Question 1

Profits or losses must be temporary for perfectly competitive firms. Why?

Accepted Answer

Profits must be temporary for perfectly

Question 2

An increase in market demand will cause an increase in industry output in the long run because

Accepted Answer

A) new firms enter the industry. 
B) new firms enter the industry and all firms increase their output. 
C) all firms decrease their output but more new firms enter. 
D) no firms enter but the existing firms increase their output. 
A) new firms enter the industry. 
B) new firms enter the industry and all firms increase their output. 
C) all firms decrease their output but more new firms enter. 
D) no firms enter but the existing firms increase their output.

Question 3

Richard Bland quit his job as an accounting professor to start his own restaurant. He gave up a salary of $50,000 per year and withdrew $100,000 in bank CDs earning 5 percent to buy a building and equipment. In the restaurant's first year it had direct expenses of $75,000 and revenues of $150,000. The restaurant's economic profit was

Accepted Answer

A) $15,000. 
B) $20,000. 
C) $75,000. 
D) not possible to determine from the information given. 
A) $15,000. 
B) $20,000. 
C) $75,000. 
D) not possible to determine from the information given.

Question 4

The process of adjustment to a new long-run equilibrium in a perfectly competitive industry is not complete if

Accepted Answer

A) other firms want to enter the industry. 
B) all firms are at the minimum average cost. 
C) all firms receive zero economic profit. 
D) no firms want to exit the industry. 
A) other firms want to enter the industry. 
B) all firms are at the minimum average cost. 
C) all firms receive zero economic profit. 
D) no firms want to exit the industry.

Question 5

Give a complete but concise definition of the following terms. 
a. perfect competition 
b. perfectly competitive firm's demand curve 
c. shutdown point 
d. long-run equilibrium in perfect competition

Accepted Answer

a. Perfect competition is a market struc

Question 6

Which of the following markets most closely resembles the characteristics of a perfectly competitive market?

Accepted Answer

A) The cable television industry 
B) The fast food restaurant industry 
C) The steel industry 
D) Hot dog vendors on city streets 
A) The cable television industry 
B) The fast food restaurant industry 
C) The steel industry 
D) Hot dog vendors on city streets

Question 7

The short-run equilibrium output of a competitive firm is found by equating marginal cost with price.

Accepted Answer

A) True 
 B)False

Question 8

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 9

The entry of firms into a perfectly competitive industry causes the supply curve to

Accepted Answer

A) increase its slope. 
B) decrease its slope. 
C) move toward the right. 
D) move toward the left. 
A) increase its slope. 
B) decrease its slope. 
C) move toward the right. 
D) move toward the left.

Question 10

Which of the following is not a characteristic of perfect competition?

Accepted Answer

A) Firms and consumers all have perfect information about the good and market. 
B) Sellers can enter the market easily. 
C) All goods sold are identical. 
D) All consumers have identical individual demand curves. 
A) Firms and consumers all have perfect information about the good and market. 
B) Sellers can enter the market easily. 
C) All goods sold are identical. 
D) All consumers have identical individual demand curves.

Question 11

Perfectly competitive markets feature relatively high barriers to entry.

Accepted Answer

A) True 
 B)False

Question 12

In perfect competition, marginal revenue always equals

Accepted Answer

A) total revenue. 
B) price. 
C) average cost. 
D) marginal fixed cost. 
A) total revenue. 
B) price. 
C) average cost. 
D) marginal fixed cost.

Question 13

A perfectly competitive firm is a "price taker" because it cannot sell its product for more than the market price.

Accepted Answer

A) True 
 B)False

Question 14

In the short run, perfectly competitive firms can

Accepted Answer

A) make an economic profit. 
B) take a loss. 
C) break even. 
D) All of the responses are correct. 
A) make an economic profit. 
B) take a loss. 
C) break even. 
D) All of the responses are correct.

Question 15

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 16

Firms in perfectly competitive markets are confined to making profits in the short run, but never a loss.

Accepted Answer

A) True 
 B)False

Question 17

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

Accepted Answer

A) True 
 B)False

Question 18

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

Accepted Answer

A) True 
 B)False

Question 19

Firms in perfect competition are often described as price

Accepted Answer

A) takers. 
B) makers. 
C) setters. 
D) leaders. 
A) takers. 
B) makers. 
C) setters. 
D) leaders.

Question 20

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.

Exam 10: The Firm and the Industry Under Perfect Competition

Profits or losses must be temporary for perfectly competitive firms. Why?

An increase in market demand will cause an increase in industry output in the long run because

The process of adjustment to a new long-run equilibrium in a perfectly competitive industry is not complete if

Give a complete but concise definition of the following terms. a. perfect competition b. perfectly competitive firm's demand curve c. shutdown point d. long-run equilibrium in perfect competition

Which of the following markets most closely resembles the characteristics of a perfectly competitive market?

The short-run equilibrium output of a competitive firm is found by equating marginal cost with price.

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

The entry of firms into a perfectly competitive industry causes the supply curve to

Which of the following is not a characteristic of perfect competition?

Perfectly competitive markets feature relatively high barriers to entry.

In perfect competition, marginal revenue always equals

A perfectly competitive firm is a "price taker" because it cannot sell its product for more than the market price.

In the short run, perfectly competitive firms can

A perfectly competitive firm should continue to expand output whenever

Firms in perfectly competitive markets are confined to making profits in the short run, but never a loss.

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

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

Firms in perfect competition are often described as price

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

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

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

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