Question 1

In the short run, perfectly competitive firms can

Accepted Answer

A)  make an economic profit. 
B)  take a loss. 
C)  break even. 
D)  All of the above are correct. 
A)  make an economic profit. 
B)  take a loss. 
C)  break even. 
D)  All of the above are correct.

Question 2

A perfectly competitive firm would be willing to remain in the industry in the long run at zero economic profit because

Accepted Answer

A)  its total revenues would be positive. 
B)  accounting profit would be negative. 
C)  revenue is equal to all costs, including the opportunity cost of capital and labor. 
D)  its fixed costs would prevent it from leaving the industry. 
A)  its total revenues would be positive. 
B)  accounting profit would be negative. 
C)  revenue is equal to all costs, including the opportunity cost of capital and labor. 
D)  its fixed costs would prevent it from leaving the industry.

Question 3

There are currently 1,000 firms in a competitive industry.Minimum long-run average cost is $80 and price $100.Explain what will happen to price, profit, and the number of firms in this industry over time.

Accepted Answer

Price exceeds minimum long-run average c

Question 4

The short-run supply curve of the perfectly competitive firm is the firm's

Accepted Answer

A)  MC curve. 
B)  AVC curve. 
C)  MC curve above the minimum point on the AVC curve. 
D)  MC curve above the minimum point on the ATC curve. 
A)  MC curve. 
B)  AVC curve. 
C)  MC curve above the minimum point on the AVC curve. 
D)  MC curve above the minimum point on the ATC curve.

Question 5

In perfect competition there are differences in the products sold by various firms.

Accepted Answer

A) True 
 B)False

Question 6

In the short-run, the lowest price that a perfectly competitive firm will accept without closing its doors is found by examining the average variable cost curve.

Accepted Answer

A) True 
 B)False

Question 7

A firm facing a horizontal demand curve

Accepted Answer

A)  cannot affect the price it receives for its output. 
B)  always produces at an output at which P = MR. 
C)  faces perfectly elastic demand for its product. 
D)  All of the above are correct. 
A)  cannot affect the price it receives for its output. 
B)  always produces at an output at which P = MR. 
C)  faces perfectly elastic demand for its product. 
D)  All of the above are correct.

Question 8

The short-run supply curve of a perfectly competitive firm

Accepted Answer

A)  intersects the minimum point of its short-run average total cost curve but not its short-run average variable cost curve. 
B)  intersects the minimum point of its short-run average variable cost curve but not its short-run average total cost curve. 
C)  intersects the minimum point of both its short-run average variable cost and its short-run average total cost curves. 
D)  intersects the minimum point of its short-run average total cost curve and may or may not intersect the minimum point of its short-run average variable cost curve. 
A)  intersects the minimum point of its short-run average total cost curve but not its short-run average variable cost curve. 
B)  intersects the minimum point of its short-run average variable cost curve but not its short-run average total cost curve. 
C)  intersects the minimum point of both its short-run average variable cost and its short-run average total cost curves. 
D)  intersects the minimum point of its short-run average total cost curve and may or may not intersect the minimum point of its short-run average variable cost curve.

Question 9

Exhibit 10-1
A perfectly competitive producer has the following short-run average cost curve and marginal cost curve:
SR AC = 2Q + 3
MC = 4Q + 3
where costs are measured in dollars and Q represents the firm's output in units.
-If the market price of wangdoodles is $15 each, the profit-maximizing producer whose short-run cost curves are given in Exhibit 10-1 should produce ____ wangdoodles.

Accepted Answer

A)  0 
B)  3 
C)  6 
D)  15 
A)  0 
B)  3 
C)  6 
D)  15

Question 10

One of the following is not a characteristic of perfect competition.Which is it?

Accepted Answer

A)  Firms advertise to increase their market share. 
B)  Profits are low in the long run. 
C)  Consumers pay little attention to brand names. 
D)  Firms pay no attention to their competitors' output levels. 
A)  Firms advertise to increase their market share. 
B)  Profits are low in the long run. 
C)  Consumers pay little attention to brand names. 
D)  Firms pay no attention to their competitors' output levels.

