Question 1

The long-run industry supply curve is the graphic representation of the quantity of output that the industry is prepared to

Accepted Answer

A) supply at different prices after the entry and exit of firms is completed. 
B) supply at a single price after the entry and exit of firms is completed. 
C) purchase at different prices after the entry and exit of firms is completed. 
D) purchase at different prices after the entry of firms is completed. 
E) supply at different prices after the exit of firms is completed. 
A) supply at different prices after the entry and exit of firms is completed. 
B) supply at a single price after the entry and exit of firms is completed. 
C) purchase at different prices after the entry and exit of firms is completed. 
D) purchase at different prices after the entry of firms is completed. 
E) supply at different prices after the exit of firms is completed.

Question 2

Which of the following statements is false?

Accepted Answer

A) If a perfectly competitive firm produces the quantity of output at which MR = MC, it follows that the firm may or may not be earning a profit. 
B) The firm's supply curve is that portion of its AVC curve that lies above its MC curve. 
C) If price is above ATC at the quantity of output at which MR = MC, the firm will be earning a profit. 
D) In long-run competitive equilibrium, price is equal to marginal cost. 
A) If a perfectly competitive firm produces the quantity of output at which MR = MC, it follows that the firm may or may not be earning a profit. 
B) The firm's supply curve is that portion of its AVC curve that lies above its MC curve. 
C) If price is above ATC at the quantity of output at which MR = MC, the firm will be earning a profit. 
D) In long-run competitive equilibrium, price is equal to marginal cost.

Question 3

In long-run competitive equilibrium, the market equilibrium price equals

Accepted Answer

A) marginal cost. 
B) short-run average total cost. 
C) long-run average total cost. 
D) a and c 
E) a, b, and c 
A) marginal cost. 
B) short-run average total cost. 
C) long-run average total cost. 
D) a and c 
E) a, b, and c

Question 4

In the short run, the best policy for a perfectly competitive firm is to

Accepted Answer

A) shut down its operation if price ever falls below average total cost. 
B) produce and sell its product as long as price is greater than average variable cost. 
C) shut down its operation if price falls between average total cost and average variable cost. 
D) a and c 
E) none of the above 
A) shut down its operation if price ever falls below average total cost. 
B) produce and sell its product as long as price is greater than average variable cost. 
C) shut down its operation if price falls between average total cost and average variable cost. 
D) a and c 
E) none of the above

Question 5

Popular online publications that have no close substitutes will be more likely to be able to charge for those publications than will a local newspaper.
​

Accepted Answer

A) True 
 B)False

Question 6

Assume that a decreasing-cost industry experiences an increase in demand. In the short run, this will

Accepted Answer

A) lead to a price increase. 
B) lead to a price decrease. 
C) have no influence on price. 
D) a or b, depending on the marginal cost curve 
A) lead to a price increase. 
B) lead to a price decrease. 
C) have no influence on price. 
D) a or b, depending on the marginal cost curve

Question 7

If MR > MC, then

Accepted Answer

A) profits are being maximized. 
B) the firm is producing too much of the good to be maximizing profits. 
C) the firm can increase its profits (or minimize its losses) by increasing output. 
D) the firm must be incurring losses. 
A) profits are being maximized. 
B) the firm is producing too much of the good to be maximizing profits. 
C) the firm can increase its profits (or minimize its losses) by increasing output. 
D) the firm must be incurring losses.

Question 8

Exhibit 22-3
​
   ​
-Refer to Exhibit 22-3. What quantity of output should the profit-maximizing firm produce?

Accepted Answer

A) 41 units 
B) 42 units 
C) 44 units 
D) 45 units 
E) 46 units 
A) 41 units 
B) 42 units 
C) 44 units 
D) 45 units 
E) 46 units

Question 9

A perfectly competitive firm can produce its current level of output at an average total cost of $10 and a marginal cost of $8. If the market price of the product is currently $8, what should the firm do?

Accepted Answer

A) The firm should definitely shut down since average total cost exceeds price. 
B) The answer depends upon the relationship between price and average variable cost.The firm should shut down if average variable cost is $8 or greater, but the firm should continue to produce the current level of output if average variable cost is less than $8. 
C) The firm should increase production in order to increase profit. 
D) The firm should continue to produce, but they should decrease production in order to increase profit. 
A) The firm should definitely shut down since average total cost exceeds price. 
B) The answer depends upon the relationship between price and average variable cost.The firm should shut down if average variable cost is $8 or greater, but the firm should continue to produce the current level of output if average variable cost is less than $8. 
C) The firm should increase production in order to increase profit. 
D) The firm should continue to produce, but they should decrease production in order to increase profit.

