Question 1

Figure 10-2
​  
-Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm.In the short run, this firm would

Accepted Answer

A) earn positive economic profits. 
B) earn economic losses. 
C) go out of business. 
D) Cannot be determined with the information given. 
A) earn positive economic profits. 
B) earn economic losses. 
C) go out of business. 
D) Cannot be determined with the information given.

Question 2

Regardless of quantity in long-run equilibrium, the industry price cannot exceed the

Accepted Answer

A) long-run average cost of supplying that quantity. 
B) total variable cost of supplying that quantity. 
C) long-run total cost of supplying that quantity. 
D) minimum long-run marginal cost of supplying that quantity. 
A) long-run average cost of supplying that quantity. 
B) total variable cost of supplying that quantity. 
C) long-run total cost of supplying that quantity. 
D) minimum long-run marginal cost of supplying that quantity.

Question 3

If a firm sells its output at a price greater than AVC, it will earn economic profit.

Accepted Answer

A) True 
 B)False

Question 4

In the long run, any firm may enter or leave a perfectly competitive market.

Accepted Answer

A) True 
 B)False

Question 5

Figure 10-6
​  
-At its long-run equilibrium level of output, the demand curve facing an individual perfectly competitive firm is tangent to its

Accepted Answer

A) total economic profit curve. 
B) long-run average cost curve. 
C) marginal cost curve. 
D) marginal profit curve. 
A) total economic profit curve. 
B) long-run average cost curve. 
C) marginal cost curve. 
D) marginal profit curve.

Question 6

It is relatively easy for a firm to enter a perfectly competitive market.

Accepted Answer

A) True 
 B)False

Question 7

Perfect competition is an ideal market structure.

Accepted Answer

A) True 
 B)False

Question 8

A perfectly competitive firm is a "price maker."

Accepted Answer

A) True 
 B)False

Question 9

Figure 10-4
​  
-For a competitive firm, if at least some portion of its short-run average cost curve lies below the price of the product, we can conclude that the firm

Accepted Answer

A) is earning a profit at the profit maximizing output level. 
B) is incurring short-run losses. 
C) is earning zero economic profits. 
D) is going to shut down. 
A) is earning a profit at the profit maximizing output level. 
B) is incurring short-run losses. 
C) is earning zero economic profits. 
D) is going to shut down.

Question 10

In long-run equilibrium in perfect competition, every firm is producing at minimum average cost.

Accepted Answer

A) True 
 B)False

Question 11

Firms in a perfectly competitive market produce at minimum average cost in the short run and the long run.

Accepted Answer

A) True 
 B)False

Question 12

Subsidizing firms that pollute will reduce pollution in the long run.

Accepted Answer

A) True 
 B)False

Question 13

When a firm shuts down,

Accepted Answer

A) its fixed costs drop to zero. 
B) revenue will fall to zero. 
C) short-run variable costs remain at current levels in the short run. 
D) All of the responses are correct. 
A) its fixed costs drop to zero. 
B) revenue will fall to zero. 
C) short-run variable costs remain at current levels in the short run. 
D) All of the responses are correct.

Question 14

Which of the following characteristics does not fit a perfectly competitive market?

Accepted Answer

A) Numerous small firms 
B) Identical products produced by all firms in the market 
C) Each individual firm has a small amount of control over the market price 
D) Ease of entry and exit from the market 
A) Numerous small firms 
B) Identical products produced by all firms in the market 
C) Each individual firm has a small amount of control over the market price 
D) Ease of entry and exit from the market

Question 15

Figure 10-7
​  
-In the short run, the firm in Figure 10-8 will shut down if the price falls below

Accepted Answer

A) $8. 
B) $6. 
C) $5. 
D) $1. 
A) $8. 
B) $6. 
C) $5. 
D) $1.

Question 16

It pays the firm to produce only if total variable costs exceed total revenue.

