Question 1

For a perfectly competitive firm,

Accepted Answer

A) the marginal revenue curve and the demand curve are the same. 
B) the marginal revenue curve and the marginal cost curve are the same. 
C) the supply curve and the marginal revenue curve are the same. 
D) the demand curve and the marginal cost curve are the same. 
E) none of the above 
A) the marginal revenue curve and the demand curve are the same. 
B) the marginal revenue curve and the marginal cost curve are the same. 
C) the supply curve and the marginal revenue curve are the same. 
D) the demand curve and the marginal cost curve are the same. 
E) none of the above A

Question 2

Ultimately, market supply curves are upward sloping because of

Accepted Answer

A) the law of diminishing marginal returns. 
B) economies of scale. 
C) average fixed cost falling continually as more output is produced. 
D) the law of the short run marginal cost curve. 
E) specialization. 
A) the law of diminishing marginal returns. 
B) economies of scale. 
C) average fixed cost falling continually as more output is produced. 
D) the law of the short run marginal cost curve. 
E) specialization. A

Question 3

If an industry is in long-run competitive equilibrium and experiences a decrease in demand, then as a result the equilibrium price will __________, which will cause the representative firm's __________ curve to shift downward and some firms will __________ the industry.

Accepted Answer

A) rise; marginal cost; enter 
B) fall; marginal cost; enter 
C) rise; marginal revenue; enter 
D) fall; demand; exit 
E) fall; marginal cost; exit 
A) rise; marginal cost; enter 
B) fall; marginal cost; enter 
C) rise; marginal revenue; enter 
D) fall; demand; exit 
E) fall; marginal cost; exit D

Question 4

If a firm is a price taker, its demand curve is

Accepted Answer

A) downward sloping. 
B) upward sloping. 
C) perfectly inelastic. 
D) perfectly elastic. 
A) downward sloping. 
B) upward sloping. 
C) perfectly inelastic. 
D) perfectly elastic.

Question 5

For the perfectly competitive firm, the demand curve and the marginal revenue curve are one and the same.

Accepted Answer

A) True 
 B)False

Question 6

In the theory of perfect competition, the assumption of easy entry into and exit from the market implies

Accepted Answer

A) positive economic profits in the long run. 
B) losses in the long-run equilibrium. 
C) zero economic profits in the long run. 
D) zero economic profits in both the short run and the long run. 
E) positive economic profits in both the short run and the long run. 
A) positive economic profits in the long run. 
B) losses in the long-run equilibrium. 
C) zero economic profits in the long run. 
D) zero economic profits in both the short run and the long run. 
E) positive economic profits in both the short run and the long run.

Question 7

In the theory of perfect competition, the assumptions of many buyers and sellers, the production of a homogeneous product, and the possession of all relevant information by buyers and sellers imply that the perfectly competitive firm

Accepted Answer

A) sets the price it wishes. 
B) has a demand curve that is downward sloping. 
C) has a demand curve that is perfectly elastic. 
D) a and b 
E) a and c 
A) sets the price it wishes. 
B) has a demand curve that is downward sloping. 
C) has a demand curve that is perfectly elastic. 
D) a and b 
E) a and c

Question 8

For a perfectly competitive firm, MR = MC at 250 units of output. At 250 units, ATC is greater than AVC. It necessarily follows that

Accepted Answer

A) the firm should shut down its operation. 
B) the marginal cost curve must have an upward-sloping portion and a downward-sloping portion. 
C) the firm should continue to produce. 
D) b and c 
E) none of the above 
A) the firm should shut down its operation. 
B) the marginal cost curve must have an upward-sloping portion and a downward-sloping portion. 
C) the firm should continue to produce. 
D) b and c 
E) none of the above

Question 9

Which of the following statements is false?

Accepted Answer

A) The perfectly competitive firm's demand curve is horizontal at the market price. 
B) The theory of perfect competition is completely and accurately descriptive of most real-world firms. 
C) If Firm X does not strictly meet all the assumptions of the theory of perfect competition, but behaves as if it does, then the theory of perfect competition is relevant to it. 
D) In perfect competition, the market price is established at the intersection of the market demand and market supply curves. 
A) The perfectly competitive firm's demand curve is horizontal at the market price. 
B) The theory of perfect competition is completely and accurately descriptive of most real-world firms. 
C) If Firm X does not strictly meet all the assumptions of the theory of perfect competition, but behaves as if it does, then the theory of perfect competition is relevant to it. 
D) In perfect competition, the market price is established at the intersection of the market demand and market supply curves.

Question 10

Which of the following statements is false?

Accepted Answer

A) The market demand curve in a perfectly competitive market is downward sloping. 
B) The firm's demand curve in a perfectly competitive market is horizontal. 
C) The firm's demand curve in a perfectly competitive market is perfectly elastic. 
D) Marginal revenue is equal to the change in total revenue divided by the change in quantity of output. 
E) none of the above 
A) The market demand curve in a perfectly competitive market is downward sloping. 
B) The firm's demand curve in a perfectly competitive market is horizontal. 
C) The firm's demand curve in a perfectly competitive market is perfectly elastic. 
D) Marginal revenue is equal to the change in total revenue divided by the change in quantity of output. 
E) none of the above

Question 11

Equilibrium price is $10 in a perfectly competitive market. For a perfectly competitive firm, MR = MC at 1,200 units of output. At 1,200 units, ATC is $23, and AVC is $18. The best policy for this firm is to __________ in the short run. Also, this firm earns __________ of __________ if it produces and sells 1,200 units.

Accepted Answer

A) shut down; losses; $15,600 
B) shut down; losses; $9,600 
C) continue to produce; losses; $15,600 
D) continue to produce; profits; $15,600 
A) shut down; losses; $15,600 
B) shut down; losses; $9,600 
C) continue to produce; losses; $15,600 
D) continue to produce; profits; $15,600

Question 12

A constant-cost industry is characterized by

Accepted Answer

A) an upward-sloping long-run supply curve. 
B) a downward-sloping long-run supply curve. 
C) a perfectly elastic long-run supply curve. 
D) perfectly elastic short-run and long-run supply curves. 
E) a perfectly elastic short-run supply curve and an upward-sloping long-run supply curve. 
A) an upward-sloping long-run supply curve. 
B) a downward-sloping long-run supply curve. 
C) a perfectly elastic long-run supply curve. 
D) perfectly elastic short-run and long-run supply curves. 
E) a perfectly elastic short-run supply curve and an upward-sloping long-run supply curve.

Question 13

Perfectly competitive industries are

Accepted Answer

A) difficult to enter because there are already so many producers in the industry. 
B) not particularly appealing or attractive to enter because there tend to be so many buyers that it is difficult to deal with them. 
C) relatively easy to enter but not so easy to exit from. 
D) a and b 
E) none of the above 
A) difficult to enter because there are already so many producers in the industry. 
B) not particularly appealing or attractive to enter because there tend to be so many buyers that it is difficult to deal with them. 
C) relatively easy to enter but not so easy to exit from. 
D) a and b 
E) none of the above

Question 14

In the short-run, if P < ATC, a perfectly competitive firm should

Accepted Answer

A) increase production to the output level at which P = ATC. 
B) continue producing at a loss. 
C) shut down. 
D) continue producing at a profit. 
E) There is not enough information to answer the question. 
A) increase production to the output level at which P = ATC. 
B) continue producing at a loss. 
C) shut down. 
D) continue producing at a profit. 
E) There is not enough information to answer the question.

Question 15

Which of the following is inconsistent with long-run industry equilibrium?

Accepted Answer

A) upward-sloping marginal cost curves for all of the firms in the industry 
B) zero economic profits 
C) P = minimum ATC 
D) SRATC = LRATC 
E) none of the above 
A) upward-sloping marginal cost curves for all of the firms in the industry 
B) zero economic profits 
C) P = minimum ATC 
D) SRATC = LRATC 
E) none of the above

Question 16

The horizontal demand curve faced by the perfectly competitive firm implies that the firm can sell an infinite amount of the product at the equilibrium price.

Accepted Answer

A) True 
 B)False

Question 17

As firms exit an industry, the industry supply curve shifts __________ and the equilibrium price __________ until long-run competitive equilibrium is established and the surviving firms are earning __________ economic profits.

Accepted Answer

A) leftward; rises; zero 
B) leftward; falls; positive 
C) leftward; rises; positive 
D) rightward; falls; negative 
E) rightward; rises; positive 
A) leftward; rises; zero 
B) leftward; falls; positive 
C) leftward; rises; positive 
D) rightward; falls; negative 
E) rightward; rises; positive

Question 18

Exhibit 22-6
​
  
-Refer to Exhibit 22-6. A perfectly competitive firm operating in the market depicted in graph (1) faces the demand curve depicted in

Accepted Answer

A) graph (1)-the same as the market demand curve. 
B) graph (2). 
C) graph (3). 
D) graph (4). 
A) graph (1)-the same as the market demand curve. 
B) graph (2). 
C) graph (3). 
D) graph (4).

Question 19

Exhibit 22-8
​
  
-Refer to Exhibit 22-8. What is the total variable cost of firm A at the profit-maximizing (or loss-minimizing) level of production?

Accepted Answer

A) $300 
B) $700 
C) $1,000 
D) $400 
A) $300 
B) $700 
C) $1,000 
D) $400

Question 20

Exhibit 22-10
   ​
-Refer to Exhibit 22-10. Is it possible for this firm to produce "too much" output (in terms of profitability)?

Accepted Answer

A) Yes, any quantity above 5 units is too much output. 
B) Yes, any quantity above 6 units is too much output. 
C) Yes, any quantity above 7 units is too much output. 
D) No, it is not possible for this firm to produce too much output. 
A) Yes, any quantity above 5 units is too much output. 
B) Yes, any quantity above 6 units is too much output. 
C) Yes, any quantity above 7 units is too much output. 
D) No, it is not possible for this firm to produce too much output.

Exam 22: Perfect Competition

For a perfectly competitive firm,

Ultimately, market supply curves are upward sloping because of

If an industry is in long-run competitive equilibrium and experiences a decrease in demand, then as a result the equilibrium price will __________, which will cause the representative firm's __________ curve to shift downward and some firms will __________ the industry.

If a firm is a price taker, its demand curve is

For the perfectly competitive firm, the demand curve and the marginal revenue curve are one and the same.

In the theory of perfect competition, the assumption of easy entry into and exit from the market implies

In the theory of perfect competition, the assumptions of many buyers and sellers, the production of a homogeneous product, and the possession of all relevant information by buyers and sellers imply that the perfectly competitive firm

For a perfectly competitive firm, MR = MC at 250 units of output. At 250 units, ATC is greater than AVC. It necessarily follows that

Which of the following statements is false?

Which of the following statements is false?

A constant-cost industry is characterized by

Perfectly competitive industries are

In the short-run, if P < ATC, a perfectly competitive firm should

Which of the following is inconsistent with long-run industry equilibrium?

The horizontal demand curve faced by the perfectly competitive firm implies that the firm can sell an infinite amount of the product at the equilibrium price.

As firms exit an industry, the industry supply curve shifts __________ and the equilibrium price __________ until long-run competitive equilibrium is established and the surviving firms are earning __________ economic profits.

Exhibit 22-6 ​ -Refer to Exhibit 22-6. A perfectly competitive firm operating in the market depicted in graph (1) faces the demand curve depicted in

Exhibit 22-8 ​ -Refer to Exhibit 22-8. What is the total variable cost of firm A at the profit-maximizing (or loss-minimizing) level of production?

Exhibit 22-10 ​ -Refer to Exhibit 22-10. Is it possible for this firm to produce "too much" output (in terms of profitability)?

What Economics Is About

Production Possibilities Frontier Framework

Supply and Demand Theory

Prices Free Controlled and Relative

Supply Demand and Price Applications

Macroeconomic Measurements Part I Prices and Unemployment

Macroeconomic Measurements Part II Gdp and Real Gdp

Aggregate Demand and Aggregate Supply

Classical Macroeconomics and the Self Regulating Economy

Keynesian Macroeconomics and Economic Instability a Critique of the Self Regulating Economy

Fiscal Policy and the Federal Budget

Money Banking and the Financial System

The Federal Reserve System

Money and the Economy

Monetary Policy

Expectations Theory and the Economy

Economic Growth Resources Technology Ideas and Institutions

Debates in Macroeconomics Over the Role and Effects of Government

Elasticity

Consumer Choice and Behavioral Economics

Production and Costs

Monopoly

Monopolistic Competition Oligopoly and Game Theory

Government and Product Markets Antitrust and Regulation

Factor Markets With Emphasis on the Labor Market

Wages Unions and Labor

The Distribution of Income and Poverty

Interest Rent and Profit

Market Failure Externalities Public Goods and Asymmetric Information

Public Choice and Special Interest Group Politics

Building Theories to Explain Everyday Life From Observations to Questions to Theories to Predictions

International Trade

International Finance

The Economic Case for and Against Government Five Topics Considered

Stocks Bonds Futures and Options

Filters

If an industry is in long-run competitive equilibrium and experiences a decrease in demand, then as a result the equilibrium price will , which will cause the representative firm's curve to shift downward and some firms will __ the industry.

As firms exit an industry, the industry supply curve shifts and the equilibrium price until long-run competitive equilibrium is established and the surviving firms are earning __ economic profits.

Exhibit 22-6 -Refer to Exhibit 22-6. A perfectly competitive firm operating in the market depicted in graph (1) faces the demand curve depicted in

Exhibit 22-8 -Refer to Exhibit 22-8. What is the total variable cost of firm A at the profit-maximizing (or loss-minimizing) level of production?

Exhibit 22-10 -Refer to Exhibit 22-10. Is it possible for this firm to produce "too much" output (in terms of profitability)?