Question 1

In the short run, a perfectly competitive firm can make a profit, a loss, or go out of business.

Accepted Answer

A) True 
 B)False

Question 2

Helga owns Viking, Inc., started with her $100,000 inheritance.Helga's accountant informs her that her firm earned a profit of $100,000 last year, and that if she chooses to invest the money she can expect a 10 percent return.If Helga did not run Viking, she would not work.What were Helga's economic profits last year?

Accepted Answer

A) Zero 
B) $100,000 
C) $90,000 
D) $95,000 
A) Zero 
B) $100,000 
C) $90,000 
D) $95,000

Question 3

Figure 10-9
​  
-Figure 10-9 shows supply and demand conditions in a perfectly competitive industry and for a firm in that industry.Assume the industry initially has supply curve S1 and demand curve D1.If demand shifts to D2, then in the short run price will

Accepted Answer

A) rise to A. 
B) rise to some level between A and B. 
C) remain at B. 
D) fall to C. 
A) rise to A. 
B) rise to some level between A and B. 
C) remain at B. 
D) fall to C.

Question 4

The short-run market demand curve in perfect competition is positively sloped.

Accepted Answer

A) True 
 B)False

Question 5

A firm will not choose to produce if total variable costs exceed total revenue.

Accepted Answer

A) True 
 B)False

Question 6

A perfectly competitive firm will always maximize profits by producing where

Accepted Answer

A) per-unit costs are lowest. 
B) total costs and total revenue are equal. 
C) P = MC. 
D) P = AC. 
A) per-unit costs are lowest. 
B) total costs and total revenue are equal. 
C) P = MC. 
D) P = AC.

Question 7

The most efficient market structure in the long run is

Accepted Answer

A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly. 
A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly.

Question 8

Which of the following markets most closely resembles the characteristics of a perfectly competitive market?

Accepted Answer

A) The cable television industry 
B) The fast food restaurant industry 
C) The steel industry 
D) Hot dog vendors on city streets 
A) The cable television industry 
B) The fast food restaurant industry 
C) The steel industry 
D) Hot dog vendors on city streets

Question 9

Table 10-2   ​
-Refer to Table 10-2.Which firm is better off staying in business in the short run?

Accepted Answer

A) Firm A 
B) Firm B 
C) Firm C 
D) Firm D 
A) Firm A 
B) Firm B 
C) Firm C 
D) Firm D

Question 10

Perfect competition forms one extreme of the market structure spectrum.

Accepted Answer

A) True 
 B)False

Question 11

Under perfect competition, firms are relatively ignorant of the actions of their competitors.

Accepted Answer

A) True 
 B)False

Question 12

In a long-run equilibrium in a perfectly competitive market, firms are selling at a price equal to marginal cost.

Accepted Answer

A) True 
 B)False

Question 13

The demand curve of a perfectly competitive firm is vertical.

Accepted Answer

A) True 
 B)False

Question 14

The short-run supply curve for the perfectly competitive firm is that part of the marginal cost curve that lies above the average fixed cost curve.

Accepted Answer

A) True 
 B)False

Question 15

Figure 10-1
​  
-A firm earns a profit of exactly zero at its optimal output level only if

Accepted Answer

A) P = MR. 
B) P = MC. 
C) P = AC. 
D) P = SRAVC. 
A) P = MR. 
B) P = MC. 
C) P = AC. 
D) P = SRAVC.

Question 16

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

Accepted Answer

A) True 
 B)False

Question 17

Perfectly competitive markets feature relatively high barriers to entry.

Accepted Answer

A) True 
 B)False

Question 18

When a firm leaves a perfectly competitive industry,

Accepted Answer

A) the individual demand curves facing remaining firms shift toward the point of minimum average cost in the long run. 
B) short-run industry equilibrium is reestablished at a new point along the original short-run industry supply curve. 
C) the short-run industry supply curve shifts to the right. 
D) at the new long-run equilibrium, the remaining firms in the industry will each receive a higher profit. 
A) the individual demand curves facing remaining firms shift toward the point of minimum average cost in the long run. 
B) short-run industry equilibrium is reestablished at a new point along the original short-run industry supply curve. 
C) the short-run industry supply curve shifts to the right. 
D) at the new long-run equilibrium, the remaining firms in the industry will each receive a higher profit.

Question 19

A perfectly competitive firm is a price

Accepted Answer

A) giver. 
B) taker. 
C) maker. 
D) leader. 
A) giver. 
B) taker. 
C) maker. 
D) leader.

Question 20

In the short run, if price is below AC, maximizing profits really means minimizing total losses.

Accepted Answer

A) True 
 B)False

Exam 10: The Firm and the Industry Under Perfect Competition

In the short run, a perfectly competitive firm can make a profit, a loss, or go out of business.

Figure 10-9 ​ -Figure 10-9 shows supply and demand conditions in a perfectly competitive industry and for a firm in that industry.Assume the industry initially has supply curve S1 and demand curve D1.If demand shifts to D2, then in the short run price will

The short-run market demand curve in perfect competition is positively sloped.

A firm will not choose to produce if total variable costs exceed total revenue.

A perfectly competitive firm will always maximize profits by producing where

The most efficient market structure in the long run is

Which of the following markets most closely resembles the characteristics of a perfectly competitive market?

Table 10-2 ​ -Refer to Table 10-2.Which firm is better off staying in business in the short run?

Perfect competition forms one extreme of the market structure spectrum.

Under perfect competition, firms are relatively ignorant of the actions of their competitors.

In a long-run equilibrium in a perfectly competitive market, firms are selling at a price equal to marginal cost.

The demand curve of a perfectly competitive firm is vertical.

The short-run supply curve for the perfectly competitive firm is that part of the marginal cost curve that lies above the average fixed cost curve.

Figure 10-1 ​ -A firm earns a profit of exactly zero at its optimal output level only if

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

Perfectly competitive markets feature relatively high barriers to entry.

When a firm leaves a perfectly competitive industry,

A perfectly competitive firm is a price

In the short run, if price is below AC, maximizing profits really means minimizing total losses.

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 10-9 -Figure 10-9 shows supply and demand conditions in a perfectly competitive industry and for a firm in that industry.Assume the industry initially has supply curve S₁ and demand curve D₁.If demand shifts to D₂, then in the short run price will

Table 10-2 -Refer to Table 10-2.Which firm is better off staying in business in the short run?

Figure 10-1 -A firm earns a profit of exactly zero at its optimal output level only if