Question 1

A perfectly competitive firm would be willing to remain in the industry in the long run at zero economic profit because

Accepted Answer

A) its total revenues would be positive. 
B) accounting profit would be negative. 
C) revenue is equal to all costs, including the opportunity cost of capital and labor. 
D) its fixed costs would prevent it from leaving the industry. 
A) its total revenues would be positive. 
B) accounting profit would be negative. 
C) revenue is equal to all costs, including the opportunity cost of capital and labor. 
D) its fixed costs would prevent it from leaving the industry.

Question 2

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 
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

Question 3

Why study perfect competition, if it rarely exists?

Accepted Answer

Perfect competition is the circumstance

Question 4

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 5

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

Accepted Answer

A) loss; GBHC 
B) profit; ADGHC 
C) loss; ADEC 
D) profit; EGH 
A) loss; GBHC 
B) profit; ADGHC 
C) loss; ADEC 
D) profit; EGH

Question 6

Figure 10-1 ​
 
If the perfectly competitive firm depicted in Figure 10-1 is currently producing at C, its profits

Accepted Answer

A) are equal to zero. 
B) are negative, that is, it is suffering a loss. 
C) are maximized. 
D) could be higher if the firm produced at D. 
A) are equal to zero. 
B) are negative, that is, it is suffering a loss. 
C) are maximized. 
D) could be higher if the firm produced at D.

Question 7

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 8

Figure 10-6 ​
 
In Figure 10-6, if the current market price is at $10, then in the long-run equilibrium

Accepted Answer

A) each firm will be producing a smaller output. 
B) the market price will rise to $20. 
C) the number of firms in the market will increase. 
D) All of these responses are correct. 
A) each firm will be producing a smaller output. 
B) the market price will rise to $20. 
C) the number of firms in the market will increase. 
D) All of these responses are correct.

Question 9

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 10

Draw a graph showing the typical competitive firm losing money but continuing to operate. Explain why the firm continues to operate rather than shut down.

Accepted Answer

Figure 10-10 shows price (= MR)above min

Question 11

Under the theory of perfect competition, firms and buyers know the availability and prices associated with all products in the market.

Accepted Answer

A) True 
 B)False

Question 12

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 13

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

Accepted Answer

A) True 
 B)False

Question 14

Perfect competition requires that three conditions be satisfied.

Accepted Answer

A) True 
 B)False

Question 15

Perfectly competitive firms are known for being "price makers."

Accepted Answer

A) True 
 B)False

Question 16

The entry of new firms into an industry will very likely

Accepted Answer

A) shift the industry supply curve to the right. 
B) cause the market price to fall. 
C) reduce the profits of existing firms in the industry. 
D) All of the responses are correct. 
A) shift the industry supply curve to the right. 
B) cause the market price to fall. 
C) reduce the profits of existing firms in the industry. 
D) All of the responses are correct.

Question 17

What happens to the price of the product and total revenue for a perfectly competitive firm if it doubles the amount of output it supplies in the market?

Accepted Answer

The perfectly competitive firm is so ins

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Entry by new firms into a perfectly competitive industry

Accepted Answer

A) has no effect on existing firms. 
B) results in higher output by existing firms in equilibrium. 
C) results in lower output by existing firms in equilibrium. 
D) results in no change in the market price or output. 
A) has no effect on existing firms. 
B) results in higher output by existing firms in equilibrium. 
C) results in lower output by existing firms in equilibrium. 
D) results in no change in the market price or output.

Question 20

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.

Exam 10: The Firm and the Industry Under Perfect Competition

A perfectly competitive firm would be willing to remain in the industry in the long run at zero economic profit because

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

Why study perfect competition, if it rarely exists?

A perfectly competitive firm will always maximize profits by producing where

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

Figure 10-1 ​ If the perfectly competitive firm depicted in Figure 10-1 is currently producing at C, its profits

The demand curve in the perfectly competitive industry

Figure 10-6 ​ In Figure 10-6, if the current market price is at $10, then in the long-run equilibrium

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

Draw a graph showing the typical competitive firm losing money but continuing to operate. Explain why the firm continues to operate rather than shut down.

Under the theory of perfect competition, firms and buyers know the availability and prices associated with all products in the market.

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

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

Perfect competition requires that three conditions be satisfied.

Perfectly competitive firms are known for being "price makers."

The entry of new firms into an industry will very likely

What happens to the price of the product and total revenue for a perfectly competitive firm if it doubles the amount of output it supplies in the market?

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

Entry by new firms into a perfectly competitive industry

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

What Is Economics

The Economy: 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

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

Filters

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

Figure 10-1 If the perfectly competitive firm depicted in Figure 10-1 is currently producing at C, its profits

Figure 10-6 In Figure 10-6, if the current market price is at $10, then in the long-run equilibrium