Question 1

In perfect competition, the

Accepted Answer

A)  market demand for the good or service is large relative to the minimum efficient scale of a single producer. 
B)  market demand for the good or service is small relative to the minimum efficient scale of a single producer. 
C)  market demand for the good or service can be small relative to the minimum efficient scale of a single producer as long as the goods or services are not identical. 
D)  size of the market demand for the good or service relative to the minimum efficient scale of a single producer does not affect competition. 
A)  market demand for the good or service is large relative to the minimum efficient scale of a single producer. 
B)  market demand for the good or service is small relative to the minimum efficient scale of a single producer. 
C)  market demand for the good or service can be small relative to the minimum efficient scale of a single producer as long as the goods or services are not identical. 
D)  size of the market demand for the good or service relative to the minimum efficient scale of a single producer does not affect competition.

Question 2

-Consider the perfectly competitive firm in the above figure. At what price will long-run equilibrium occur?

Accepted Answer

A)  $11 
B)  $12 
C)  $22 
D)  $23 
A)  $11 
B)  $12 
C)  $22 
D)  $23

Question 3

By producing less, a firm can reduce

Accepted Answer

A)  its fixed costs and its variable costs. 
B)  its fixed costs but not its variable costs. 
C)  its variable costs but not its fixed costs. 
D)  neither its variable costs nor its fixed costs. 
A)  its fixed costs and its variable costs. 
B)  its fixed costs but not its variable costs. 
C)  its variable costs but not its fixed costs. 
D)  neither its variable costs nor its fixed costs.

Question 4

In the long run, perfectly competitive firms make zero economic profit. This result is due mainly to which of the following assumptions?

Accepted Answer

A)  few buyers and sellers 
B)  unrestricted entry and exit 
C)  firms must act as price takers 
D)  demand for the firm's output is perfectly elastic 
A)  few buyers and sellers 
B)  unrestricted entry and exit 
C)  firms must act as price takers 
D)  demand for the firm's output is perfectly elastic

Question 5

A perfectly competitive firm's short-run supply curve is

Accepted Answer

A)  its marginal cost curve above the shutdown point. 
B)  its marginal revenue curve above the shutdown point. 
C)  its demand curve. 
D)  horizontal at the going price. 
A)  its marginal cost curve above the shutdown point. 
B)  its marginal revenue curve above the shutdown point. 
C)  its demand curve. 
D)  horizontal at the going price.

Question 6

-The figure above shows a perfectly competitive firm. In the short run, the firm will shut down

Accepted Answer

A)  only if the AVC of producing 10 units is less than $20. 
B)  only if the AVC of producing 10 units is more than $20. 
C)  only if the AVC curve reaches its minimum before 10 units are produced. 
D)  always. 
A)  only if the AVC of producing 10 units is less than $20. 
B)  only if the AVC of producing 10 units is more than $20. 
C)  only if the AVC curve reaches its minimum before 10 units are produced. 
D)  always.

Question 7

-In the above figure, the marginal cost of the last unit produced by the profit maximizing firm is

Accepted Answer

A)  $5. 
B)  $10. 
C)  $15. 
D)  $20. 
A)  $5. 
B)  $10. 
C)  $15. 
D)  $20.

Question 8

Which of the following statements regarding the long-term equilibrium is TRUE?

Accepted Answer

A)  As new firms enter a market, each existing firm increases the quantity it produces. 
B)  Firms leave a market if they are making zero economic profit. 
C)  Entry and exit stop when firms are making an economic profit. 
D)  Entry and exit stop when firms make zero economic profit. 
A)  As new firms enter a market, each existing firm increases the quantity it produces. 
B)  Firms leave a market if they are making zero economic profit. 
C)  Entry and exit stop when firms are making an economic profit. 
D)  Entry and exit stop when firms make zero economic profit.

Question 9

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $20, how much economic profit does the firm make?

Accepted Answer

A)  $0 
B)  $12 
C)  -$20 
D)  -$10 
A)  $0 
B)  $12 
C)  -$20 
D)  -$10

Question 10

Perfect competition implies that

Accepted Answer

A)  there are many firms in the market. 
B)  all firms are price takers. 
C)  all firms are producing the same identical product. 
D)  All of the above answers are correct. 
A)  there are many firms in the market. 
B)  all firms are price takers. 
C)  all firms are producing the same identical product. 
D)  All of the above answers are correct.

Question 11

A perfectly competitive firm's short-run shutdown point is the level of output at which

Accepted Answer

A)  price equals average total cost. 
B)  price equals average fixed cost. 
C)  price equals the minimum average variable cost. 
D)  price is above the minimum average total cost but below the minimum average fixed cost. 
A)  price equals average total cost. 
B)  price equals average fixed cost. 
C)  price equals the minimum average variable cost. 
D)  price is above the minimum average total cost but below the minimum average fixed cost.

Question 12

Suppose a perfectly competitive market is in long-run equilibrium. If there is a permanent increase in demand

Accepted Answer

A)  at least in the short run, some firms will increase their output. 
B)  at least in the short run, the price will increase initially. 
C)  new firms will enter the market. 
D)  All of the above answers are correct. 
A)  at least in the short run, some firms will increase their output. 
B)  at least in the short run, the price will increase initially. 
C)  new firms will enter the market. 
D)  All of the above answers are correct.

Question 13

A perfectly competitive firm shuts down if the price of its product is

Accepted Answer

A)  greater than its minimum average variable cost. 
B)  less than its minimum average variable cost. 
C)  greater than its maximum variable cost. 
D)  less than its minimum total cost. 
A)  greater than its minimum average variable cost. 
B)  less than its minimum average variable cost. 
C)  greater than its maximum variable cost. 
D)  less than its minimum total cost.

Question 14

-In the above figure, if the price is $16 per unit, how many units will a profit maximizing perfectly competitive firm produce?

Accepted Answer

A)  0 
B)  20 
C)  30 
D)  35 
A)  0 
B)  20 
C)  30 
D)  35

Question 15

In the short run, a perfectly competitive firm will shut down if

Accepted Answer

A)  it incurs any economic loss. 
B)  price equals average cost. 
C)  total revenue is less than total variable cost. 
D)  total revenue is less than total fixed cost. 
A)  it incurs any economic loss. 
B)  price equals average cost. 
C)  total revenue is less than total variable cost. 
D)  total revenue is less than total fixed cost.

Question 16

In the long run, fixed costs are

Accepted Answer

A)  zero and variable costs are zero. 
B)  zero and variable costs are positive. 
C)  positive and variable costs are zero. 
D)  positive and variable costs are positive. 
A)  zero and variable costs are zero. 
B)  zero and variable costs are positive. 
C)  positive and variable costs are zero. 
D)  positive and variable costs are positive.

Question 17

An example of a perfectly competitive firm is

Accepted Answer

A)  an oat farmer in the United States. 
B)  the local cable TV company. 
C)  a U.S. automobile producer. 
D)  a big city newspaper. 
A)  an oat farmer in the United States. 
B)  the local cable TV company. 
C)  a U.S. automobile producer. 
D)  a big city newspaper.

Question 18

The difference between a firm's total revenue and its total opportunity cost is the firm's

Accepted Answer

A)  normal profit. 
B)  economic profit. 
C)  marginal profit. 
D)  marginal revenue. 
A)  normal profit. 
B)  economic profit. 
C)  marginal profit. 
D)  marginal revenue.

Question 19

Which of the following is ALWAYS true for a perfectly competitive firm?

Accepted Answer

A)  P = MR 
B)  P = ATC 
C)  MR = ATC 
D)  P = AVC 
A)  P = MR 
B)  P = ATC 
C)  MR = ATC 
D)  P = AVC

Question 20

-The figure above shows a perfectly competitive firm. The firm is operating; that is, the firm has not shut down. The firm is

Accepted Answer

A)  making an economic profit of $200. 
B)  incurring a economic loss of $200. 
C)  incurring an economic loss of $600. 
D)  making zero economic profit. 
A)  making an economic profit of $200. 
B)  incurring a economic loss of $200. 
C)  incurring an economic loss of $600. 
D)  making zero economic profit.

In perfect competition, the

-Consider the perfectly competitive firm in the above figure. At what price will long-run equilibrium occur?

By producing less, a firm can reduce

In the long run, perfectly competitive firms make zero economic profit. This result is due mainly to which of the following assumptions?

A perfectly competitive firm's short-run supply curve is

-The figure above shows a perfectly competitive firm. In the short run, the firm will shut down

-In the above figure, the marginal cost of the last unit produced by the profit maximizing firm is

Which of the following statements regarding the long-term equilibrium is TRUE?

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $20, how much economic profit does the firm make?

Perfect competition implies that

A perfectly competitive firm's short-run shutdown point is the level of output at which

Suppose a perfectly competitive market is in long-run equilibrium. If there is a permanent increase in demand

A perfectly competitive firm shuts down if the price of its product is

-In the above figure, if the price is $16 per unit, how many units will a profit maximizing perfectly competitive firm produce?

In the short run, a perfectly competitive firm will shut down if

In the long run, fixed costs are

An example of a perfectly competitive firm is

The difference between a firm's total revenue and its total opportunity cost is the firm's

Which of the following is ALWAYS true for a perfectly competitive firm?

-The figure above shows a perfectly competitive firm. The firm is operating; that is, the firm has not shut down. The firm is

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

In perfect competition, the

-Consider the perfectly competitive firm in the above figure. At what price will long-run equilibrium occur?

By producing less, a firm can reduce

In the long run, perfectly competitive firms make zero economic profit. This result is due mainly to which of the following assumptions?

A perfectly competitive firm's short-run supply curve is

-The figure above shows a perfectly competitive firm. In the short run, the firm will shut down

-In the above figure, the marginal cost of the last unit produced by the profit maximizing firm is

Which of the following statements regarding the long-term equilibrium is TRUE?

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $20, how much economic profit does the firm make?

Perfect competition implies that

A perfectly competitive firm's short-run shutdown point is the level of output at which

Suppose a perfectly competitive market is in long-run equilibrium. If there is a permanent increase in demand

A perfectly competitive firm shuts down if the price of its product is

-In the above figure, if the price is $16 per unit, how many units will a profit maximizing perfectly competitive firm produce?

In the short run, a perfectly competitive firm will shut down if

In the long run, fixed costs are

An example of a perfectly competitive firm is

The difference between a firm's total revenue and its total opportunity cost is the firm's

Which of the following is ALWAYS true for a perfectly competitive firm?

-The figure above shows a perfectly competitive firm. The firm is operating; that is, the firm has not shut down. The firm is

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