Question 1

The quantity which a firm will supply in the short run

Accepted Answer

A)  can be read from its average cost curve. 
B)  can be read from its average variable cost curve. 
C)  can be read from the firm's marginal cost curve above average variable cost. 
D)  is always zero above minimum average variable cost. 
A)  can be read from its average cost curve. 
B)  can be read from its average variable cost curve. 
C)  can be read from the firm's marginal cost curve above average variable cost. 
D)  is always zero above minimum average variable cost.

Question 2

If there are no profits in competitive equilibrium, why do firms produce? How can they stay in business?

Accepted Answer

The "no profits" conclusion of competiti

Question 3

The strength of the competition faced by a company can profoundly affect its

Accepted Answer

A)  pricing. 
B)  output decisions. 
C)  input decisions. 
D)  All of the above are correct. 
A)  pricing. 
B)  output decisions. 
C)  input decisions. 
D)  All of the above are correct.

Question 4

In short-run equilibrium, a perfectly competitive firm

Accepted Answer

A)  may earn a profit or a loss. 
B)  always earns a profit. 
C)  never earns a profit. 
D)  earns a profit only if the firm has no fixed cost. 
A)  may earn a profit or a loss. 
B)  always earns a profit. 
C)  never earns a profit. 
D)  earns a profit only if the firm has no fixed cost.

Question 5

Perfectly competitive markets are not the best at producing the goods that are desired by consumers.

Accepted Answer

A) True 
 B)False

Question 6

Economic profit equals gross earnings minus the firm's direct costs.

Accepted Answer

A) True 
 B)False

Question 7

Regardless of quantity in long-run equilibrium, the industry price cannot exceed the

Accepted Answer

A)  long-run average cost of supplying that quantity. 
B)  total variable cost of supplying that quantity. 
C)  long-run total cost of supplying that quantity. 
D)  minimum long-run marginal cost of supplying that quantity. 
A)  long-run average cost of supplying that quantity. 
B)  total variable cost of supplying that quantity. 
C)  long-run total cost of supplying that quantity. 
D)  minimum long-run marginal cost of supplying that quantity.

Question 8

The short-run supply curve for the perfectly competitive firm is that part of the marginal cost curve that lies above the average fixed cost curve.

Accepted Answer

A) True 
 B)False

Question 9

In perfect competition, an increase in fixed costs will eventually cause all except

Accepted Answer

A)  reduction in industry output. 
B)  reduction in a firm's output. 
C)  reduction in the number of firms. 
D)  decrease in industry supply. 
A)  reduction in industry output. 
B)  reduction in a firm's output. 
C)  reduction in the number of firms. 
D)  decrease in industry supply.

Question 10

To determine whether a market is perfectly competitive, economists examine the

Accepted Answer

A)  number of firms in the market. 
B)  similarities among the products of the different firms in the market. 
C)  ease of entry and exit by firms in the market. 
D)  All of the above are correct. 
A)  number of firms in the market. 
B)  similarities among the products of the different firms in the market. 
C)  ease of entry and exit by firms in the market. 
D)  All of the above are correct.

Question 11

Which of the following observations is not true?

Accepted Answer

A)  Demand curve of the perfectly competitive firm is perfectly elastic. 
B)  There is only one price for a product in a perfectly competitive market. 
C)  A firm in a perfectly competitive market can sell as much as it wants at market price. 
D)  Demand curve of the perfectly competitive industry is perfectly elastic. 
A)  Demand curve of the perfectly competitive firm is perfectly elastic. 
B)  There is only one price for a product in a perfectly competitive market. 
C)  A firm in a perfectly competitive market can sell as much as it wants at market price. 
D)  Demand curve of the perfectly competitive industry is perfectly elastic.

Question 12

The perfectly competitive firm's short-run shutdown rule is to shut down immediately if

Accepted Answer

A)  TR  Q. 
A)  TR  Q.

