Question 1

Perfectly competitive markets are not the most efficient type.

Accepted Answer

A) True 
 B)False  False

Question 2

If the price is less that the firm's AVC, the firm's output

Accepted Answer

A) is determined by the relationship between MC and AVC. 
B) will drop to zero. 
C) will change to where MC = ATC. 
D) will increase to where P = AC. 
A) is determined by the relationship between MC and AVC. 
B) will drop to zero. 
C) will change to where MC = ATC. 
D) will increase to where P = AC. B

Question 3

Table 10-1  
-In Table 10-1 the short-run cost schedules of a perfectly competitive firm are shown.Suppose that the market price of output is $20, the firm will produce ____ units and earn a profit of ____.

Accepted Answer

A) 6; $7.02 
B) 6; $112,98 
C) 8; $160 
D) 4; $19 
A) 6; $7.02 
B) 6; $112,98 
C) 8; $160 
D) 4; $19 D

Question 4

Figure 10-4
​  
-Figure 10-4 shows the industry's supply and demand curves in panel (1) and the cost curves of a firm in the industry in panel (2).At S2, the firm is

Accepted Answer

A) going to shut down. 
B) incurring losses. 
C) earning zero economic profits. 
D) earning economic profit greater than zero. 
A) going to shut down. 
B) incurring losses. 
C) earning zero economic profits. 
D) earning economic profit greater than zero.

Question 5

What happens to the price of the product and total revenue for a perfectly competitive firm if it doubles the amount of output it supplies in the market?

Accepted Answer

The perfectly competitive firm is so ins

Question 6

Figure 10-6
​  
-In Figure 10-6, if the current market price is at $10, then in the long-run equilibrium

Accepted Answer

A) each firm will be producing a smaller output. 
B) the market price will rise to $20. 
C) the number of firms in the market will increase. 
D) All of these responses are correct. 
A) each firm will be producing a smaller output. 
B) the market price will rise to $20. 
C) the number of firms in the market will increase. 
D) All of these responses are correct.

Question 7

If the opportunity cost of capital is below the rate of return to capital in the perfectly competitive beauty salon industry,

Accepted Answer

A) resources will flow into the industry. 
B) beauty salon owners must be earning negative economic profit. 
C) the beauty salon industry cannot be in long-run equilibrium. 
D) beauty salon owners must be earning negative marginal revenue at their current levels of output. 
A) resources will flow into the industry. 
B) beauty salon owners must be earning negative economic profit. 
C) the beauty salon industry cannot be in long-run equilibrium. 
D) beauty salon owners must be earning negative marginal revenue at their current levels of output.

Question 8

Zero economic profit means that the firm's owners receive no compensation for their investment.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is a characteristic of a perfectly competitive market?

Accepted Answer

A) A few large firms 
B) Firms producing specialized products in order to attract consumers 
C) Each individual firm having some control over the market price 
D) A large number of small firms 
A) A few large firms 
B) Firms producing specialized products in order to attract consumers 
C) Each individual firm having some control over the market price 
D) A large number of small firms

Question 10

When the market is in long-run equilibrium in a perfectly competitive market, this implies that in the long run means

Accepted Answer

A) no firm in the industry has an incentive to exit. 
B) no firm outside the industry has an incentive to enter. 
C) no firm in the industry has an incentive to increase or decrease its output. 
D) all of these conditions are met in the long run equilibrium. 
A) no firm in the industry has an incentive to exit. 
B) no firm outside the industry has an incentive to enter. 
C) no firm in the industry has an incentive to increase or decrease its output. 
D) all of these conditions are met in the long run equilibrium.

Question 11

A firm can stay in business while taking a loss in the short run as long as it covers its

Accepted Answer

A) fixed costs. 
B) variable costs. 
C) fixed and variable costs. 
D) A firm can never stay in business when it experiences losses. 
A) fixed costs. 
B) variable costs. 
C) fixed and variable costs. 
D) A firm can never stay in business when it experiences losses.

Question 12

In the short run, only a limited number of new firms may enter a perfectly competitive market.

Accepted Answer

A) True 
 B)False

Question 13

Figure 10-2
​  
-Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm.At its profit-maximizing output, the firm's total ____ is represented by area ____.

Accepted Answer

A) loss; GBHC 
B) profit; ADGHC 
C) loss; ADEC 
D) profit; EGH 
A) loss; GBHC 
B) profit; ADGHC 
C) loss; ADEC 
D) profit; EGH

Question 14

Figure 10-1
​  
-Suppose a perfectly competitive firm's situation is shown in Figure 10-1 and the firm is currently producing at D.What can be said about this situation?

Accepted Answer

A) The firm is suffering an economic loss but is maximizing profits. 
B) The firm is not suffering an economic loss but is not maximizing profits. 
C) The firm is not suffering an economic loss and should increase output. 
D) The firm is suffering an economic loss and should decrease output. 
A) The firm is suffering an economic loss but is maximizing profits. 
B) The firm is not suffering an economic loss but is not maximizing profits. 
C) The firm is not suffering an economic loss and should increase output. 
D) The firm is suffering an economic loss and should decrease output.

Question 15

The implications of the zero economic profit condition in a perfectly competitive market implies that the opportunity cost of capital is integrated into the firm's cost relationships.

Accepted Answer

A) True 
 B)False

Question 16

Economists study perfect competition

Accepted Answer

A) because many markets are perfectly competitive. 
B) for its descriptive realism. 
C) to establish a benchmark by which to measure the performance of the economy. 
D) All of the responses are correct. 
A) because many markets are perfectly competitive. 
B) for its descriptive realism. 
C) to establish a benchmark by which to measure the performance of the economy. 
D) All of the responses are correct.

Question 17

We expect the demand curve in the perfectly competitive industry to be

Accepted Answer

A) negatively sloped. 
B) vertical. 
C) horizontal. 
D) perfectly elastic. 
A) negatively sloped. 
B) vertical. 
C) horizontal. 
D) perfectly elastic.

Question 18

In the short run, a perfectly competitive firm can make a profit, a loss, or shut down.

Accepted Answer

A) True 
 B)False

Question 19

In long-run equilibrium, the perfectly competitive firm produces

Accepted Answer

A) where P = MC = AC. 
B) at the lowest point on its long-run average cost curve. 
C) where its long-run average cost curve is tangent to its horizontal demand curve. 
D) All of the responses are correct. 
A) where P = MC = AC. 
B) at the lowest point on its long-run average cost curve. 
C) where its long-run average cost curve is tangent to its horizontal demand curve. 
D) All of the responses are correct.

Question 20

A perfectly competitive firm will not operate where MC = MR but at MC = AC.

Accepted Answer

A) True 
 B)False

Exam 10: The Firm and the Industry Under Perfect Competition

Perfectly competitive markets are not the most efficient type.

If the price is less that the firm's AVC, the firm's output

Table 10-1 -In Table 10-1 the short-run cost schedules of a perfectly competitive firm are shown.Suppose that the market price of output is $20, the firm will produce ____ units and earn a profit of ____.

Figure 10-4 ​ -Figure 10-4 shows the industry's supply and demand curves in panel (1) and the cost curves of a firm in the industry in panel (2).At S2, the firm is

What happens to the price of the product and total revenue for a perfectly competitive firm if it doubles the amount of output it supplies in the market?

Figure 10-6 ​ -In Figure 10-6, if the current market price is at $10, then in the long-run equilibrium

If the opportunity cost of capital is below the rate of return to capital in the perfectly competitive beauty salon industry,

Zero economic profit means that the firm's owners receive no compensation for their investment.

Which of the following is a characteristic of a perfectly competitive market?

When the market is in long-run equilibrium in a perfectly competitive market, this implies that in the long run means

A firm can stay in business while taking a loss in the short run as long as it covers its

In the short run, only a limited number of new firms may enter a perfectly competitive market.

Figure 10-2 ​ -Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm.At its profit-maximizing output, the firm's total ____ is represented by area ____.

Figure 10-1 ​ -Suppose a perfectly competitive firm's situation is shown in Figure 10-1 and the firm is currently producing at D.What can be said about this situation?

The implications of the zero economic profit condition in a perfectly competitive market implies that the opportunity cost of capital is integrated into the firm's cost relationships.

Economists study perfect competition

We expect the demand curve in the perfectly competitive industry to be

In the short run, a perfectly competitive firm can make a profit, a loss, or shut down.

In long-run equilibrium, the perfectly competitive firm produces

A perfectly competitive firm will not operate where MC = MR but at MC = AC.

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Case for Free Markets: the Price System

Monopoly

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

Filters

Table 10-1 -In Table 10-1 the short-run cost schedules of a perfectly competitive firm are shown.Suppose that the market price of output is $20, the firm will produce units and earn a profit of .

Figure 10-4 -Figure 10-4 shows the industry's supply and demand curves in panel (1) and the cost curves of a firm in the industry in panel (2).At S₂, the firm is

Figure 10-6 -In Figure 10-6, if the current market price is at $10, then in the long-run equilibrium

Figure 10-2 -Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm.At its profit-maximizing output, the firm's total is represented by area .

Figure 10-1 -Suppose a perfectly competitive firm's situation is shown in Figure 10-1 and the firm is currently producing at D.What can be said about this situation?