at which the quantity of a good demanded in a given time period equals the quantity supplied. 
C) Remains unchanged forever. 
D) Remains unchanged only if demand doesn't change. 
A) Ensures that anyone who wants the good can get it. 
B) Is the price at which the quantity of a good demanded in a given time period equals the quantity supplied. 
C) Remains unchanged forever. 
D) Remains unchanged only if demand doesn't change.

Question 9

Barb's Soccer Ball Company produces 800 soccer balls per week.If the firm used marginal cost pricing to determine soccer ball output,it would produce 600 soccer balls.Consumers do not receive the most desirable quantity of soccer balls from Bib's because

Accepted Answer

A) Economic losses are occurring. 
B) The firm must be earning higher than normal economic profits. 
C) The cost of producing the additional 200 soccer balls is greater than the amount that consumers are willing to pay for the additional soccer balls. 
D) The cost of producing the additional 200 soccer balls is less than the amount that consumers are willing to pay for the additional soccer balls. 
A) Economic losses are occurring. 
B) The firm must be earning higher than normal economic profits. 
C) The cost of producing the additional 200 soccer balls is greater than the amount that consumers are willing to pay for the additional soccer balls. 
D) The cost of producing the additional 200 soccer balls is less than the amount that consumers are willing to pay for the additional soccer balls.

Question 10

Refer to Figure 23.2 for a perfectly competitive firm.This firm will maximize profits by producing the level of output that corresponds to point

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 11

In a competitive market,if the market price is equal to the minimum point of the firm's ATC curve,the firm may seek to earn economic profits by

Accepted Answer

A) Producing at the rate of output where price equals demand. 
B) Decreasing production costs through technological improvements. 
C) Decreasing price. 
D) Increasing price. 
A) Producing at the rate of output where price equals demand. 
B) Decreasing production costs through technological improvements. 
C) Decreasing price. 
D) Increasing price.

Question 12

When a computer firm is producing a level of output at which MC is greater than price,from society's standpoint the firm is producing too

Accepted Answer

A) Much because society is giving up more to produce additional computers than the computers are worth. 
B) Much because society would be willing to give up more alternative goods in order to get additional computers. 
C) Little because society is giving up more to produce additional computers than the computers are worth. 
D) Little because society would be willing to give up more alternative goods in order to get additional computers. 
A) Much because society is giving up more to produce additional computers than the computers are worth. 
B) Much because society would be willing to give up more alternative goods in order to get additional computers. 
C) Little because society is giving up more to produce additional computers than the computers are worth. 
D) Little because society would be willing to give up more alternative goods in order to get additional computers.

Question 13

Marginal cost pricing results in the most desirable mix of goods and services from the consumer's standpoint because

Accepted Answer

A) Firms are forced to produce at the most technically efficient output level. 
B) Economic profits are zero. 
C) Prices are forced down to the lowest possible level. 
D) The prices consumers pay are a reflection of the value of the goods and services given up. 
A) Firms are forced to produce at the most technically efficient output level. 
B) Economic profits are zero. 
C) Prices are forced down to the lowest possible level. 
D) The prices consumers pay are a reflection of the value of the goods and services given up.

Question 14

Perfectly competitive firms cannot individually affect market price because

Accepted Answer

A) There is an infinite demand for their goods. 
B) Demand is perfectly inelastic for their goods. 
C) There are many firms,none of which has a significant share of total output. 
D) The government exercises control over the market power of competitive firms. 
A) There is an infinite demand for their goods. 
B) Demand is perfectly inelastic for their goods. 
C) There are many firms,none of which has a significant share of total output. 
D) The government exercises control over the market power of competitive firms.

Question 15

Profit per unit is equal to

Accepted Answer

A) Price divided by average total cost. 
B) Price minus average total cost. 
C) Total revenue minus total cost. 
D) Total revenue minus variable cost divided by quantity. 
A) Price divided by average total cost. 
B) Price minus average total cost. 
C) Total revenue minus total cost. 
D) Total revenue minus variable cost divided by quantity.

Question 16

The behavior expected in a competitive market includes

Accepted Answer

A) Very little entry and exit. 
B) Marginal cost pricing. 
C) Aggressive behavior among competitors to control prices. 
D) Little technological growth. 
A) Very little entry and exit. 
B) Marginal cost pricing. 
C) Aggressive behavior among competitors to control prices. 
D) Little technological growth.

Question 17

If someone invents a more cost effective way to produce frozen pizzas,then

Accepted Answer

A) The market supply curve for frozen pizzas will shift to the right. 
B) The market supply curve for frozen pizzas will shift to the left. 
C) There will be a movement up along the market supply curve for frozen pizzas. 
D) There will be a movement down along the market supply curve for frozen pizzas. 
A) The market supply curve for frozen pizzas will shift to the right. 
B) The market supply curve for frozen pizzas will shift to the left. 
C) There will be a movement up along the market supply curve for frozen pizzas. 
D) There will be a movement down along the market supply curve for frozen pizzas.

Question 18

When economic profits exist in the market for a particular product,this is a signal to producers that

Accepted Answer

A) Consumers would like more scarce resources devoted to the production of this product. 
B) The market is oversupplied with this product. 
C) The best mix of goods and services is being produced with society's scarce resources. 
D) Price is at the minimum of the ATC curve. 
A) Consumers would like more scarce resources devoted to the production of this product. 
B) The market is oversupplied with this product. 
C) The best mix of goods and services is being produced with society's scarce resources. 
D) Price is at the minimum of the ATC curve.

Question 19

Refer to Figure 23.5 for a perfectly competitive firm.This firm will maximize profits by producing the level of output that corresponds to point

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 20

Economic losses mean that firms will exit from a market in the short run.

Accepted Answer

A) True 
 B)False

Exam 23: Competitive Markets

If two products are homogeneous,then they

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

In which of the following cases would a firm enter a market?

The entry of firms into a market

If the firm in Figure 23.4 raised the price of its product above $4,the firm would

Perfect information is a necessary condition of perfect competition.

In which of the following cases would entry and exit cease?

The equilibrium price in a competitive market

Barb's Soccer Ball Company produces 800 soccer balls per week.If the firm used marginal cost pricing to determine soccer ball output,it would produce 600 soccer balls.Consumers do not receive the most desirable quantity of soccer balls from Bib's because

Refer to Figure 23.2 for a perfectly competitive firm.This firm will maximize profits by producing the level of output that corresponds to point

In a competitive market,if the market price is equal to the minimum point of the firm's ATC curve,the firm may seek to earn economic profits by

When a computer firm is producing a level of output at which MC is greater than price,from society's standpoint the firm is producing too

Marginal cost pricing results in the most desirable mix of goods and services from the consumer's standpoint because

Perfectly competitive firms cannot individually affect market price because

Profit per unit is equal to

The behavior expected in a competitive market includes

If someone invents a more cost effective way to produce frozen pizzas,then

When economic profits exist in the market for a particular product,this is a signal to producers that

Refer to Figure 23.5 for a perfectly competitive firm.This firm will maximize profits by producing the level of output that corresponds to point

Economic losses mean that firms will exit from a market in the short run.

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

Financial Markets

Taxes: Equity Versus Efficiency

Transfer Payments: Welfare and Social Security

International Trade

International Finance

Global Poverty

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