Question 13

The market for a perfectly competitive industry clears at a price of $3, and the minimum average cost for all firms is $2.50.In the long run, we would expect an increase in

Accepted Answer

A)  each firm's output. 
B)  the number of firms. 
C)  each firm's profit. 
D)  each firm's average cost. 
A)  each firm's output. 
B)  the number of firms. 
C)  each firm's profit. 
D)  each firm's average cost.

Question 14

An industry supply curve is the horizontal summation of the supply curves of all of the individual firms.

Accepted Answer

A) True 
 B)False

Question 15

Figure 10-5
  
-Figure 10-5 shows supply and demand conditions in a perfectly competitive industry and for a firm in that industry.At point C, the firm would

Accepted Answer

A)  earn zero economic profit. 
B)  earn negative economic profit. 
C)  have a zero opportunity cost of capital. 
D)  have a negative opportunity cost of capital. 
A)  earn zero economic profit. 
B)  earn negative economic profit. 
C)  have a zero opportunity cost of capital. 
D)  have a negative opportunity cost of capital.

Question 16

In a long-run equilibrium in a perfectly competitive market, the average firm earns positive economic profits.

Accepted Answer

A) True 
 B)False

Question 17

A perfectly competitive firm can maximize profits by producing the quantity at which MR exceeds MC by the greatest amount.

Accepted Answer

A) True 
 B)False

Question 18

A perfectly competitive industry in long-run equilibrium is described as efficient because firms

Accepted Answer

A)  produce at the low point on their average cost curve. 
B)  produce where marginal cost yields a profit. 
C)  earn no more than the cost of capital. 
D)  are not profitable. 
A)  produce at the low point on their average cost curve. 
B)  produce where marginal cost yields a profit. 
C)  earn no more than the cost of capital. 
D)  are not profitable.

Question 19

In the long run, any firm may enter or leave a perfectly competitive market.

Accepted Answer

A) True 
 B)False

Question 20

Perfect competition is the term used to describe

Accepted Answer

A)  an industry in which all businessmen are honest and accommodating. 
B)  an industry in which numerous firms produce identical products. 
C)  an industry untouched by government regulation. 
D)  the kind of industry any American would support. 
A)  an industry in which all businessmen are honest and accommodating. 
B)  an industry in which numerous firms produce identical products. 
C)  an industry untouched by government regulation. 
D)  the kind of industry any American would support.

Exam 10: The Firm and the Industry under Perfect Competition

The quantity which a firm will supply in the short run

If there are no profits in competitive equilibrium, why do firms produce? How can they stay in business?

The strength of the competition faced by a company can profoundly affect its

In short-run equilibrium, a perfectly competitive firm

Perfectly competitive markets are not the best at producing the goods that are desired by consumers.

Economic profit equals gross earnings minus the firm's direct costs.

Regardless of quantity in long-run equilibrium, the industry price cannot exceed the

The short-run supply curve for the perfectly competitive firm is that part of the marginal cost curve that lies above the average fixed cost curve.

In perfect competition, an increase in fixed costs will eventually cause all except

To determine whether a market is perfectly competitive, economists examine the

Which of the following observations is not true?

The perfectly competitive firm's short-run shutdown rule is to shut down immediately if

The market for a perfectly competitive industry clears at a price of $3, and the minimum average cost for all firms is $2.50.In the long run, we would expect an increase in

An industry supply curve is the horizontal summation of the supply curves of all of the individual firms.

Figure 10-5 -Figure 10-5 shows supply and demand conditions in a perfectly competitive industry and for a firm in that industry.At point C, the firm would

In a long-run equilibrium in a perfectly competitive market, the average firm earns positive economic profits.

A perfectly competitive firm can maximize profits by producing the quantity at which MR exceeds MC by the greatest amount.

A perfectly competitive industry in long-run equilibrium is described as efficient because firms

In the long run, any firm may enter or leave a perfectly competitive market.

Perfect competition is the term used to describe

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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