Question 10

Assume a constant-cost industry that is initially in long-run competitive equilibrium. An increase in demand will cause a(n) __________ in prices and profits, and as a result, firms will __________ the industry, causing the market supply curve to shift __________, which, in turn, will eventually cause the equilibrium price to be __________ before.

Accepted Answer

A) decrease; exit; leftward; lower than 
B) increase; enter; rightward; higher than 
C) decrease; exit; rightward; higher than 
D) increase; enter; rightward; the same as 
E) increase; exit; leftward; lower than 
A) decrease; exit; leftward; lower than 
B) increase; enter; rightward; higher than 
C) decrease; exit; rightward; higher than 
D) increase; enter; rightward; the same as 
E) increase; exit; leftward; lower than

Question 11

Exhibit 22-8
​
  
-Refer to Exhibit 22-8. Which of the following is true in the short run of firms A and B, two perfectly competitive firms?

Accepted Answer

A) Both firm A and firm B will continue to produce in the short run. 
B) Firm A will continue to produce and firm B will shut down. 
C) Firm A will shut down and firm B will continue to produce. 
D) Firm A will continue to produce in the short run and shut down in the long run. 
E) a and d 
A) Both firm A and firm B will continue to produce in the short run. 
B) Firm A will continue to produce and firm B will shut down. 
C) Firm A will shut down and firm B will continue to produce. 
D) Firm A will continue to produce in the short run and shut down in the long run. 
E) a and d

Question 12

Exhibit 22-1
​
   ​
-Refer to Exhibit 22-1. The data in this table are relevant to a perfectly competitive firm because

Accepted Answer

A) its total revenue is different at different levels of quantities sold. 
B) its total revenue is the same at all levels of quantities sold. 
C) it doesn't have to lower price to sell additional units of the product. 
D) marginal revenue is greater than price. 
A) its total revenue is different at different levels of quantities sold. 
B) its total revenue is the same at all levels of quantities sold. 
C) it doesn't have to lower price to sell additional units of the product. 
D) marginal revenue is greater than price.

Question 13

Which of the following is not a characteristic of perfect competition?

Accepted Answer

A) buyers and sellers having no influence on price 
B) there are no barriers to entry or exit 
C) sellers produce and sell a heterogeneous product 
D) buyers and sellers have access to all relevant information 
E) none of the above 
A) buyers and sellers having no influence on price 
B) there are no barriers to entry or exit 
C) sellers produce and sell a heterogeneous product 
D) buyers and sellers have access to all relevant information 
E) none of the above

Question 14

Why must profits be zero in long-run competitive equilibrium?

Accepted Answer

A) If profits are not zero, firms will enter or exit the industry. 
B) If profits are not zero, firms will produce higher-quality goods. 
C) If profits are not zero, marginal revenue will rise. 
D) If profits are not zero, marginal cost will rise. 
A) If profits are not zero, firms will enter or exit the industry. 
B) If profits are not zero, firms will produce higher-quality goods. 
C) If profits are not zero, marginal revenue will rise. 
D) If profits are not zero, marginal cost will rise.

Question 15

When the government imposes taxes on firms that are earning high profits, there could be an unintended effect of reducing the supply of goods in that market compared to what the supply would be if the profits were not taxed.

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 22-9
​
  
-Refer to Exhibit 22-9. Assume that demand increases from D1 to D2; in the new long run equilibrium, price settles at a level between P1 and P2 This means that the industry in question is a(n) __________-cost industry.

Accepted Answer

A) decreasing 
B) increasing 
C) constant 
D) marginal 
E) low 
A) decreasing 
B) increasing 
C) constant 
D) marginal 
E) low

Question 17

The market demand curve in a perfectly competitive market is

Accepted Answer

A) downward sloping. 
B) upward sloping. 
C) perfectly horizontal. 
D) perfectly vertical. 
E) downward or upward sloping depending upon the type of product offered for sale. 
A) downward sloping. 
B) upward sloping. 
C) perfectly horizontal. 
D) perfectly vertical. 
E) downward or upward sloping depending upon the type of product offered for sale.

