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

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 3

Many fast-food restaurants have begun offering value meals with fruit or salad instead of French fries. If consumers find this idea attractive, the market demand for potatoes will most likely:

Accepted Answer

A) decrease, which may result in short-run losses for potato growers. 
B) decrease but have no effect on the profits earned by potato growers in the short run. 
C) increase, which may result in short-run losses for potato growers. 
D) increase but have no effect on the profits earned by potato growers in the short run. 
A) decrease, which may result in short-run losses for potato growers. 
B) decrease but have no effect on the profits earned by potato growers in the short run. 
C) increase, which may result in short-run losses for potato growers. 
D) increase but have no effect on the profits earned by potato growers in the short run.

Question 4

A perfectly competitive firm will be profitable if price at the profit-maximizing quantity is above:

Accepted Answer

A) MC. 
B) AVC. 
C) ATC. 
D) AFC. 
A) MC. 
B) AVC. 
C) ATC. 
D) AFC.

Question 5

Firms know that when they enter a profitable industry,profits will eventually be eliminated by competition.Why would a firm want to enter such an industry?

Accepted Answer

The decision to enter a profitable indus

Question 6

In a perfectly competitive market, market prices are determined by:

Accepted Answer

A) individual producers. 
B) market supply and market demand. 
C) the entrepreneur. 
D) individual consumers. 
A) individual producers. 
B) market supply and market demand. 
C) the entrepreneur. 
D) individual consumers.

Question 7

Which of the necessary conditions for perfect competition are least likely to be satisfied in the real world? Explain your selections.

Accepted Answer

(Here are some possible answers. )
The l

Question 8

In a perfectly competitive market, many firms produce many different varieties of the same product.

Accepted Answer

A) True 
 B)False

Question 9

A perfectly competitive firm facing a price of $10 decides to produce 100 units. If its marginal cost of producing the last unit is $12 and it is seeking to maximize profit, the firm should:

Accepted Answer

A) produce more units. 
B) produce fewer units. 
C) continue producing 100 units. 
D) shut down. 
A) produce more units. 
B) produce fewer units. 
C) continue producing 100 units. 
D) shut down.

Question 10

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

Accepted Answer

A) market price rises from P0 to P1 and the firm's output rises from q0 to q1. 
B) market price rises from P0 to P1 and the firm's output rises from Q0 to Q1. 
C) market price remains at P0 because perfectly competitive firms can't earn positive economic profit. 
D) the firm's output remains at q0 because perfectly competitive firms can't earn positive economic profit. 
A) market price rises from P0 to P1 and the firm's output rises from q0 to q1. 
B) market price rises from P0 to P1 and the firm's output rises from Q0 to Q1. 
C) market price remains at P0 because perfectly competitive firms can't earn positive economic profit. 
D) the firm's output remains at q0 because perfectly competitive firms can't earn positive economic profit.

Question 11

An assumption of a competitive market is that both buyers and sellers are price takers. When we go to the mall to shop for clothing or to the grocery to buy food, what do we usually observe?

Accepted Answer

A) Both buyers and sellers are usually price takers. 
B) Buyers are often price takers, but sellers are usually price makers. 
C) Buyers are often price makers, but sellers are usually price takers. 
D) Both buyers and sellers are usually price makers. 
A) Both buyers and sellers are usually price takers. 
B) Buyers are often price takers, but sellers are usually price makers. 
C) Buyers are often price makers, but sellers are usually price takers. 
D) Both buyers and sellers are usually price makers.

Question 12

Refer to the table shown. If the market price is $6, 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 13

In the wake of the 2008 recession, the electronics retailer Circuit City closed its stores. If we assume this was a short-run decision, the most likely explanation for it is that the price of a typical product sold at Circuit City stores was:

Accepted Answer

A) greater than the average total cost of producing the toy. 
B) equal to the average total cost of producing the toy. 
C) less than the average total cost of producing the toy but greater than the average variable cost. 
D) less than the average variable cost of producing the toy. 
A) greater than the average total cost of producing the toy. 
B) equal to the average total cost of producing the toy. 
C) less than the average total cost of producing the toy but greater than the average variable cost. 
D) less than the average variable cost of producing the toy.

Question 14

Refer to the graph shown. If the firm increases output from 30 to 40, total revenue will increase:

Accepted Answer

A) more than total cost, and so profit will increase. 
B) more than total cost, and so profit will decrease. 
C) less than total cost, and so profit will increase. 
D) less than total cost, and so profit will decrease. 
A) more than total cost, and so profit will increase. 
B) more than total cost, and so profit will decrease. 
C) less than total cost, and so profit will increase. 
D) less than total cost, and so profit will decrease.

Question 15

In a perfectly competitive constant-cost industry:

Accepted Answer

A) factor prices do not change as industry output increases. 
B) factor prices rise as industry output increases. 
C) factor prices fall as industry output increases. 
D) there is no way to predict what will happen to factor prices as industry output increases. 
A) factor prices do not change as industry output increases. 
B) factor prices rise as industry output increases. 
C) factor prices fall as industry output increases. 
D) there is no way to predict what will happen to factor prices as industry output increases.

Question 16

Using a supply and demand and a typical firm diagram,illustrate the impact of a flood on the market for contractors once the flood has receded.NOTE: Assume the market was perfectly competitive and in a long-run equilibrium position before the flood.Also assume that construction is a constant-cost industry.

Accepted Answer

The diagrams: @#IMG-DLM& Initially the market is i

Question 17

The supply curve of a perfectly competitive firm is:

Accepted Answer

A) the marginal cost curve only if price exceeds average variable cost. 
B) the marginal cost curve only if price exceeds average total cost. 
C) the average total cost curve only if price exceeds average variable cost. 
D) nonexistent. 
A) the marginal cost curve only if price exceeds average variable cost. 
B) the marginal cost curve only if price exceeds average total cost. 
C) the average total cost curve only if price exceeds average variable cost. 
D) nonexistent.

Question 18

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 19

Suppose that the marginal cost of producing cottonseed meal is $170 per ton. If the cottonseed oil industry is perfectly competitive and in long-run equilibrium, the average total cost of producing cottonseed oil:

Accepted Answer

A) is less than $170 per ton. 
B) is equal to $170 per ton. 
C) is greater than $170 per ton. 
D) cannot be determined. 
A) is less than $170 per ton. 
B) is equal to $170 per ton. 
C) is greater than $170 per ton. 
D) cannot be determined.

Question 20

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.

Exam 13: Perfect Competition

In a perfectly competitive market, a decrease 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:

Many fast-food restaurants have begun offering value meals with fruit or salad instead of French fries. If consumers find this idea attractive, the market demand for potatoes will most likely:

A perfectly competitive firm will be profitable if price at the profit-maximizing quantity is above:

Firms know that when they enter a profitable industry,profits will eventually be eliminated by competition.Why would a firm want to enter such an industry?

In a perfectly competitive market, market prices are determined by:

Which of the necessary conditions for perfect competition are least likely to be satisfied in the real world? Explain your selections.

In a perfectly competitive market, many firms produce many different varieties of the same product.

A perfectly competitive firm facing a price of $10 decides to produce 100 units. If its marginal cost of producing the last unit is $12 and it is seeking to maximize profit, the firm should:

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

An assumption of a competitive market is that both buyers and sellers are price takers. When we go to the mall to shop for clothing or to the grocery to buy food, what do we usually observe?

Refer to the table shown. If the market price is $6, a perfectly competitive profit-maximizing firm will produce: Quantity Marginal Cast 1 \ 3 2 5 3 7 4 9

In the wake of the 2008 recession, the electronics retailer Circuit City closed its stores. If we assume this was a short-run decision, the most likely explanation for it is that the price of a typical product sold at Circuit City stores was:

Refer to the graph shown. If the firm increases output from 30 to 40, total revenue will increase:

In a perfectly competitive constant-cost industry:

The supply curve of a perfectly competitive firm is:

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

Suppose that the marginal cost of producing cottonseed meal is $170 per ton. If the cottonseed oil industry is perfectly competitive and in long-run equilibrium, the average total cost of producing cottonseed oil:

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:

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

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

Filters

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 increases from D₀ to D₁, in the short run:

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