Question 1

A firm in short-run equilibrium always earns positive profits if

Accepted Answer

A) AC > P > AVC. 
B) AR > AC. 
C) MR = MC. 
D) AC > MC. 
A) AC > P > AVC. 
B) AR > AC. 
C) MR = MC. 
D) AC > MC.

Question 2

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

Accepted Answer

A) True 
 B)False

Question 3

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 4

The long-run supply curve of an industry equals the industry's

Accepted Answer

A) long-run marginal cost curve. 
B) the horizontal sum of all firms' supply curves at any point in time. 
C) long-run average cost curve. 
D) long-run total variable cost curve. 
A) long-run marginal cost curve. 
B) the horizontal sum of all firms' supply curves at any point in time. 
C) long-run average cost curve. 
D) long-run total variable cost curve.

Question 5

When the market is in long-run equilibrium in a perfectly competitive market, this implies that in the long run means

Accepted Answer

A) no firm in the industry has an incentive to exit. 
B) no firm outside the industry has an incentive to enter. 
C) no firm in the industry has an incentive to increase or decrease its output. 
D) all of these conditions are met in the long run equilibrium. 
A) no firm in the industry has an incentive to exit. 
B) no firm outside the industry has an incentive to enter. 
C) no firm in the industry has an incentive to increase or decrease its output. 
D) all of these conditions are met in the long run equilibrium.

Question 6

In long-run equilibrium, the perfectly competitive firm produces

Accepted Answer

A) where P = MC = AC. 
B) at the lowest point on its long-run average cost curve. 
C) where its long-run average cost curve is tangent to its horizontal demand curve. 
D) All of the responses are correct. 
A) where P = MC = AC. 
B) at the lowest point on its long-run average cost curve. 
C) where its long-run average cost curve is tangent to its horizontal demand curve. 
D) All of the responses are correct.

Question 7

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 8

In the short run, a perfectly competitive firm can either make a profit or exit the market.

Accepted Answer

A) True 
 B)False

Question 9

Table 10-1   In Table 10-1 the short-run cost schedules of a perfectly competitive firm are shown. Suppose that the market price of output is $20, the firm will produce ____ units and earn a profit of ____.

Accepted Answer

A) 6; $7.02 
B) 6; $112,98 
C) 8; $160 
D) 4; $19 
A) 6; $7.02 
B) 6; $112,98 
C) 8; $160 
D) 4; $19

Question 10

Explain the reasoning behind the shutdown rules. When is it appropriate to operate with a loss?

Accepted Answer

1. The firm will make a profit if total

Question 11

The perfectly competitive firm has no influence over price because

Accepted Answer

A) its output is so insignificant relative to the market as a whole. 
B) antitrust laws constrain perfectly competitive firms. 
C) consumers establish the prices of products. 
D) it doesn't know its demand curve. 
A) its output is so insignificant relative to the market as a whole. 
B) antitrust laws constrain perfectly competitive firms. 
C) consumers establish the prices of products. 
D) it doesn't know its demand curve.

Question 12

Define the following terms and explain their importance to the study of economics. 
a. marginal cost 
b. marginal revenue 
c. short-run equilibrium 
d. supply curve of the firm 
e. economic profit

Accepted Answer

a. Marginal cost is the cost to the firm

Question 13

A perfectly competitive firm has a horizontal demand curve because it can sell as much as it wants at the market price.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following statements concerning equilibrium in the long run is not true?

Accepted Answer

A) Most firms earn economic profits in the long run. 
B) The firm can vary its plant size in the long run. 
C) Economic profits are eliminated as new firms enter the industry in the long run. 
D) For firms in long-run equilibrium, P = MC = AC. 
A) Most firms earn economic profits in the long run. 
B) The firm can vary its plant size in the long run. 
C) Economic profits are eliminated as new firms enter the industry in the long run. 
D) For firms in long-run equilibrium, P = MC = AC.

Question 15

Figure 10-8 ​
 
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

Which requirement for perfect competition rules out trade associations or other collusive arrangements in which firms work together to influence price?

Accepted Answer

A) Freedom of entry and exit 
B) Homogeneity of product 
C) Perfect information 
D) Numerous small firms and customers 
A) Freedom of entry and exit 
B) Homogeneity of product 
C) Perfect information 
D) Numerous small firms and customers

Question 17

The result that perfectly competitive firms produce at the lowest per-unit cost is derived from the assumptions of

Accepted Answer

A) homogeneous products. 
B) few sellers. 
C) firms facing horizontal demand curves. 
D) free entry and exit. 
A) homogeneous products. 
B) few sellers. 
C) firms facing horizontal demand curves. 
D) free entry and exit.

Question 18

Draw a graph illustrating the relationship between the demand curve of the perfectly competitive firm and the perfectly competitive industry. Label all curves and axes correctly.

Accepted Answer

The diagram of the firm and in

Question 19

The exit of existing firms from an industry will very likely

Accepted Answer

A) shift the industry supply curve to the left. 
B) cause the market price to rise. 
C) eliminate the losses of existing firms in the industry. 
D) All of the responses are correct. 
A) shift the industry supply curve to the left. 
B) cause the market price to rise. 
C) eliminate the losses of existing firms in the industry. 
D) All of the responses are correct.

Question 20

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.

Exam 10: The Firm and the Industry Under Perfect Competition

A firm in short-run equilibrium always earns positive profits if

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

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

The long-run supply curve of an industry equals the industry's

When the market is in long-run equilibrium in a perfectly competitive market, this implies that in the long run means

In long-run equilibrium, the perfectly competitive firm produces

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

In the short run, a perfectly competitive firm can either make a profit or exit the market.

Table 10-1 In Table 10-1 the short-run cost schedules of a perfectly competitive firm are shown. Suppose that the market price of output is $20, the firm will produce ____ units and earn a profit of ____.

Explain the reasoning behind the shutdown rules. When is it appropriate to operate with a loss?

The perfectly competitive firm has no influence over price because

Define the following terms and explain their importance to the study of economics. a. marginal cost b. marginal revenue c. short-run equilibrium d. supply curve of the firm e. economic profit

A perfectly competitive firm has a horizontal demand curve because it can sell as much as it wants at the market price.

Which of the following statements concerning equilibrium in the long run is not true?

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

Which requirement for perfect competition rules out trade associations or other collusive arrangements in which firms work together to influence price?

The result that perfectly competitive firms produce at the lowest per-unit cost is derived from the assumptions of

Draw a graph illustrating the relationship between the demand curve of the perfectly competitive firm and the perfectly competitive industry. Label all curves and axes correctly.

The exit of existing firms from an industry will very likely

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

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. In the short run, this firm would

Table 10-1 In Table 10-1 the short-run cost schedules of a perfectly competitive firm are shown. Suppose that the market price of output is $20, the firm will produce units and earn a profit of .

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