Question 1

In the short run if TR < TC, a perfectly competitive firm will always shut down.

Accepted Answer

A) True 
 B)False

Question 2

A perfectly competitive firm has a horizontal demand curve because it can sell as much as it wants at the market price.

Accepted Answer

A) True 
 B)False

Question 3

The strength of the competition faced by a company can profoundly affect its

Accepted Answer

A) pricing. 
B) output decisions. 
C) input decisions. 
D) All of the responses are correct. 
A) pricing. 
B) output decisions. 
C) input decisions. 
D) All of the responses are correct.

Question 4

The perfectly competitive firm's short-run shutdown rule is to shut down immediately if

Accepted Answer

A) TR  Q. 
A) TR  Q.

Question 5

A firm that is earning zero economic profit should go out of business.

Accepted Answer

A) True 
 B)False

Question 6

A market

Accepted Answer

A) may be an organized exchange. 
B) refers to a set of sellers and buyers whose actions affect a commodity's price. 
C) is that area in which buyers and sellers compete to affect a product's price. 
D) All of the responses are correct. 
A) may be an organized exchange. 
B) refers to a set of sellers and buyers whose actions affect a commodity's price. 
C) is that area in which buyers and sellers compete to affect a product's price. 
D) All of the responses are correct.

Question 7

In perfect competition, an increase in fixed costs will eventually cause all except

Accepted Answer

A) reduction in industry output. 
B) reduction in a firm's output. 
C) reduction in the number of firms. 
D) decrease in industry supply. 
A) reduction in industry output. 
B) reduction in a firm's output. 
C) reduction in the number of firms. 
D) decrease in industry supply.

Question 8

Perfectly competitive markets are not the best at producing the goods that are desired by consumers.

Accepted Answer

A) True 
 B)False

Question 9

In long-run equilibrium under perfect competition,

Accepted Answer

A) the firm and the industry will have the same cost curves. 
B) only a very few firms will be earning economic profits. 
C) the demand curves facing individual firms will fall to the level of minimum AC. 
D) individual firms will tend to increase their outputs. 
A) the firm and the industry will have the same cost curves. 
B) only a very few firms will be earning economic profits. 
C) the demand curves facing individual firms will fall to the level of minimum AC. 
D) individual firms will tend to increase their outputs.

Question 10

Which of the following statements is not true in a perfectly competitive industry in long-run equilibrium?

Accepted Answer

A) A profit-maximizing firm may produce any output level at which P < LRAC. 
B) Every firm produces at an output level at which MC = LRAC. 
C) There is no entry or exit from the industry. 
D) No firm earns an economic profit. 
A) A profit-maximizing firm may produce any output level at which P < LRAC. 
B) Every firm produces at an output level at which MC = LRAC. 
C) There is no entry or exit from the industry. 
D) No firm earns an economic profit.

Question 11

Which of the following statements concerning equilibrium in the long run is not true?

Accepted Answer

A) Most firms earn economic profits in the long run. 
B) The firm can vary its plant size in the long run. 
C) Economic profits are eliminated as new firms enter the industry in the long run. 
D) For firms in long-run equilibrium, P = MC = AC. 
A) Most firms earn economic profits in the long run. 
B) The firm can vary its plant size in the long run. 
C) Economic profits are eliminated as new firms enter the industry in the long run. 
D) For firms in long-run equilibrium, P = MC = AC.

Question 12

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 13

At a firm's profit-maximizing level of output, its price is $200 and its short-run average total cost is $225.The firm

Accepted Answer

A) has a profit of $25 per unit of output. 
B) should shut down if its short-run average fixed cost is less than $25. 
C) has a loss of $100 per unit of output. 
D) should shut down if its short-run average variable cost exceeds $25. 
A) has a profit of $25 per unit of output. 
B) should shut down if its short-run average fixed cost is less than $25. 
C) has a loss of $100 per unit of output. 
D) should shut down if its short-run average variable cost exceeds $25.

Question 14

In a perfectly competitive industry, influence over price is exerted by

Accepted Answer

A) individual sellers. 
B) individual buyers. 
C) the largest firms. 
D) the forces of supply and demand. 
A) individual sellers. 
B) individual buyers. 
C) the largest firms. 
D) the forces of supply and demand.

Question 15

Perfectly competitive markets have absolutely no drawbacks.

Accepted Answer

A) True 
 B)False

Question 16

The process of adjustment to a new long-run equilibrium in a perfectly competitive industry is complete when

Accepted Answer

A) no firms want to enter or exit the industry. 
B) every firm has adjusted its production process to make the most efficient use of its resources. 
C) investors in the industry receive the standard economy-wide rate of return on their investments. 
D) All of the responses are correct. 
A) no firms want to enter or exit the industry. 
B) every firm has adjusted its production process to make the most efficient use of its resources. 
C) investors in the industry receive the standard economy-wide rate of return on their investments. 
D) All of the responses are correct.

Question 17

If the price falls below minimum SRAVC, the quantity supplied by the firm will be

Accepted Answer

A) the quantity at minimum MC. 
B) zero. 
C) the quantity at the point where MC intersects AC. 
D) the quantity at minimum AC. 
A) the quantity at minimum MC. 
B) zero. 
C) the quantity at the point where MC intersects AC. 
D) the quantity at minimum AC.

Question 18

Figure 10-2
​  
-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 responses are correct. 
A) make an economic profit. 
B) take a loss. 
C) break even. 
D) All of the responses are correct.

Question 19

Under perfect competition, a firm's

Accepted Answer

A) demand curve and average revenue curve are identical, but the marginal revenue curve is different. 
B) demand curve is different, but the average revenue curve and the marginal revenue curve are identical. 
C) demand curve, average revenue curve and marginal revenue curve are identical. 
D) none of these are true. 
A) demand curve and average revenue curve are identical, but the marginal revenue curve is different. 
B) demand curve is different, but the average revenue curve and the marginal revenue curve are identical. 
C) demand curve, average revenue curve and marginal revenue curve are identical. 
D) none of these are true.

Question 20

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.

Exam 10: The Firm and the Industry Under Perfect Competition

In the short run if TR < TC, a perfectly competitive firm will always shut down.

A perfectly competitive firm has a horizontal demand curve because it can sell as much as it wants at the market price.

The strength of the competition faced by a company can profoundly affect its

The perfectly competitive firm's short-run shutdown rule is to shut down immediately if

A firm that is earning zero economic profit should go out of business.

A market

In perfect competition, an increase in fixed costs will eventually cause all except

Perfectly competitive markets are not the best at producing the goods that are desired by consumers.

In long-run equilibrium under perfect competition,

Which of the following statements is not true in a perfectly competitive industry in long-run equilibrium?

Which of the following statements concerning equilibrium in the long run is not true?

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

At a firm's profit-maximizing level of output, its price is $200 and its short-run average total cost is $225.The firm

In a perfectly competitive industry, influence over price is exerted by

Perfectly competitive markets have absolutely no drawbacks.

The process of adjustment to a new long-run equilibrium in a perfectly competitive industry is complete when

If the price falls below minimum SRAVC, the quantity supplied by the firm will be

Figure 10-2 ​ -In the short run, perfectly competitive firms can

Under perfect competition, a firm's

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

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

Figure 10-2 -In the short run, perfectly competitive firms can

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