Question 1

Barriers to entry:

Accepted Answer

A) do not affect the number of firms in an industry. 
B) exist only in perfectly competitive markets. 
C) restrict the number of firms in an industry. 
D) limit output in an industry. 
A) do not affect the number of firms in an industry. 
B) exist only in perfectly competitive markets. 
C) restrict the number of firms in an industry. 
D) limit output in an industry.

Question 2

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 3

Refer to the graph shown. What distance represents average profits?

Accepted Answer

A) AB 
B) BF 
C) AF 
D) FW 
A) AB 
B) BF 
C) AF 
D) FW

Question 4

How does a market supply curve relate to a firm's supply curve?

Accepted Answer

A market supply curve is the h

Question 5

Demonstrate graphically and explain verbally a perfectly competitive firms' long run equilibrium situation (be sure to show the long-run average total cost curve,short-run average total cost curve,marginal curve,and marginal revenue curve).

Accepted Answer

The diagram: @#IMG-DLM& The key to the picture is

Question 6

Explain how the long-run market supply curve for a perfectly competitive industry depends upon factor prices.

Accepted Answer

The shape (slope)of the long-run market

Question 7

Suppose there are 1,000 firms in a perfectly competitive market and each maximizes profit at 25 units of output when market price is $1.00 per unit. One of the points on the market supply curve must be at:

Accepted Answer

A) Price = $25 and Quantity supplied = 125. 
B) Price = $25 and Quantity supplied = 24,000. 
C) Price = $1 and Quantity supplied = 125. 
D) Price = $1 and Quantity supplied = 25,000. 
A) Price = $25 and Quantity supplied = 125. 
B) Price = $25 and Quantity supplied = 24,000. 
C) Price = $1 and Quantity supplied = 125. 
D) Price = $1 and Quantity supplied = 25,000.

Question 8

Consider the following table of numbers,which represents demand and cost conditions for a competitive firm.The price of the product this firm produces is $50. $$\begin{array} { | c | c | c | c | c | c | c | c | } 
\hline \text { Q } & \text { TFC } & \text { MC } & \text { TVC } & \text { TC } & \text { TR } & \text { MR } & \text { Total Profit } \
\hline 0 & 30 & 0 & & & & & \
\hline 1 & & 20 & & & & & \
\hline 2 & & 30 & & & & & \
\hline 3 & & 40 & & & & & \
\hline 4 & & 50 & & & & & \
\hline 5 & & 60 & & & & & \
\hline 6 & & 70 & & & & & \
\hline
\end{array}$$ (a)Fill in the missing values.
(b)What level of output should the firm produces? Why?
(c)What do you predict will happen to the number of firms in the industry? Why?
(d)What do you predict will happen to supply and the market price?
(e)At which price must the firm shut down?

Accepted Answer

(a)The completed table: \[\begin{array}

Question 9

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 10

In the short run when the number of firms in the market is fixed, the market supply curve is just the horizontal sum of all the firms' marginal cost curves.

Accepted Answer

A) True 
 B)False

Question 11

Refer to the graph shown. The supply curve for the perfectly competitive firm is best represented by the segment:

Accepted Answer

A) AB. 
B) BD. 
C) CE. 
D) DE. 
A) AB. 
B) BD. 
C) CE. 
D) DE.

Question 12

Refer to the graphs shown, which depict a perfectly competitive market and firm in a constant-cost industry. If market demand decreases from D0 to D1, in the long run:

Accepted Answer

A) new firms will enter this market and the price will return to P0. 
B) new firms will enter this market and the price will remain at P1. 
C) some firms will exit this market and the price will return to P0. 
D) some firms will exit this market and the price will remain at P1. 
A) new firms will enter this market and the price will return to P0. 
B) new firms will enter this market and the price will remain at P1. 
C) some firms will exit this market and the price will return to P0. 
D) some firms will exit this market and the price will remain at P1.

Question 13

Refer to the graph shown, which depicts a perfectly competitive firm. If the price of the product is $8 and the firm maximizes profit:

Accepted Answer

A) the firm will earn economic profits of more than $330 per day. 
B) average cost of the product will be at the minimum possible level. 
C) output will be 100 units per day. 
D) the industry will be in long-run equilibrium. 
A) the firm will earn economic profits of more than $330 per day. 
B) average cost of the product will be at the minimum possible level. 
C) output will be 100 units per day. 
D) the industry will be in long-run equilibrium.

Question 14

How would an economist determine graphically the output and profit of a perfect competitor?

Accepted Answer

The P = MR = MC condition tells us how m

Question 15

Refer to the following graphs.   Which graph depicts a perfectly competitive firm that will minimize short-run losses by producing zero output?

Accepted Answer

A) Graph I 
B) Graph II 
C) Graph III 
D) Graph IV 
A) Graph I 
B) Graph II 
C) Graph III 
D) Graph IV

Question 16

In a perfectly competitive market, economic forces are controlled by government policy makers.

Accepted Answer

A) True 
 B)False

Question 17

If the long-run market supply curve is perfectly elastic, a fall in demand will cause the final equilibrium to be at:

Accepted Answer

A) the same price but a lower output. 
B) a lower price and a lower output. 
C) a lower price but the same output. 
D) the same price and the same output. 
A) the same price but a lower output. 
B) a lower price and a lower output. 
C) a lower price but the same output. 
D) the same price and the same output.

Question 18

A perfectly competitive firm facing a price of $50 decides to produce 500 widgets. Its marginal cost of producing the last widget is $50. If the firm's goal is maximize profit, it should:

Accepted Answer

A) produce more widgets. 
B) produce fewer widgets. 
C) continue producing 500 widgets. 
D) shut down. 
A) produce more widgets. 
B) produce fewer widgets. 
C) continue producing 500 widgets. 
D) shut down.

Question 19

Total profit is maximized at the output level at which the:

Accepted Answer

A) vertical distance between the total revenue curve and the total cost curve is maximized. 
B) total cost and total revenue curves intersect. 
C) area between the total revenue and total cost curves is greatest. 
D) vertical distance between the total revenue and total cost curves is minimized. 
A) vertical distance between the total revenue curve and the total cost curve is maximized. 
B) total cost and total revenue curves intersect. 
C) area between the total revenue and total cost curves is greatest. 
D) vertical distance between the total revenue and total cost curves is minimized.

Question 20

Refer to the graph shown. If the firm increases output from 50 to 60, 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.

Exam 13: Perfect Competition

Barriers to entry:

Marginal revenue is equal to:

Refer to the graph shown. What distance represents average profits?

How does a market supply curve relate to a firm's supply curve?

Demonstrate graphically and explain verbally a perfectly competitive firms' long run equilibrium situation (be sure to show the long-run average total cost curve,short-run average total cost curve,marginal curve,and marginal revenue curve).

Explain how the long-run market supply curve for a perfectly competitive industry depends upon factor prices.

Suppose there are 1,000 firms in a perfectly competitive market and each maximizes profit at 25 units of output when market price is $1.00 per unit. One of the points on the market supply curve must be at:

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

In the short run when the number of firms in the market is fixed, the market supply curve is just the horizontal sum of all the firms' marginal cost curves.

Refer to the graph shown. The supply curve for the perfectly competitive firm is best represented by the segment:

Refer to the graphs shown, which depict a perfectly competitive market and firm in a constant-cost industry. If market demand decreases from D0 to D1, in the long run:

Refer to the graph shown, which depicts a perfectly competitive firm. If the price of the product is $8 and the firm maximizes profit:

How would an economist determine graphically the output and profit of a perfect competitor?

Refer to the following graphs. Which graph depicts a perfectly competitive firm that will minimize short-run losses by producing zero output?

In a perfectly competitive market, economic forces are controlled by government policy makers.

If the long-run market supply curve is perfectly elastic, a fall in demand will cause the final equilibrium to be at:

A perfectly competitive firm facing a price of $50 decides to produce 500 widgets. Its marginal cost of producing the last widget is $50. If the firm's goal is maximize profit, it should:

Total profit is maximized at the output level at which the:

Refer to the graph shown. If the firm increases output from 50 to 60, total revenue will increase:

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 in a constant-cost industry. If market demand decreases from D₀ to D₁, in the long run: