Question 1

If a perfectly competitive industry is in long-run equilibrium, firms maximize profits, and the process of entry and exit results in

Accepted Answer

A) all firms producing where P = MC = AC. 
B) a left shift in the industry supply curve. 
C) a few firms earning economic profits. 
D) the price falling to the point where MR > MC. 
A) all firms producing where P = MC = AC. 
B) a left shift in the industry supply curve. 
C) a few firms earning economic profits. 
D) the price falling to the point where MR > MC.

Question 2

The short-run supply curve for a perfectly competitive firm is that portion of the MC curve above the AVC curve.

Accepted Answer

A) True 
 B)False

Question 3

When a perfectly competitive industry is in long-run equilibrium, firms maximize profits, and entry forces the price down

Accepted Answer

A) until all firms with losses leave the industry. 
B) until each firm can earn acceptable level of economic profit. 
C) until price becomes tangent to the long-run average cost curve. 
D) until the long-run average cost curve rises above the demand curve. 
A) until all firms with losses leave the industry. 
B) until each firm can earn acceptable level of economic profit. 
C) until price becomes tangent to the long-run average cost curve. 
D) until the long-run average cost curve rises above the demand curve.

Question 4

If you must determine the long-run equilibrium output of a perfectly competitive firm and you are permitted to see only one curve, which of the following curves is most helpful?

Accepted Answer

A) Demand 
B) Marginal cost 
C) Average cost 
D) Average fixed cost 
A) Demand 
B) Marginal cost 
C) Average cost 
D) Average fixed cost

Question 5

Perfect competition requires that three conditions be satisfied.

Accepted Answer

A) True 
 B)False

Question 6

Figure 10-2
​  
-In the short run, perfectly competitive firms will determine whether to continue producing the current output, reduce output, or increase output based on the relationship between

Accepted Answer

A) price and average cost. 
B) price and marginal cost. 
C) marginal revenue and average cost. 
D) average revenue and average cost. 
A) price and average cost. 
B) price and marginal cost. 
C) marginal revenue and average cost. 
D) average revenue and average cost.

Question 7

A subsidy to firms intended to reduce pollution in an industry would

Accepted Answer

A) shift the LRAC curve upward. 
B) have the same impact on the firm as a tax. 
C) likely drive some existing firms from the industry. 
D) likely have the paradoxical effect of increasing pollution in the industry in the long run. 
A) shift the LRAC curve upward. 
B) have the same impact on the firm as a tax. 
C) likely drive some existing firms from the industry. 
D) likely have the paradoxical effect of increasing pollution in the industry in the long run.

Question 8

For a firm in a perfectly competitive market, its short-run supply curve is that portion of the MC curve above where it intersects with the average total cost curve.

Accepted Answer

A) True 
 B)False

Question 9

As long as TVC < TR, a firm will have a positive level of output in the short run.

Accepted Answer

A) True 
 B)False

Question 10

A firm that is operating at a loss may continue to operate for a while because of costs that it will still have to pay even if production ceases.

Accepted Answer

A) True 
 B)False

Question 11

The perfectly competitive widget industry is in long-run equilibrium.A profit-maximizing manufacturer receives total revenue of $55,000.He uses his labor, $15,000 worth of wire, and $15,000 worth of steel to make the widgets.The manufacturer

Accepted Answer

A) is earning an economic profit of $25,000. 
B) must have an opportunity cost of labor of less than $25,000. 
C) must have an opportunity cost of labor of exactly $25,000. 
D) must have an opportunity cost of labor of more than $25,000. 
A) is earning an economic profit of $25,000. 
B) must have an opportunity cost of labor of less than $25,000. 
C) must have an opportunity cost of labor of exactly $25,000. 
D) must have an opportunity cost of labor of more than $25,000.

Question 12

Long-run average cost of the perfectly competitive firm includes the

Accepted Answer

A) cost of raw materials per unit of output. 
B) opportunity cost of labor per unit of output. 
C) opportunity cost of capital per unit of output. 
D) All of the responses are correct. 
A) cost of raw materials per unit of output. 
B) opportunity cost of labor per unit of output. 
C) opportunity cost of capital per unit of output. 
D) All of the responses are correct.

Question 13

The long run for the industry is defined as a period of time long enough for

Accepted Answer

A) any new firm that desires to enter the industry. 
B) any old firm that desires to leave the industry. 
C) all aspects of production to vary and there are no fixed costs. 
D) All of the responses are correct. 
A) any new firm that desires to enter the industry. 
B) any old firm that desires to leave the industry. 
C) all aspects of production to vary and there are no fixed costs. 
D) All of the responses are correct.

Question 14

In a market with perfectly competitive firms, the market demand curve is usually ____ and the demand curve facing each individual firm ____.

Accepted Answer

A) upward sloping; horizontal 
B) downward sloping; horizontal 
C) horizontal; downward sloping 
D) downward sloping; downward sloping 
A) upward sloping; horizontal 
B) downward sloping; horizontal 
C) horizontal; downward sloping 
D) downward sloping; downward sloping

Question 15

An industry supply curve is the horizontal summation of the supply curves of all of the individual firms.

Accepted Answer

A) True 
 B)False

Question 16

A tax on polluting firms

Accepted Answer

A) would shift the LRAC curve upward. 
B) would shift the LRAC curve downward. 
C) would have the same impact on the firm as a subsidy. 
D) tends to have the perverse effect of increasing pollution. 
A) would shift the LRAC curve upward. 
B) would shift the LRAC curve downward. 
C) would have the same impact on the firm as a subsidy. 
D) tends to have the perverse effect of increasing pollution.

Question 17

The market for toothpaste is a good example of perfect competition.

Accepted Answer

A) True 
 B)False

Question 18

Figure 10-7
​  
-In Figure 10-7, output at which point represents short-run but not long-run equilibrium?

Accepted Answer

A) A only 
B) B only 
C) Both A and B 
D) Both B and C 
A) A only 
B) B only 
C) Both A and B 
D) Both B and C

Question 19

The long-run industry supply curve in perfect competition is derived from the

Accepted Answer

A) short-run industry supply curve which shifts as new firms enter the industry. 
B) short-run industry supply curve which shifts as old firms exit the industry. 
C) freedom of firms from sunk costs so that new cost curves become long-run curves. 
D) All of the reasons listed. 
A) short-run industry supply curve which shifts as new firms enter the industry. 
B) short-run industry supply curve which shifts as old firms exit the industry. 
C) freedom of firms from sunk costs so that new cost curves become long-run curves. 
D) All of the reasons listed.

Question 20

Once a firm's marginal revenue curve is known, the output level can be determined.

Accepted Answer

A) True 
 B)False

Exam 10: The Firm and the Industry Under Perfect Competition

If a perfectly competitive industry is in long-run equilibrium, firms maximize profits, and the process of entry and exit results in

The short-run supply curve for a perfectly competitive firm is that portion of the MC curve above the AVC curve.

When a perfectly competitive industry is in long-run equilibrium, firms maximize profits, and entry forces the price down

If you must determine the long-run equilibrium output of a perfectly competitive firm and you are permitted to see only one curve, which of the following curves is most helpful?

Perfect competition requires that three conditions be satisfied.

Figure 10-2 ​ -In the short run, perfectly competitive firms will determine whether to continue producing the current output, reduce output, or increase output based on the relationship between

A subsidy to firms intended to reduce pollution in an industry would

For a firm in a perfectly competitive market, its short-run supply curve is that portion of the MC curve above where it intersects with the average total cost curve.

As long as TVC < TR, a firm will have a positive level of output in the short run.

A firm that is operating at a loss may continue to operate for a while because of costs that it will still have to pay even if production ceases.

The perfectly competitive widget industry is in long-run equilibrium.A profit-maximizing manufacturer receives total revenue of $55,000.He uses his labor, $15,000 worth of wire, and $15,000 worth of steel to make the widgets.The manufacturer

Long-run average cost of the perfectly competitive firm includes the

The long run for the industry is defined as a period of time long enough for

In a market with perfectly competitive firms, the market demand curve is usually ____ and the demand curve facing each individual firm ____.

An industry supply curve is the horizontal summation of the supply curves of all of the individual firms.

A tax on polluting firms

The market for toothpaste is a good example of perfect competition.

Figure 10-7 ​ -In Figure 10-7, output at which point represents short-run but not long-run equilibrium?

The long-run industry supply curve in perfect competition is derived from the

Once a firm's marginal revenue curve is known, the output level can be determined.

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 will determine whether to continue producing the current output, reduce output, or increase output based on the relationship between

In a market with perfectly competitive firms, the market demand curve is usually and the demand curve facing each individual firm .

Figure 10-7 -In Figure 10-7, output at which point represents short-run but not long-run equilibrium?