Question 1

Perfect competition is characterized by numerous products with well-known brand names.

Accepted Answer

A) True 
 B)False

Question 2

The entry of new firms into a perfectly competitive market shifts the demand curve outward.

Accepted Answer

A) True 
 B)False

Question 3

The short-run supply curve of a perfectly competitive firm

Accepted Answer

A) intersects the minimum point of its short-run average total cost curve but not its short-run average variable cost curve. 
B) intersects the minimum point of its short-run average variable cost curve but not its short-run average total cost curve. 
C) intersects the minimum point of both its short-run average variable cost and its short-run average total cost curves. 
D) intersects the minimum point of its short-run average total cost curve and may or may not intersect the minimum point of its short-run average variable cost curve. 
A) intersects the minimum point of its short-run average total cost curve but not its short-run average variable cost curve. 
B) intersects the minimum point of its short-run average variable cost curve but not its short-run average total cost curve. 
C) intersects the minimum point of both its short-run average variable cost and its short-run average total cost curves. 
D) intersects the minimum point of its short-run average total cost curve and may or may not intersect the minimum point of its short-run average variable cost curve.

Question 4

Figure 10-4
​  
-If a competitive firm's short-run average cost curve lies above the price of the product, we can conclude that the firm

Accepted Answer

A) is earning a huge profit. 
B) is incurring losses. 
C) is earning zero economic profits. 
D) is earning a normal profit. 
A) is earning a huge profit. 
B) is incurring losses. 
C) is earning zero economic profits. 
D) is earning a normal profit.

Question 5

In determining whether a market meets the conditions for perfect competition, it is necessary to

Accepted Answer

A) consider the number of firms in the market. 
B) determine the appropriate size of the firm. 
C) assess the production technology available to firms. 
D) evaluate the promotional tools that can be used by firms. 
A) consider the number of firms in the market. 
B) determine the appropriate size of the firm. 
C) assess the production technology available to firms. 
D) evaluate the promotional tools that can be used by firms.

Question 6

A perfectly competitive industry in long-run equilibrium is described as efficient because firms

Accepted Answer

A) produce at the low point on their average cost curve. 
B) produce where marginal cost yields a profit. 
C) earn no more than the cost of capital. 
D) are not profitable. 
A) produce at the low point on their average cost curve. 
B) produce where marginal cost yields a profit. 
C) earn no more than the cost of capital. 
D) are not profitable.

Question 7

Which of the following is a characteristic of perfect competition?

Accepted Answer

A) Large barriers to entry. 
B) A small number of firms. 
C) Firms selling unique goods. 
D) None of the alternatives are characteristics of perfect competition. 
A) Large barriers to entry. 
B) A small number of firms. 
C) Firms selling unique goods. 
D) None of the alternatives are characteristics of perfect competition.

Question 8

The number of firms in a perfectly competitive industry is not fixed in the long run.

Accepted Answer

A) True 
 B)False

Question 9

A firm that knows the market price for its product and its costs can determine how much output that they wish to produce.

Accepted Answer

A) True 
 B)False

Question 10

What is the difference between the short run and the long run as economists define the two?

Accepted Answer

The short run is a period of time within

Question 11

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

Accepted Answer

A) ADFO. 
B) BGHC. 
C) BGIO. 
D) ADGIO. 
A) ADFO. 
B) BGHC. 
C) BGIO. 
D) ADGIO.

Question 12

At a perfectly competitive firm's short-run equilibrium level of output,

Accepted Answer

A) P = MR = MC. 
B) P = MR, but MR does not equal MC. 
C) P = MC, but MR does not equal MC. 
D) MR = MC and P < MR. 
A) P = MR = MC. 
B) P = MR, but MR does not equal MC. 
C) P = MC, but MR does not equal MC. 
D) MR = MC and P < MR.

Question 13

We don't need to draw separate curves for demand, average revenue, and marginal revenue curves for a perfectly competitive firm.Why?

Accepted Answer

Under perfect competition the firm's dem

Question 14

In perfect competition, there are differences in the products sold by various firms.

Accepted Answer

A) True 
 B)False

Question 15

In perfect competition, a firm's marginal revenue is the same as the demand curve at high levels of output.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is closest to the economist's definition of perfect competition?

Accepted Answer

A) The airline industry 
B) The soft drink industry 
C) The fishing industry 
D) Cellular telephone service 
A) The airline industry 
B) The soft drink industry 
C) The fishing industry 
D) Cellular telephone service

Question 17

A perfectly competitive firm can maximize profits by producing the quantity at which MR exceeds MC by the greatest amount.

Accepted Answer

A) True 
 B)False

Question 18

The demand curve in the perfectly competitive industry

Accepted Answer

A) is identical to the firm's demand curve. 
B) negatively sloped. 
C) positively sloped. 
D) perfectly elastic. 
A) is identical to the firm's demand curve. 
B) negatively sloped. 
C) positively sloped. 
D) perfectly elastic.

Question 19

The market for a perfectly competitive industry has an equilibrium price of $5 and the minimum average cost for the firms in this market is $3.In the long run, we would expect

Accepted Answer

A) each firm to produce less output than their current output. 
B) the number of firms to fall. 
C) each firm's profits to remain at $2 per unit. 
D) each firm's average cost to rise. 
A) each firm to produce less output than their current output. 
B) the number of firms to fall. 
C) each firm's profits to remain at $2 per unit. 
D) each firm's average cost to rise.

Question 20

Why doesn't a perfectly competitive firm charge a price slightly higher than the industry price in order to earn extra profit?

Accepted Answer

A perfectly competitive firm is producin

Exam 10: The Firm and the Industry Under Perfect Competition

Perfect competition is characterized by numerous products with well-known brand names.

The entry of new firms into a perfectly competitive market shifts the demand curve outward.

The short-run supply curve of a perfectly competitive firm

Figure 10-4 ​ -If a competitive firm's short-run average cost curve lies above the price of the product, we can conclude that the firm

In determining whether a market meets the conditions for perfect competition, it is necessary to

A perfectly competitive industry in long-run equilibrium is described as efficient because firms

Which of the following is a characteristic of perfect competition?

The number of firms in a perfectly competitive industry is not fixed in the long run.

A firm that knows the market price for its product and its costs can determine how much output that they wish to produce.

What is the difference between the short run and the long run as economists define the two?

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

At a perfectly competitive firm's short-run equilibrium level of output,

We don't need to draw separate curves for demand, average revenue, and marginal revenue curves for a perfectly competitive firm.Why?

In perfect competition, there are differences in the products sold by various firms.

In perfect competition, a firm's marginal revenue is the same as the demand curve at high levels of output.

Which of the following is closest to the economist's definition of perfect competition?

A perfectly competitive firm can maximize profits by producing the quantity at which MR exceeds MC by the greatest amount.

The demand curve in the perfectly competitive industry

The market for a perfectly competitive industry has an equilibrium price of $5 and the minimum average cost for the firms in this market is $3.In the long run, we would expect

Why doesn't a perfectly competitive firm charge a price slightly higher than the industry price in order to earn extra profit?

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 10-4 -If a competitive firm's short-run average cost curve lies above the price of the product, we can conclude that the firm

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