Question 18

If a market comes close to meeting (but does not perfectly meet) all the assumptions of the theory of perfect competition, it follows that

Accepted Answer

A) the market is not perfectly competitive. 
B) the theory of perfect competition still may be able to predict behavior in the market. 
C) firms in the market cannot be price takers. 
D) firms in the market do not try to maximize profit. 
E) a and c 
A) the market is not perfectly competitive. 
B) the theory of perfect competition still may be able to predict behavior in the market. 
C) firms in the market cannot be price takers. 
D) firms in the market do not try to maximize profit. 
E) a and c

Question 19

A perfectly competitive market is initially in long-run competitive equilibrium. Then, market demand increases. This causes existing firms in the market to __________ and __________. As a result of the latter, the market supply curve shifts __________.

Accepted Answer

A) produce more output; some existing firms to exit the market; leftward 
B) produce less output; new firms to enter the market; rightward 
C) produce more output; new firms to enter the market; rightward 
D) expand their plant size; some existing firms to exit the market; leftward 
E) none of the above 
A) produce more output; some existing firms to exit the market; leftward 
B) produce less output; new firms to enter the market; rightward 
C) produce more output; new firms to enter the market; rightward 
D) expand their plant size; some existing firms to exit the market; leftward 
E) none of the above

Question 20

Assume a decreasing-cost industry that is initially in long-run competitive equilibrium. A decrease in demand will cause a(n) __________ in prices and profits, and as a result, firms will __________ the industry, causing the market supply curve to shift __________,which, in turn, will eventually cause the equilibrium price to be __________ before.

Accepted Answer

A) a decrease; exit; rightward; lower than 
B) an increase; enter; rightward; higher than 
C) a decrease; exit; leftward; higher than 
D) an increase; enter; rightward; the same as 
E) an increase; exit; leftward; lower than 
A) a decrease; exit; rightward; lower than 
B) an increase; enter; rightward; higher than 
C) a decrease; exit; leftward; higher than 
D) an increase; enter; rightward; the same as 
E) an increase; exit; leftward; lower than

Exam 22: Perfect Competition

The long-run industry supply curve is the graphic representation of the quantity of output that the industry is prepared to

Which of the following statements is false?

In long-run competitive equilibrium, the market equilibrium price equals

In the short run, the best policy for a perfectly competitive firm is to

Popular online publications that have no close substitutes will be more likely to be able to charge for those publications than will a local newspaper. ​

Assume that a decreasing-cost industry experiences an increase in demand. In the short run, this will

If MR > MC, then

Exhibit 22-3 ​ ​ -Refer to Exhibit 22-3. What quantity of output should the profit-maximizing firm produce?

A perfectly competitive firm can produce its current level of output at an average total cost of $10 and a marginal cost of $8. If the market price of the product is currently $8, what should the firm do?

Exhibit 22-8 ​ -Refer to Exhibit 22-8. Which of the following is true in the short run of firms A and B, two perfectly competitive firms?

Exhibit 22-1 ​ ​ -Refer to Exhibit 22-1. The data in this table are relevant to a perfectly competitive firm because

Which of the following is not a characteristic of perfect competition?

Why must profits be zero in long-run competitive equilibrium?

When the government imposes taxes on firms that are earning high profits, there could be an unintended effect of reducing the supply of goods in that market compared to what the supply would be if the profits were not taxed.

Exhibit 22-9 ​ -Refer to Exhibit 22-9. Assume that demand increases from D1 to D2; in the new long run equilibrium, price settles at a level between P1 and P2 This means that the industry in question is a(n) __________-cost industry.

The market demand curve in a perfectly competitive market is

If a market comes close to meeting (but does not perfectly meet) all the assumptions of the theory of perfect competition, it follows that

A perfectly competitive market is initially in long-run competitive equilibrium. Then, market demand increases. This causes existing firms in the market to __________ and __________. As a result of the latter, the market supply curve shifts __________.

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

Popular online publications that have no close substitutes will be more likely to be able to charge for those publications than will a local newspaper.

Exhibit 22-3 -Refer to Exhibit 22-3. What quantity of output should the profit-maximizing firm produce?

Exhibit 22-8 -Refer to Exhibit 22-8. Which of the following is true in the short run of firms A and B, two perfectly competitive firms?

Exhibit 22-1 -Refer to Exhibit 22-1. The data in this table are relevant to a perfectly competitive firm because

Exhibit 22-9 -Refer to Exhibit 22-9. Assume that demand increases from D₁ to D₂; in the new long run equilibrium, price settles at a level between P₁ and P₂ This means that the industry in question is a(n) __________-cost industry.

A perfectly competitive market is initially in long-run competitive equilibrium. Then, market demand increases. This causes existing firms in the market to and . As a result of the latter, the market supply curve shifts __.