Question 1

Figure 10-8
  
-In the long run, the perfectly competitive firm in Figure 10-8 will leave the industry if the price falls below

Accepted Answer

A)  $10. 
B)  $9. 
C)  $5. 
D)  $2. 
A)  $10. 
B)  $9. 
C)  $5. 
D)  $2.

Question 2

Perfectly competitive markets have absolutely no drawbacks.

Accepted Answer

A) True 
 B)False

Question 3

Table 10-1
 $$\begin{array} { c c c c } 
\underline { \text { Q(in units) }} & \underline {\text { AFC (in dollars) }} & \underline {\text { AVC (in dollars) }} &\underline { \text { MC (in dollars) }} \
0 & C & C & C \
2 & 2.5 & 18 & 10 \
4 & 1.25 & 14 & 14 \
6 & 0.83 & 18 & 42 \
8 & 0.63 & 30 & 94\
10 & 0.5 & 50 & 170
\end{array}$$
-In Table 10-1 are the short-run cost schedules of a perfectly competitive firm.If the market price of output is $50, the firm will produce ____ units and earn a profit of ____.

Accepted Answer

A)  6; $187.02 
B)  6; $48 
C)  8; $154.96 
D)  8; $245.04 
A)  6; $187.02 
B)  6; $48 
C)  8; $154.96 
D)  8; $245.04

Question 4

The short-run equilibrium output of a competitive firm is found by equating marginal cost with price.

Accepted Answer

A) True 
 B)False

Question 5

When a perfectly competitive industry is in long-run equilibrium, firms maximize profits, and entry forces the price down

Accepted Answer

A)  until all loss making firms leave the industry. 
B)  until each firm can earn acceptable level of economic profit. 
C)  until price becomes tangent to the long run average cost curve. 
D)  until the long average cost curve rises above the demand curve. 
A)  until all loss making firms leave the industry. 
B)  until each firm can earn acceptable level of economic profit. 
C)  until price becomes tangent to the long run average cost curve. 
D)  until the long average cost curve rises above the demand curve.

Question 6

Figure 10-8
  
-Figure 10-8 displays the cost curves of a perfectly competitive firm.Profits at a price of $10 would be approximately

Accepted Answer

A)  $1 per unit. 
B)  $3 per unit. 
C)  $5 per unit. 
D)  $10 per unit. 
A)  $1 per unit. 
B)  $3 per unit. 
C)  $5 per unit. 
D)  $10 per unit.

Question 7

The perfectly competitive widget industry is in long-run equilibrium.A profit-maximizing manufacturer receives total revenue of $55,000.He uses his labor, $15,000 worth of wire, and $15,000 worth of steel to make the widgets.The manufacturer

Accepted Answer

A)  is earning an economic profit of $25,000. 
B)  must have an opportunity cost of labor of less than $25,000. 
C)  must have an opportunity cost of labor of exactly $25,000. 
D)  must have an opportunity cost of labor of more than $25,000. 
A)  is earning an economic profit of $25,000. 
B)  must have an opportunity cost of labor of less than $25,000. 
C)  must have an opportunity cost of labor of exactly $25,000. 
D)  must have an opportunity cost of labor of more than $25,000.

Question 8

The demand curve of a perfectly competitive firm is vertical.

Accepted Answer

A) True 
 B)False

Question 9

Explain why Adam Smith believed that competitive markets are a key component of achieving the gains from the invisible hand.

Accepted Answer

Adam Smith believed that individuals act

Question 10

At its long-run equilibrium level of output, the demand curve facing an individual perfectly competitive firm is tangent to its

Accepted Answer

A)  total economic profit curve. 
B)  long-run average cost curve. 
C)  marginal cost curve. 
D)  marginal profit curve. 
A)  total economic profit curve. 
B)  long-run average cost curve. 
C)  marginal cost curve. 
D)  marginal profit curve.

Question 11

It is relatively easy for a firm to enter a perfectly competitive market.

Accepted Answer

A) True 
 B)False

Question 12

Figure 10-8
  
-For the perfectly competitive firm in Figure 10-8, what is the long-run price and quantity?

