Question 1

Because only competitive firms are price takers, only competitive firms have supply curves.

Accepted Answer

A) True 
 B)False

Question 2

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

Accepted Answer

A) an increase in quantity, a decrease in price, and no change in profit in the long run. 
B) an increase in price, quantity, and profit in the long run. 
C) an increase in quantity, no change in price, and no change in profit in the long run. 
D) a decrease in price, a decrease in quantity, and a decrease in profit in the long run. 
A) an increase in quantity, a decrease in price, and no change in profit in the long run. 
B) an increase in price, quantity, and profit in the long run. 
C) an increase in quantity, no change in price, and no change in profit in the long run. 
D) a decrease in price, a decrease in quantity, and a decrease in profit in the long run.

Question 3

The American Widget Corporation (AWC)is a profit-maximizing and perfectly competitive firm that is currently experiencing a loss.However,the market price of widgets is expected to increase in the near future.The company's vice-president,Alan R.("Big Tuna")Burns,has recommended against increasing output in response to a higher price for widgets.His argument is that the marginal cost of the additional units of output will increase,and these higher costs will worsen AWC's losses.Evaluate this argument using an appropriate picture.

Accepted Answer

The argument is incorrect.Initially pric

Question 4

Perfectly competitive firms:

Accepted Answer

A) are price takers, since they are not large enough to influence the market price. 
B) are individually able to influence the market price. 
C) will succeed by charging a price higher than that charged by the rest of the market. 
D) can influence the prices of other firms in the same industry by altering their own prices. 
A) are price takers, since they are not large enough to influence the market price. 
B) are individually able to influence the market price. 
C) will succeed by charging a price higher than that charged by the rest of the market. 
D) can influence the prices of other firms in the same industry by altering their own prices.

Question 5

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 6

Refer to the graph shown, which depicts a perfectly competitive firm. If the price of the product is $3:

Accepted Answer

A) new firms will enter the industry. 
B) the firm will just cover its opportunity cost of production. 
C) the industry will be in long-run equilibrium. 
D) the firm may continue to operate in the short run but will exit the industry in the long run. 
A) new firms will enter the industry. 
B) the firm will just cover its opportunity cost of production. 
C) the industry will be in long-run equilibrium. 
D) the firm may continue to operate in the short run but will exit the industry in the long run.

Question 7

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 8

Assume the smart watch industry is a perfectly competitive industry that uses a specialized input. If this industry experiences an increase in demand, we might expect that in the long run:

Accepted Answer

A) both input and output prices will increase. 
B) only input prices will increase. 
C) only output prices will increase. 
D) neither input nor output prices will increase. 
A) both input and output prices will increase. 
B) only input prices will increase. 
C) only output prices will increase. 
D) neither input nor output prices will increase.

Question 9

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 10

Refer to the graph shown. If the firm increases output from 40 to 50, 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

Because only competitive firms are price takers, only competitive firms have supply curves.

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

Perfectly competitive firms:

Each firm in perfect competition:

Refer to the graph shown, which depicts a perfectly competitive firm. If the price of the product is $3:

In a perfectly competitive market:

Assume the smart watch industry is a perfectly competitive industry that uses a specialized input. If this industry experiences an increase in demand, we might expect that in the long run:

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

Refer to the graph shown. If the firm increases output from 40 to 50, 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. If market demand is D₀, the: