Question 1

In a perfectly competitive market, a decrease in market demand in a long-run constant-cost industry causes:

Accepted Answer

A)  an increase in price, quantity, and profit in the short run. 
B)  an increase in price, quantity, and profit in the long run. 
C)  a decrease in price, a decrease in quantity, and a decrease in profit in the short run. 
D)  a decrease in price, a decrease in quantity, and a decrease in profit in the long run. 
A)  an increase in price, quantity, and profit in the short run. 
B)  an increase in price, quantity, and profit in the long run. 
C)  a decrease in price, a decrease in quantity, and a decrease in profit in the short run. 
D)  a decrease in price, a decrease in quantity, and a decrease in profit in the long run.

Question 2

The demand for clothing increases. As a result, the price of clothing increases above the minimum average cost of producing it. In the long run, if the clothing industry is perfectly competitive and is a constant-cost industry:

Accepted Answer

A)  the supply of clothing and the price of clothing will increase. 
B)  the supply of clothing will increase but the price will not. 
C)  the price of clothing will increase but the supply will not. 
D)  neither the price nor the supply of clothing will increase. 
A)  the supply of clothing and the price of clothing will increase. 
B)  the supply of clothing will increase but the price will not. 
C)  the price of clothing will increase but the supply will not. 
D)  neither the price nor the supply of clothing will increase.

Question 3

Suppose a perfectly competitive firm's marginal revenue is $10 and its marginal cost is $11. Under these circumstances the firm:

Accepted Answer

A)  is maximizing profit and should not change output. 
B)  is not maximizing profit and should increase output. 
C)  is not maximizing profit and should reduce output. 
D)  needs to know the market price before it can determine whether it is maximizing profit. 
A)  is maximizing profit and should not change output. 
B)  is not maximizing profit and should increase output. 
C)  is not maximizing profit and should reduce output. 
D)  needs to know the market price before it can determine whether it is maximizing profit.

Question 4

Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand decreases from D0 to D1:

Accepted Answer

A)  market price falls from P0 to P1 and the firm's output rises from q0 to q1. 
B)  market price falls from P0 to P1 and the firm's output falls from q1 to q0. 
C)  market price remains at P0 because perfectly competitive firms can't earn positive economic profit. 
D)  the firm's output remains at q1 because perfectly competitive firms can't earn positive economic profit. 
A)  market price falls from P0 to P1 and the firm's output rises from q0 to q1. 
B)  market price falls from P0 to P1 and the firm's output falls from q1 to q0. 
C)  market price remains at P0 because perfectly competitive firms can't earn positive economic profit. 
D)  the firm's output remains at q1 because perfectly competitive firms can't earn positive economic profit.

Question 5

Refer to the graph shown. If market price increases from $5.00 per unit to $6.00 per unit, a profit-maximizing perfectly competitive firm will:

Accepted Answer

A)  increase output from 650 to 750. 
B)  decrease output from 750 to 650. 
C)  continue to produce 650 units. 
D)  produce 850 units of output. 
A)  increase output from 650 to 750. 
B)  decrease output from 750 to 650. 
C)  continue to produce 650 units. 
D)  produce 850 units of output.

Question 6

Each firm in perfect competition:

Accepted Answer

A)  sets quantity based on market price. 
B)  follows the pricing decisions of other firms. 
C)  follows the output of other firms. 
D)  follows the reactions of competitors. 
A)  sets quantity based on market price. 
B)  follows the pricing decisions of other firms. 
C)  follows the output of other firms. 
D)  follows the reactions of competitors.

Question 7

In perfect competition, price is equal to marginal revenue.

Accepted Answer

A) True 
 B)False

Question 8

The marginal cost curve is a competitive firm's supply curve; it shows how many units of output a firm will be willing to sell at different prices.