Accepted Answer

A)  P = 4, Q = 150 
B)  P = 9, Q = 200 
C)  P = 10, Q = 200 
D)  P = 5, Q = 150 
A)  P = 4, Q = 150 
B)  P = 9, Q = 200 
C)  P = 10, Q = 200 
D)  P = 5, Q = 150

Question 13

We don't need to draw separate curves for demand, average revenue, and marginal revenue curves for a perfectly competitive firm.Why?

Accepted Answer

Under perfect competition the firm's dem

Question 14

For a perfectly competitive firm, the long-run supply curve is the long-run average cost curve.

Accepted Answer

A) True 
 B)False

Question 15

Figure 10-5
  
-In Figure 10-5, points which lie on the firm's short-run supply curve are

Accepted Answer

A)  A, B, C. 
B)  C, D, H. 
C)  F, E, G. 
D)  A, C, H. 
A)  A, B, C. 
B)  C, D, H. 
C)  F, E, G. 
D)  A, C, H.

Question 16

Figure 10-6
  
-In Figure 10-6, the price at long-run equilibrium is

Accepted Answer

A)  $5. 
B)  $10. 
C)  $20. 
D)  $35. 
A)  $5. 
B)  $10. 
C)  $20. 
D)  $35.

Question 17

In the long run, a perfectly competitive firm earns no accounting profits.

Accepted Answer

A) True 
 B)False

Question 18

Perfect competition is an ideal market structure.

Accepted Answer

A) True 
 B)False

Question 19

If you must determine the long-run equilibrium output of a perfectly competitive firm and you are permitted to see only one curve, which of the following curves is most helpful?

Accepted Answer

A)  demand 
B)  marginal cost 
C)  average cost 
D)  average fixed cost 
A)  demand 
B)  marginal cost 
C)  average cost 
D)  average fixed cost

Question 20

Once a firm's marginal revenue curve is known, the output level can be determined.

Accepted Answer

A) True 
 B)False

Exam 10: The Firm and the Industry under Perfect Competition

Figure 10-8 -In the long run, the perfectly competitive firm in Figure 10-8 will leave the industry if the price falls below

Perfectly competitive markets have absolutely no drawbacks.

Table 10-1 0 C C C 2 2.5 18 10 4 1.25 14 14 6 0.83 18 42 8 0.63 30 94 10 0.5 50 170 -In Table 10-1 are the short-run cost schedules of a perfectly competitive firm.If the market price of output is $50, the firm will produce ____ units and earn a profit of ____.

The short-run equilibrium output of a competitive firm is found by equating marginal cost with price.

When a perfectly competitive industry is in long-run equilibrium, firms maximize profits, and entry forces the price down

Figure 10-8 -Figure 10-8 displays the cost curves of a perfectly competitive firm.Profits at a price of $10 would be approximately

The perfectly competitive widget industry is in long-run equilibrium.A profit-maximizing manufacturer receives total revenue of $55,000.He uses his labor, $15,000 worth of wire, and $15,000 worth of steel to make the widgets.The manufacturer

The demand curve of a perfectly competitive firm is vertical.

Explain why Adam Smith believed that competitive markets are a key component of achieving the gains from the invisible hand.

At its long-run equilibrium level of output, the demand curve facing an individual perfectly competitive firm is tangent to its

It is relatively easy for a firm to enter a perfectly competitive market.

Figure 10-8 -For the perfectly competitive firm in Figure 10-8, what is the long-run price and quantity?

We don't need to draw separate curves for demand, average revenue, and marginal revenue curves for a perfectly competitive firm.Why?

For a perfectly competitive firm, the long-run supply curve is the long-run average cost curve.

Figure 10-5 -In Figure 10-5, points which lie on the firm's short-run supply curve are

Figure 10-6 -In Figure 10-6, the price at long-run equilibrium is

In the long run, a perfectly competitive firm earns no accounting profits.

Perfect competition is an ideal market structure.

If you must determine the long-run equilibrium output of a perfectly competitive firm and you are permitted to see only one curve, which of the following curves is most helpful?

Once a firm's marginal revenue curve is known, the output level can be determined.

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

Table 10-1 0 C C C 2 2.5 18 10 4 1.25 14 14 6 0.83 18 42 8 0.63 30 94 10 0.5 50 170 -In Table 10-1 are the short-run cost schedules of a perfectly competitive firm.If the market price of output is $50, the firm will produce units and earn a profit of .