Accepted Answer

A) True 
 B)False

Question 17

Figure 10-6
​  
-In Figure 10-6, the price at long-run equilibrium is

Accepted Answer

A) $5. 
B) $10. 
C) $20. 
D) $35. 
A) $5. 
B) $10. 
C) $20. 
D) $35.

Question 18

Perfectly competitive firms ____ earn zero economic profit in long-run equilibrium because ____.

Accepted Answer

A) always; firms in perfectly competitive industries always maximize output and so flood the market until the equilibrium price of output is driven to zero 
B) sometimes; the demand curve for an individual perfectly competitive firm may or may not cross the company's long-run average total cost curve at its lowest point 
C) always; firms enter whenever their economic profit is positive and exit whenever it's negative, so in long-run equilibrium economic profit must always be zero 
D) never; no firm would be willing to produce if it received zero economic profit 
A) always; firms in perfectly competitive industries always maximize output and so flood the market until the equilibrium price of output is driven to zero 
B) sometimes; the demand curve for an individual perfectly competitive firm may or may not cross the company's long-run average total cost curve at its lowest point 
C) always; firms enter whenever their economic profit is positive and exit whenever it's negative, so in long-run equilibrium economic profit must always be zero 
D) never; no firm would be willing to produce if it received zero economic profit

Question 19

A perfectly competitive firm should continue to expand output whenever

Accepted Answer

A) P > AC. 
B) P > MC. 
C) P > AVC. 
D) P > AFC. 
A) P > AC. 
B) P > MC. 
C) P > AVC. 
D) P > AFC.

Question 20

The market for a perfectly competitive industry clears at a price of $3, and the minimum average cost for all firms is $2.50.In the long run, we would expect an increase in

Accepted Answer

A) each firm's output. 
B) the number of firms. 
C) each firm's profit. 
D) each firm's average cost. 
A) each firm's output. 
B) the number of firms. 
C) each firm's profit. 
D) each firm's average cost.

Exam 10: The Firm and the Industry Under Perfect Competition

Figure 10-2 ​ -Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm.In the short run, this firm would

Regardless of quantity in long-run equilibrium, the industry price cannot exceed the

If a firm sells its output at a price greater than AVC, it will earn economic profit.

In the long run, any firm may enter or leave a perfectly competitive market.

Figure 10-6 ​ -At its long-run equilibrium level of output, the demand curve facing an individual perfectly competitive firm is tangent to its

It is relatively easy for a firm to enter a perfectly competitive market.

Perfect competition is an ideal market structure.

A perfectly competitive firm is a "price maker."

Figure 10-4 ​ -For a competitive firm, if at least some portion of its short-run average cost curve lies below the price of the product, we can conclude that the firm

In long-run equilibrium in perfect competition, every firm is producing at minimum average cost.

Firms in a perfectly competitive market produce at minimum average cost in the short run and the long run.

Subsidizing firms that pollute will reduce pollution in the long run.

When a firm shuts down,

Which of the following characteristics does not fit a perfectly competitive market?

Figure 10-7 ​ -In the short run, the firm in Figure 10-8 will shut down if the price falls below

It pays the firm to produce only if total variable costs exceed total revenue.

Figure 10-6 ​ -In Figure 10-6, the price at long-run equilibrium is

Perfectly competitive firms ____ earn zero economic profit in long-run equilibrium because ____.

A perfectly competitive firm should continue to expand output whenever

The market for a perfectly competitive industry clears at a price of $3, and the minimum average cost for all firms is $2.50.In the long run, we would expect an increase in

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 -Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm.In the short run, this firm would

Figure 10-6 -At its long-run equilibrium level of output, the demand curve facing an individual perfectly competitive firm is tangent to its

Figure 10-4 -For a competitive firm, if at least some portion of its short-run average cost curve lies below the price of the product, we can conclude that the firm

Figure 10-7 -In the short run, the firm in Figure 10-8 will shut down if the price falls below

Figure 10-6 -In Figure 10-6, the price at long-run equilibrium is

Perfectly competitive firms earn zero economic profit in long-run equilibrium because .