Question 11

In a long-run equilibrium in a perfectly competitive market, firms are selling at a price equal to average cost.

Accepted Answer

A) True 
 B)False

Question 12

The long run for the industry is defined as a period of time long enough for

Accepted Answer

A)  any new firm that desires to enter the industry. 
B)  any old firm that desires to leave the industry. 
C)  all aspects of production to vary and there are no fixed costs. 
D)  All of the above are correct. 
A)  any new firm that desires to enter the industry. 
B)  any old firm that desires to leave the industry. 
C)  all aspects of production to vary and there are no fixed costs. 
D)  All of the above are correct.

Question 13

Which of the following most resembles a perfectly competitive market?

Accepted Answer

A)  the stock market 
B)  the publishing industry 
C)  the steel industry 
D)  the new car market 
A)  the stock market 
B)  the publishing industry 
C)  the steel industry 
D)  the new car market

Question 14

In the short run, if price is below AC, maximizing profits really means minimizing total losses.

Accepted Answer

A) True 
 B)False

Question 15

Firms in perfect competition are often described as price

Accepted Answer

A)  takers. 
B)  makers. 
C)  setters. 
D)  leaders. 
A)  takers. 
B)  makers. 
C)  setters. 
D)  leaders.

Question 16

Long-run average cost of the perfectly competitive firm includes the

Accepted Answer

A)  cost of raw materials per unit of output. 
B)  opportunity cost of labor per unit of output. 
C)  opportunity cost of capital per unit of output. 
D)  All of the above are correct. 
A)  cost of raw materials per unit of output. 
B)  opportunity cost of labor per unit of output. 
C)  opportunity cost of capital per unit of output. 
D)  All of the above are correct.

Question 17

Total profit of a competitive firm can be found by multiplying profit per unit times units sold.

Accepted Answer

A) True 
 B)False

Question 18

Give a complete but concise definition of the following terms.
a.perfect competition
b.perfectly competitive firm's demand curve
c.shutdown point
d.long-run equilibrium in perfect competition

Accepted Answer

a.Perfect competition is a market struct

Question 19

The market demand schedule in perfect competition is horizontal.

Accepted Answer

A) True 
 B)False

Question 20

Why do economists consider perfect competition to be the most efficient market structure?

Accepted Answer

Perfect competition is the most efficien

Exam 10: The Firm and the Industry under Perfect Competition

In the short run, perfectly competitive firms can

A perfectly competitive firm would be willing to remain in the industry in the long run at zero economic profit because

There are currently 1,000 firms in a competitive industry.Minimum long-run average cost is $80 and price $100.Explain what will happen to price, profit, and the number of firms in this industry over time.

The short-run supply curve of the perfectly competitive firm is the firm's

In perfect competition there are differences in the products sold by various firms.

In the short-run, the lowest price that a perfectly competitive firm will accept without closing its doors is found by examining the average variable cost curve.

A firm facing a horizontal demand curve

The short-run supply curve of a perfectly competitive firm

One of the following is not a characteristic of perfect competition.Which is it?

In a long-run equilibrium in a perfectly competitive market, firms are selling at a price equal to average cost.

The long run for the industry is defined as a period of time long enough for

Which of the following most resembles a perfectly competitive market?

In the short run, if price is below AC, maximizing profits really means minimizing total losses.

Firms in perfect competition are often described as price

Long-run average cost of the perfectly competitive firm includes the

Total profit of a competitive firm can be found by multiplying profit per unit times units sold.

Give a complete but concise definition of the following terms. a.perfect competition b.perfectly competitive firm's demand curve c.shutdown point d.long-run equilibrium in perfect competition

The market demand schedule in perfect competition is horizontal.

Why do economists consider perfect competition to be the most efficient market structure?

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

Filters