Question 1

Which of the following characterizes a perfectly competitive market?

Accepted Answer

A)  The market demand curve is vertical. 
B)  The demand for each individual firm's product is perfectly elastic. 
C)  Each firm sets a different price. 
D)  Each firm produces a product slightly different from that of its competitors. 
A)  The market demand curve is vertical. 
B)  The demand for each individual firm's product is perfectly elastic. 
C)  Each firm sets a different price. 
D)  Each firm produces a product slightly different from that of its competitors. B

Question 2

In perfect competition

Accepted Answer

A)  many firms sell slightly different products to many buyers. 
B)  sellers are better informed about the prices than buyers. 
C)  firms face no restrictions on entry into market. 
D)  established firms have advantage over new ones. 
A)  many firms sell slightly different products to many buyers. 
B)  sellers are better informed about the prices than buyers. 
C)  firms face no restrictions on entry into market. 
D)  established firms have advantage over new ones. C

Question 3

-The table above gives the total revenue and total cost for a perfectly competitive firm producing chocolate chip cookies. If the firm is producing 1 pound of cookies, to maximize its profit it will

Accepted Answer

A)  increase its output. 
B)  decrease its output. 
C)  continue producing 1 pound of cookies. 
D)  shut down. 
A)  increase its output. 
B)  decrease its output. 
C)  continue producing 1 pound of cookies. 
D)  shut down. A

Question 4

The short-run market supply curve for a perfectly competitive market is obtained by summing the part of each firm's

Accepted Answer

A)  AVC curve that lies above its MC curve. 
B)  MC curve that lies above its AVC curve. 
C)  AVC curve that lies below the MC curve. 
D)  MC curve that lies below the AVC curve. 
A)  AVC curve that lies above its MC curve. 
B)  MC curve that lies above its AVC curve. 
C)  AVC curve that lies below the MC curve. 
D)  MC curve that lies below the AVC curve.

Question 5

In the long run, the economic profit of a firm in a perfectly competitive market

Accepted Answer

A)  will be above zero. 
B)  will be below zero. 
C)  will equal zero. 
D)  can be above, below, or equal to zero. 
A)  will be above zero. 
B)  will be below zero. 
C)  will equal zero. 
D)  can be above, below, or equal to zero.

Question 6

A perfectly competitive firm is definitely making an economic profit when

Accepted Answer

A)  MR  ATC. 
C)  P  AVC. 
A)  MR  ATC. 
C)  P  AVC.

Question 7

In a perfectly competitive market, an increase in market demand

Accepted Answer

A)  raises the price in the short run and attracts new firms in the long run. 
B)  raises the price in the short run and the long run. 
C)  lowers the price in the short run and in the long run. 
D)  has no effect on the price in either the short run or the long run because the firms are price takers. 
A)  raises the price in the short run and attracts new firms in the long run. 
B)  raises the price in the short run and the long run. 
C)  lowers the price in the short run and in the long run. 
D)  has no effect on the price in either the short run or the long run because the firms are price takers.

Question 8

Which of the following four firms would most likely NOT be part of a perfectly competitive market?

Accepted Answer

A)  Mark sells his tomatoes at the local farmers market. 
B)  The WaveHouse is the only place in San Diego where you can ride an indoor 10 foot wave. 
C)  Village Pizza sells pizza in a college town. 
D)  Space Age Fuel is a gas station in Bend, Oregon. 
A)  Mark sells his tomatoes at the local farmers market. 
B)  The WaveHouse is the only place in San Diego where you can ride an indoor 10 foot wave. 
C)  Village Pizza sells pizza in a college town. 
D)  Space Age Fuel is a gas station in Bend, Oregon.

Question 9

The short-run supply curve for a perfectly competitive firm is its

Accepted Answer

A)  marginal cost curve above the horizontal axis. 
B)  marginal cost curve above its shutdown point. 
C)  average cost curve above the horizontal axis. 
D)  average cost curve above its shutdown point. 
A)  marginal cost curve above the horizontal axis. 
B)  marginal cost curve above its shutdown point. 
C)  average cost curve above the horizontal axis. 
D)  average cost curve above its shutdown point.

Question 10

A perfectly competitive firm will shut down rather than produce if its

Accepted Answer

A)  price is less than average variable cost. 
B)  price is less than total variable cost. 
C)  total revenue is less than total cost. 
D)  price is less than marginal cost. 
A)  price is less than average variable cost. 
B)  price is less than total variable cost. 
C)  total revenue is less than total cost. 
D)  price is less than marginal cost.

Question 11

What are the requirements for perfect competition?

Accepted Answer

The requirements are: many firms selling

Question 12

In a perfectly competitive market, the market supply curve is the sum of the

Accepted Answer

A)  supply curves of all the individual firms. 
B)  average variable cost curves of all the individual firms. 
C)  average total cost curves of all the individual firms. 
D)  average fixed cost curves of all the individual firms. 
A)  supply curves of all the individual firms. 
B)  average variable cost curves of all the individual firms. 
C)  average total cost curves of all the individual firms. 
D)  average fixed cost curves of all the individual firms.

Question 13

-The figure above shows a firm in a perfectly competitive market. The firm will shut down if price falls below

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  P4.

Question 14

Entry of new firms into a perfectly competitive market lowers the profits of the existing firms.

Accepted Answer

A) True 
 B)False

Question 15

In a perfectly competitive market, there are

Accepted Answer

A)  many buyers and many sellers. 
B)  many buyers, but there might be only one or two sellers. 
C)  many sellers, but there might be only one or two buyers. 
D)  one firm that sets the price for the others to follow. 
A)  many buyers and many sellers. 
B)  many buyers, but there might be only one or two sellers. 
C)  many sellers, but there might be only one or two buyers. 
D)  one firm that sets the price for the others to follow.

Question 16

In perfect competition, the firm's marginal revenue curve

Accepted Answer

A)  cuts its demand curve from below, going from left to right. 
B)  cuts its demand curve from above, going from left to right. 
C)  always lies below its demand curve. 
D)  is the same as its demand curve. 
A)  cuts its demand curve from below, going from left to right. 
B)  cuts its demand curve from above, going from left to right. 
C)  always lies below its demand curve. 
D)  is the same as its demand curve.

Question 17

Homer's Holesome Donuts has determined that its profit-maximizing quantity is 10,000 donuts per year. Homer's earns $12,000 in revenue from the sale of those donuts. Homer's has two costs. First he pays $16,000 in annual rental payments for its five-year lease on its store. Second Homer incurs an additional cost of $5,000 for ingredients. Homer's variable cost is equal to

Accepted Answer

A)  0. 
B)  $5,000. 
C)  $16,000. 
D)  $21,000. 
A)  0. 
B)  $5,000. 
C)  $16,000. 
D)  $21,000.

Question 18

When the market demand increases in a perfect competition, the long-run result is a larger number of firms, a higher price, and a permanent economic profit for the firms.

Accepted Answer

A) True 
 B)False

Question 19

Because the demand for a perfectly competitive firm's product is perfectly elastic, marginal revenue is equal to

Accepted Answer

A)  one. 
B)  zero. 
C)  the price of the product. 
D)  negative one. 
A)  one. 
B)  zero. 
C)  the price of the product. 
D)  negative one.

Question 20

Hubert's Copy Services is in perfect competition. Hubert currently charges 10 cents per page, which is the going market price. He thinks that he can increase his profit by raising the price. Is it possible? Why or why not?

Accepted Answer

If Hubert raises his price, his profit w

Which of the following characterizes a perfectly competitive market?

In perfect competition

-The table above gives the total revenue and total cost for a perfectly competitive firm producing chocolate chip cookies. If the firm is producing 1 pound of cookies, to maximize its profit it will

The short-run market supply curve for a perfectly competitive market is obtained by summing the part of each firm's

In the long run, the economic profit of a firm in a perfectly competitive market

A perfectly competitive firm is definitely making an economic profit when

In a perfectly competitive market, an increase in market demand

Which of the following four firms would most likely NOT be part of a perfectly competitive market?

The short-run supply curve for a perfectly competitive firm is its

A perfectly competitive firm will shut down rather than produce if its

What are the requirements for perfect competition?

In a perfectly competitive market, the market supply curve is the sum of the

-The figure above shows a firm in a perfectly competitive market. The firm will shut down if price falls below

Entry of new firms into a perfectly competitive market lowers the profits of the existing firms.

In a perfectly competitive market, there are

In perfect competition, the firm's marginal revenue curve

When the market demand increases in a perfect competition, the long-run result is a larger number of firms, a higher price, and a permanent economic profit for the firms.

Because the demand for a perfectly competitive firm's product is perfectly elastic, marginal revenue is equal to

Hubert's Copy Services is in perfect competition. Hubert currently charges 10 cents per page, which is the going market price. He thinks that he can increase his profit by raising the price. Is it possible? Why or why not?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 12: Perfect Competition

Which of the following characterizes a perfectly competitive market?

In perfect competition

-The table above gives the total revenue and total cost for a perfectly competitive firm producing chocolate chip cookies. If the firm is producing 1 pound of cookies, to maximize its profit it will

The short-run market supply curve for a perfectly competitive market is obtained by summing the part of each firm's

In the long run, the economic profit of a firm in a perfectly competitive market

A perfectly competitive firm is definitely making an economic profit when

In a perfectly competitive market, an increase in market demand

Which of the following four firms would most likely NOT be part of a perfectly competitive market?

The short-run supply curve for a perfectly competitive firm is its

A perfectly competitive firm will shut down rather than produce if its

What are the requirements for perfect competition?

In a perfectly competitive market, the market supply curve is the sum of the

-The figure above shows a firm in a perfectly competitive market. The firm will shut down if price falls below

Entry of new firms into a perfectly competitive market lowers the profits of the existing firms.

In a perfectly competitive market, there are

In perfect competition, the firm's marginal revenue curve

When the market demand increases in a perfect competition, the long-run result is a larger number of firms, a higher price, and a permanent economic profit for the firms.

Because the demand for a perfectly competitive firm's product is perfectly elastic, marginal revenue is equal to

Hubert's Copy Services is in perfect competition. Hubert currently charges 10 cents per page, which is the going market price. He thinks that he can increase his profit by raising the price. Is it possible? Why or why not?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters