Question 1

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

Accepted Answer

A) this market is in long-run equilibrium because the firm is earning positive economic profit. 
B) this market is in long-run equilibrium because the firm is earning zero economic profit. 
C) this market is in short-run equilibrium but not long-run equilibrium. 
D) the firm will raise the price above P0 to increase profit. 
A) this market is in long-run equilibrium because the firm is earning positive economic profit. 
B) this market is in long-run equilibrium because the firm is earning zero economic profit. 
C) this market is in short-run equilibrium but not long-run equilibrium. 
D) the firm will raise the price above P0 to increase profit.

Question 2

Study the graph below and answer the following questions.   (a)Is this firm making profit by producing 500 units in the short run? Why or why not?
(b)What will happen in the long run in this industry?
(c)Will the firm survive in this industry?

Accepted Answer

(a)At 500 units,the price equals SRATC.T

Question 3

Refer to the graph shown. Suppose the market price is $4. At this price, a perfectly competitive firm should:

Accepted Answer

A) continue to produce in the short run but shut down in the long run. 
B) continue to produce in both the short run and the long run. 
C) shut down in the short run but continue production in the long run. 
D) shut down immediately. 
A) continue to produce in the short run but shut down in the long run. 
B) continue to produce in both the short run and the long run. 
C) shut down in the short run but continue production in the long run. 
D) shut down immediately.

Question 4

To maximize profits, a perfectly competitive firm should do all the following except:

Accepted Answer

A) produce until economic profits are maximized. 
B) produce until marginal cost equals price. 
C) produce until marginal revenue equals marginal cost. 
D) produce until per-unit profits are maximized. 
A) produce until economic profits are maximized. 
B) produce until marginal cost equals price. 
C) produce until marginal revenue equals marginal cost. 
D) produce until per-unit profits are maximized.

Question 5

Demonstrate graphically and explain verbally how a perfectly competitive firm's MC curve is its supply curve.

Accepted Answer

The key to the answer is to remember tha

Question 6

Which of the following is one of the necessary conditions for perfect competition?

Accepted Answer

A) Diminishing utility 
B) No barriers to entry 
C) Differentiated products 
D) Indivisible setup costs 
A) Diminishing utility 
B) No barriers to entry 
C) Differentiated products 
D) Indivisible setup costs

Question 7

Some firms,particularly but not exclusively Japanese firms,have historically considered their workers to be lifetime employees.Let's call these firms Type A firms.How would this management attitude affect Type A firms' production decisions during a period of slack demand and falling prices relative to other (Type B)firms?

Accepted Answer

If workers were considered lifetime empl

Question 8

Using the following diagram,demonstrate graphically and explain verbally why any movement away from output level Q0 would decrease the firm's profit.

Accepted Answer

If the firm produces less than Q₀,say at

Question 9

When the electronics retailer Circuit City closed its stores following the 2008 recession, the market supply of electronic goods:

Accepted Answer

A) decreased, causing the market price to fall. 
B) decreased, causing the market price to rise. 
C) increased, causing the market price to fall. 
D) increased, causing the market price to rise. 
A) decreased, causing the market price to fall. 
B) decreased, causing the market price to rise. 
C) increased, causing the market price to fall. 
D) increased, causing the market price to rise.

Question 10

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 11

Consider the following diagram of a representative competitive firm:   Is this a long-run equilibrium situation? If yes,explain why it is.If no,explain what will happen to transform it into a long-run equilibrium situation.

Accepted Answer

The diagram does not show a competitive

Question 12

How does the Internet affect the competitive nature of markets?

Accepted Answer

The Internet makes many markets more clo

Question 13

Suppose there are 200 firms in a perfectly competitive market and each maximizes profit at 120 units of output when market price is $5.00 per unit. One of the points on the market supply curve must be at:

Accepted Answer

A) Price = $5 and Quantity supplied = 320. 
B) Price = $5 and Quantity supplied = 24,000. 
C) Price = $1,000 and Quantity supplied = 320. 
D) Price = $1,000 and Quantity supplied = 24,000. 
A) Price = $5 and Quantity supplied = 320. 
B) Price = $5 and Quantity supplied = 24,000. 
C) Price = $1,000 and Quantity supplied = 320. 
D) Price = $1,000 and Quantity supplied = 24,000.

Question 14

Refer to the graph shown. Assuming that the industry operates under conditions of perfect competition:

Accepted Answer

A) it is currently in equilibrium. 
B) new firms will soon enter the industry. 
C) existing firms will leave the industry. 
D) firms in the industry are earning zero economic profit. 
A) it is currently in equilibrium. 
B) new firms will soon enter the industry. 
C) existing firms will leave the industry. 
D) firms in the industry are earning zero economic profit.

Question 15

Assume that the home construction industry is perfectly competitive and is in long-run competitive equilibrium. It follows that:

Accepted Answer

A) marginal cost equals long-run average total cost. 
B) there will be incentive for new firms to enter the industry. 
C) marginal cost exceeds long-run average total cost. 
D) firms in the industry enjoy economic profits. 
A) marginal cost equals long-run average total cost. 
B) there will be incentive for new firms to enter the industry. 
C) marginal cost exceeds long-run average total cost. 
D) firms in the industry enjoy economic profits.

Question 16

Refer to the graph shown, which depicts a perfectly competitive firm. When it is maximizing profit, the total profit earned by the firm represented is:

Accepted Answer

A) $220. 
B) $275. 
C) $330. 
D) $605. 
A) $220. 
B) $275. 
C) $330. 
D) $605.

Question 17

In determining the supply curve of a perfectly competitive firm,what cost information do you need? Explain.

Accepted Answer

To determine the supply curve of a perfe

Question 18

As long as marginal cost is below marginal revenue, a perfectly competitive firm should:

Accepted Answer

A) increase production. 
B) hold production constant. 
C) decrease production. 
D) reconsider past production decisions. 
A) increase production. 
B) hold production constant. 
C) decrease production. 
D) reconsider past production decisions.

Question 19

In a perfectly competitive market, firms set:

Accepted Answer

A) prices and quantities. 
B) prices but not quantities. 
C) quantities but not prices. 
D) neither prices nor quantities. 
A) prices and quantities. 
B) prices but not quantities. 
C) quantities but not prices. 
D) neither prices nor quantities.

Question 20

A perfectly competitive market is a market in which economic forces operate unimpeded.The six conditions necessary to have a perfectly competitive market are: (1. )Both buyers and sellers are price takers.(2. )The number of firms is large.(3. )There are no barriers to entry.(4. )Firms' products are identical.(5. )There is complete information.And (6. )selling firms are profit maximizing entrepreneurial firms.Discuss any three of these conditions.

Accepted Answer

(Any three

Exam 13: Perfect Competition

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

Study the graph below and answer the following questions. (a)Is this firm making profit by producing 500 units in the short run? Why or why not? (b)What will happen in the long run in this industry? (c)Will the firm survive in this industry?

Refer to the graph shown. Suppose the market price is $4. At this price, a perfectly competitive firm should:

To maximize profits, a perfectly competitive firm should do all the following except:

Demonstrate graphically and explain verbally how a perfectly competitive firm's MC curve is its supply curve.

Which of the following is one of the necessary conditions for perfect competition?

Using the following diagram,demonstrate graphically and explain verbally why any movement away from output level Q0 would decrease the firm's profit.

When the electronics retailer Circuit City closed its stores following the 2008 recession, the market supply of electronic goods:

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

Consider the following diagram of a representative competitive firm: Is this a long-run equilibrium situation? If yes,explain why it is.If no,explain what will happen to transform it into a long-run equilibrium situation.

How does the Internet affect the competitive nature of markets?

Suppose there are 200 firms in a perfectly competitive market and each maximizes profit at 120 units of output when market price is $5.00 per unit. One of the points on the market supply curve must be at:

Refer to the graph shown. Assuming that the industry operates under conditions of perfect competition:

Assume that the home construction industry is perfectly competitive and is in long-run competitive equilibrium. It follows that:

Refer to the graph shown, which depicts a perfectly competitive firm. When it is maximizing profit, the total profit earned by the firm represented is:

In determining the supply curve of a perfectly competitive firm,what cost information do you need? Explain.

As long as marginal cost is below marginal revenue, a perfectly competitive firm should:

In a perfectly competitive market, firms set:

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

Using the following diagram,demonstrate graphically and explain verbally why any movement away from output level Q₀ would decrease the firm's profit.