Accepted Answer

A) True 
 B)False

Question 9

In a perfectly competitive market, an increase in market demand in a long-run constant-cost industry causes:

Accepted Answer

A)  an increase in price, quantity, and profit in the short run. 
B)  an increase in price, quantity, and profit in the long run. 
C)  a decrease in price, a decrease in quantity, and a decrease in profit in the short run. 
D)  a decrease in price, a decrease in quantity, and a decrease in profit in the long run. 
A)  an increase in price, quantity, and profit in the short run. 
B)  an increase in price, quantity, and profit in the long run. 
C)  a decrease in price, a decrease in quantity, and a decrease in profit in the short run. 
D)  a decrease in price, a decrease in quantity, and a decrease in profit in the long run.

Question 10

Refer to the graph shown. If the market price is P4, the firm will produce:

Accepted Answer

A)  Q2 and incur a loss. 
B)  Q3 and break even. 
C)  Q3 and earn a profit. 
D)  Q4 and earn a profit. 
A)  Q2 and incur a loss. 
B)  Q3 and break even. 
C)  Q3 and earn a profit. 
D)  Q4 and earn a profit.

Question 11

Suppose cookie sales fall as consumers become more carbohydrate-conscious. If the cookie industry is a constant-cost, perfectly competitive industry, this decline in market demand will cause market supply to:

Accepted Answer

A)  decrease in the long run, resulting in a lower equilibrium price. 
B)  decrease in the long run until the equilibrium price is again equal to minimum average total cost. 
C)  increase in the long run, resulting in a higher equilibrium price. 
D)  increase in the long run until the equilibrium price is again equal to minimum average total cost. 
A)  decrease in the long run, resulting in a lower equilibrium price. 
B)  decrease in the long run until the equilibrium price is again equal to minimum average total cost. 
C)  increase in the long run, resulting in a higher equilibrium price. 
D)  increase in the long run until the equilibrium price is again equal to minimum average total cost.

Question 12

Marginal revenue is equal to:

Accepted Answer

A)  total revenue divided by its output. 
B)  marginal cost. 
C)  the change in total revenue associated with a change in quantity. 
D)  the change in total profits associated with a change in quantity. 
A)  total revenue divided by its output. 
B)  marginal cost. 
C)  the change in total revenue associated with a change in quantity. 
D)  the change in total profits associated with a change in quantity.

Question 13

Refer to the graph shown. If this perfectly competitive firm is producing 120 units of output, the market price is equal to:

Accepted Answer

A)  $48. 
B)  2.50. 
C)  $0.40. 
D)  impossible to determine with the information given. 
A)  $48. 
B)  2.50. 
C)  $0.40. 
D)  impossible to determine with the information given.

Question 14

In a perfectly competitive market:

Accepted Answer

A)  price does more of the adjusting in the long run and quantity does more of the adjusting in the short run. 
B)  price does more of the adjusting in the short run and quantity does more of the adjusting in the long run. 
C)  only price adjusts in both the short run and the long run. 
D)  only quantity adjusts in both the short run and the long run. 
A)  price does more of the adjusting in the long run and quantity does more of the adjusting in the short run. 
B)  price does more of the adjusting in the short run and quantity does more of the adjusting in the long run. 
C)  only price adjusts in both the short run and the long run. 
D)  only quantity adjusts in both the short run and the long run.

Question 15

Refer to the table shown. If the market price is $4, a perfectly competitive profit-maximizing firm will produce: $$\begin{array} { | c | c | } 
\hline \text { Quantity } & \text { Marginal Cast } \
\hline 1 & \$ 3 \
\hline 2 & 5 \
\hline 3 & 7 \
\hline 4 & 9 \
\hline
\end{array}$$

Accepted Answer

A)  1 unit of output. 
B)  2 units of output. 
C)  3 units of output. 
D)  4 units of output. 
A)  1 unit of output. 
B)  2 units of output. 
C)  3 units of output. 
D)  4 units of output.

Question 16

Suppose that the firms in the perfectly competitive oat industry currently are receiving a price of $2 per bushel for their product. The minimum possible average total cost of producing oats in the long run is $1 per bushel. It follows that:

Accepted Answer

A)  the oat industry is in equilibrium. 
B)  new firms will enter the oat industry. 
C)  the price of oats will remain at $2 per bushel in the long run. 
D)  firms in the oat industry will earn economic profits in both the long run and the short run. 
A)  the oat industry is in equilibrium. 
B)  new firms will enter the oat industry. 
C)  the price of oats will remain at $2 per bushel in the long run. 
D)  firms in the oat industry will earn economic profits in both the long run and the short run.

Question 17

Refer to the graph shown. To maximize profit, this firm should produce:

Accepted Answer

A)  120 units of output. 
B)  250 units of output. 
C)  450 units of output. 
D)  525 units of output. 
A)  120 units of output. 
B)  250 units of output. 
C)  450 units of output. 
D)  525 units of output.

Question 18

If a perfectly competitive industry is in long-run equilibrium, the price of the product equals the minimum of:

Accepted Answer

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

Question 19

Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand is D0, the:

Accepted Answer

A)  firm shown in the graph will produce q0, but all the firms in the market will produce a total of Q0. 
B)  firm shown in the graph will produce q1, but all the firms in the market will produce a total of Q1. 
C)  output of the firm shown in the graph is the same as quantity supplied in the market. 
D)  firm is not producing at the output where profit is maximized. 
A)  firm shown in the graph will produce q0, but all the firms in the market will produce a total of Q0. 
B)  firm shown in the graph will produce q1, but all the firms in the market will produce a total of Q1. 
C)  output of the firm shown in the graph is the same as quantity supplied in the market. 
D)  firm is not producing at the output where profit is maximized.

Question 20

Firms continue to produce (illegally) counterfeit computer software and documentation. Some of the illegal copies are Microsoft products, though Microsoft still has a large share of the market for its products. The presence of enforced copyright protection laws indicates that the market for Microsoft software cannot be considered a competitive market because:

Accepted Answer

A)  the products of pirates are not identical to those of Microsoft. 
B)  pirate producers are not profit-maximizing entrepreneurial firms. 
C)  buyers are not price takers. 
D)  there are significant barriers to entry. 
A)  the products of pirates are not identical to those of Microsoft. 
B)  pirate producers are not profit-maximizing entrepreneurial firms. 
C)  buyers are not price takers. 
D)  there are significant barriers to entry.

Exam 13: Perfect Competition

In a perfectly competitive market, a decrease in market demand in a long-run constant-cost industry causes:

The demand for clothing increases. As a result, the price of clothing increases above the minimum average cost of producing it. In the long run, if the clothing industry is perfectly competitive and is a constant-cost industry:

Suppose a perfectly competitive firm's marginal revenue is $10 and its marginal cost is $11. Under these circumstances the firm:

Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand decreases from D0 to D1:

Refer to the graph shown. If market price increases from $5.00 per unit to $6.00 per unit, a profit-maximizing perfectly competitive firm will:

Each firm in perfect competition:

In perfect competition, price is equal to marginal revenue.

The marginal cost curve is a competitive firm's supply curve; it shows how many units of output a firm will be willing to sell at different prices.

In a perfectly competitive market, an increase in market demand in a long-run constant-cost industry causes:

Refer to the graph shown. If the market price is P4, the firm will produce:

Suppose cookie sales fall as consumers become more carbohydrate-conscious. If the cookie industry is a constant-cost, perfectly competitive industry, this decline in market demand will cause market supply to:

Marginal revenue is equal to:

Refer to the graph shown. If this perfectly competitive firm is producing 120 units of output, the market price is equal to:

In a perfectly competitive market:

Refer to the table shown. If the market price is $4, a perfectly competitive profit-maximizing firm will produce: Quantity Marginal Cast 1 \ 3 2 5 3 7 4 9

Suppose that the firms in the perfectly competitive oat industry currently are receiving a price of $2 per bushel for their product. The minimum possible average total cost of producing oats in the long run is $1 per bushel. It follows that:

Refer to the graph shown. To maximize profit, this firm should produce:

If a perfectly competitive industry is in long-run equilibrium, the price of the product equals the minimum of:

Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand is D0, the:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Filters

Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand decreases from D₀ to D₁:

Refer to the graph shown. If the market price is P₄, the firm will produce:

Refer to the graphs shown, which depict a perfectly competitive market and firm. If market demand is D₀, the: