Question 1

The marginal cost curve above the minimum of average variable cost serves as the perfectly competitive firm's _____ curve.

Accepted Answer

A)  supply 
B)  demand 
C)  profit 
D)  revenue 
A)  supply 
B)  demand 
C)  profit 
D)  revenue

Question 2

Why is a firm willing to produce a quantity that earns zero economic profits in the long run?

Accepted Answer

A firm is willing to produce a quantity

Question 3

The profit that is earned by a firm in a perfectly competitive market is the:

Accepted Answer

A)  quantity produced multiplied by the difference between the price and average total cost. 
B)  quantity produced multiplied by the difference between the price and marginal cost. 
C)  quantity produced multiplied by the price. 
D)  average total cost multiplied by the price of the good. 
A)  quantity produced multiplied by the difference between the price and average total cost. 
B)  quantity produced multiplied by the difference between the price and marginal cost. 
C)  quantity produced multiplied by the price. 
D)  average total cost multiplied by the price of the good.

Question 4

In perfectly competitive markets, the incentives for _____ help firms achieve efficiency in production.

Accepted Answer

A)  marginal cost maximization 
B)  utility maximization 
C)  profit minimization 
D)  cost minimization 
A)  marginal cost maximization 
B)  utility maximization 
C)  profit minimization 
D)  cost minimization

Question 5

In a perfectly competitive market, the market price is $3.50, and firms are producing 100 units. At a quantity of 100 units, average total cost is $4, and average variable cost is $3. In the long run, price will:

Accepted Answer

A)  rise to $4 as firms exit the market. 
B)  remain at $3.50. 
C)  fall to $3 as firms enter the market. 
D)  fall to $4 as firms enter the market. 
A)  rise to $4 as firms exit the market. 
B)  remain at $3.50. 
C)  fall to $3 as firms enter the market. 
D)  fall to $4 as firms enter the market.

Question 6

A profit-maximizing firm in a perfectly competitive market is currently producing 1,000 units. The marginal cost of the 1,000th unit is $4, and the average total cost of producing 1,000 units is $1 per unit. Which of the following statements is NOT true?

Accepted Answer

A)  The firm earns a profit of $3,000. 
B)  The market price is $4. 
C)  The marginal cost of 1,001 units is more than $4. 
D)  The firm's profit per unit is $4. 
A)  The firm earns a profit of $3,000. 
B)  The market price is $4. 
C)  The marginal cost of 1,001 units is more than $4. 
D)  The firm's profit per unit is $4.

Question 7

Which of the following is NOT a reason that firms in a perfectly competitive market are price takers?

Accepted Answer

A)  Each firm's good is a perfect substitute for another firm's good. 
B)  Each firm can sell more of its good at a lower price than at the market price. 
C)  Each buyer has perfect information about all alternatives. 
D)  There are many firms that a buyer can choose from. 
A)  Each firm's good is a perfect substitute for another firm's good. 
B)  Each firm can sell more of its good at a lower price than at the market price. 
C)  Each buyer has perfect information about all alternatives. 
D)  There are many firms that a buyer can choose from.

Question 8

Use the figure A Perfectly Competitive Market in the Short Run IV. If the price in this market persists, what will happen in the long run?
​
Figure: A Perfectly Competitive Market in the Short Run IV

Accepted Answer

A)  Firms will enter the market, and the market supply curve shifts to the right, lowering the price. 
B)  Firms will exit the market, and the average total cost curve shifts down, returning the firm to profit. 
C)  Firms will exit the market, and the market supply curve shifts to the left, raising the price. 
D)  Nothing, firms have no incentive to enter or exit this market. 
A)  Firms will enter the market, and the market supply curve shifts to the right, lowering the price. 
B)  Firms will exit the market, and the average total cost curve shifts down, returning the firm to profit. 
C)  Firms will exit the market, and the market supply curve shifts to the left, raising the price. 
D)  Nothing, firms have no incentive to enter or exit this market.

Question 9

A firm in a perfectly competitive market produces an optimal quantity when it produces the quantity where marginal:

Accepted Answer

A)  cost equals the minimum of average total cost. 
B)  cost equals the price of the good. 
C)  revenue equals minimum average total cost. 
D)  revenue is greater than the price of the good. 
A)  cost equals the minimum of average total cost. 
B)  cost equals the price of the good. 
C)  revenue equals minimum average total cost. 
D)  revenue is greater than the price of the good.

Question 10

What happens to firms that do not use the inputs and methods that minimize their production costs in a perfectly competitive market in the long run?

Accepted Answer

A)  They have profits higher than other firms. 
B)  They are driven out of the market. 
C)  They are able to charge lower prices than other firms and drive them to shut down. 
D)  They are able to set the price in the market. 
A)  They have profits higher than other firms. 
B)  They are driven out of the market. 
C)  They are able to charge lower prices than other firms and drive them to shut down. 
D)  They are able to set the price in the market.

Question 11

Use the figure A Perfectly Competitive Market and a Firm in That Market's Cost Curves. Explain why this market is not in long-run equilibrium, and then explain the process by which this market will return to long-run equilibrium.
​
Figure: A Perfectly Competitive Market and a Firm in that Market's Cost Curves

Accepted Answer

This firm is earning a profit because at

Question 12

The market for taxi services in a major metropolitan area has thousands of taxis and thousands of potential customers. Taxi services are identical, and buyers have full information about pricing. To become a taxi operator in this city requires a permit, which is difficult and expensive to obtain. Which feature of a perfectly competitive market is violated?

Accepted Answer

A)  free entry and exit 
B)  full information 
C)  standardized product 
D)  many buyers and sellers 
A)  free entry and exit 
B)  full information 
C)  standardized product 
D)  many buyers and sellers

Question 13

The demand curve for a perfectly competitive firm's product is the same as the:

Accepted Answer

A)  supply curve for a perfectly competitive firm. 
B)  demand curve for the market. 
C)  supply curve for the market. 
D)  marginal revenue curve for the firm. 
A)  supply curve for a perfectly competitive firm. 
B)  demand curve for the market. 
C)  supply curve for the market. 
D)  marginal revenue curve for the firm.

Question 14

. Use the figure Costs for a Firm. What price makes this firm willing to operate in the short run but not in the long-run?
​
Figure: Costs for a Firm

Accepted Answer

A)  $50 
B)  $60 
C)  $70 
D)  $80 
A)  $50 
B)  $60 
C)  $70 
D)  $80

Question 15

. Use the figure Costs for a Firm II. What price and quantity combination are part of this firm's long-run supply curve?
​
Figure: Costs for a Firm II

Accepted Answer

A)  price $2 and quantity 10 
B)  price $3 and quantity 20 
C)  price $5 and quantity 30 
D)  price $8 and quantity 40 
A)  price $2 and quantity 10 
B)  price $3 and quantity 20 
C)  price $5 and quantity 30 
D)  price $8 and quantity 40

Question 16

In a perfectly competitive market the market price is $4, and firms are producing 100 units. At a quantity of 100 units, average total cost is $4, and average variable cost is $3. In the long run, price will:

Accepted Answer

A)  rise above $5 as firms exit the market. 
B)  remain at $4. 
C)  fall to $3 as firms enter the market. 
D)  fall to $4 as firms enter the market. 
A)  rise above $5 as firms exit the market. 
B)  remain at $4. 
C)  fall to $3 as firms enter the market. 
D)  fall to $4 as firms enter the market.

Question 17

In a perfectly competitive market:

Accepted Answer

A)  there are few buyers. 
B)  every firm is selling a slightly different version of the product. 
C)  there is a single seller of a product. 
D)  individual firms cannot charge more than the market price. 
A)  there are few buyers. 
B)  every firm is selling a slightly different version of the product. 
C)  there is a single seller of a product. 
D)  individual firms cannot charge more than the market price.

Question 18

Suppose that Magma Motor Company has total revenue of $400,000, fixed costs of $100,000, and variable costs of $200,000. If Magma Motor company is known to be in a perfectly competitive market, which of the following is true?

Accepted Answer

A)  This market is in long-run equilibrium. 
B)  Firms will enter this market. 
C)  Firms will exit this market. 
D)  Magma's average total cost is as low as it can be. 
A)  This market is in long-run equilibrium. 
B)  Firms will enter this market. 
C)  Firms will exit this market. 
D)  Magma's average total cost is as low as it can be.

Question 19

How many buyers and sellers are there in a perfectly competitive market?

Accepted Answer

A)  one buyer and many sellers 
B)  many buyers and one seller 
C)  many buyers and many sellers 
D)  a few buyers and one seller 
A)  one buyer and many sellers 
B)  many buyers and one seller 
C)  many buyers and many sellers 
D)  a few buyers and one seller

Question 20

Which of the following is essential in perfect competition?

Accepted Answer

A)  differentiated products 
B)  imperfect information 
C)  few sellers 
D)  easy entry and exit 
A)  differentiated products 
B)  imperfect information 
C)  few sellers 
D)  easy entry and exit

The marginal cost curve above the minimum of average variable cost serves as the perfectly competitive firm's _____ curve.

Why is a firm willing to produce a quantity that earns zero economic profits in the long run?

The profit that is earned by a firm in a perfectly competitive market is the:

In perfectly competitive markets, the incentives for _____ help firms achieve efficiency in production.

In a perfectly competitive market, the market price is $3.50, and firms are producing 100 units. At a quantity of 100 units, average total cost is $4, and average variable cost is $3. In the long run, price will:

A profit-maximizing firm in a perfectly competitive market is currently producing 1,000 units. The marginal cost of the 1,000th unit is $4, and the average total cost of producing 1,000 units is $1 per unit. Which of the following statements is NOT true?

Which of the following is NOT a reason that firms in a perfectly competitive market are price takers?

Use the figure A Perfectly Competitive Market in the Short Run IV. If the price in this market persists, what will happen in the long run? Figure: A Perfectly Competitive Market in the Short Run IV

A firm in a perfectly competitive market produces an optimal quantity when it produces the quantity where marginal:

What happens to firms that do not use the inputs and methods that minimize their production costs in a perfectly competitive market in the long run?

The demand curve for a perfectly competitive firm's product is the same as the:

. Use the figure Costs for a Firm. What price makes this firm willing to operate in the short run but not in the long-run? Figure: Costs for a Firm

. Use the figure Costs for a Firm II. What price and quantity combination are part of this firm's long-run supply curve? Figure: Costs for a Firm II

In a perfectly competitive market the market price is $4, and firms are producing 100 units. At a quantity of 100 units, average total cost is $4, and average variable cost is $3. In the long run, price will:

In a perfectly competitive market:

Suppose that Magma Motor Company has total revenue of $400,000, fixed costs of $100,000, and variable costs of $200,000. If Magma Motor company is known to be in a perfectly competitive market, which of the following is true?

How many buyers and sellers are there in a perfectly competitive market?

Which of the following is essential in perfect competition?

Foundations of Economics

Extension: Understanding Graphs

Markets and Economies

Demand

Supply

Market Equilibrium

Elasticity

Consumer Behavior

Production Costs

Market Power

Factor Markets

Market Failure and Government Failure

Measuring an Economys Performance

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money and Banking

Monetary Policy

Economic Growth and Development

International Trade and Finance

Filters

Exam 9: Perfect Competition

The marginal cost curve above the minimum of average variable cost serves as the perfectly competitive firm's _____ curve.

Why is a firm willing to produce a quantity that earns zero economic profits in the long run?

The profit that is earned by a firm in a perfectly competitive market is the:

In perfectly competitive markets, the incentives for _____ help firms achieve efficiency in production.

In a perfectly competitive market, the market price is $3.50, and firms are producing 100 units. At a quantity of 100 units, average total cost is $4, and average variable cost is $3. In the long run, price will:

A profit-maximizing firm in a perfectly competitive market is currently producing 1,000 units. The marginal cost of the 1,000th unit is $4, and the average total cost of producing 1,000 units is $1 per unit. Which of the following statements is NOT true?

Which of the following is NOT a reason that firms in a perfectly competitive market are price takers?

Use the figure A Perfectly Competitive Market in the Short Run IV. If the price in this market persists, what will happen in the long run? ​ Figure: A Perfectly Competitive Market in the Short Run IV

A firm in a perfectly competitive market produces an optimal quantity when it produces the quantity where marginal:

What happens to firms that do not use the inputs and methods that minimize their production costs in a perfectly competitive market in the long run?

The demand curve for a perfectly competitive firm's product is the same as the:

. Use the figure Costs for a Firm. What price makes this firm willing to operate in the short run but not in the long-run? ​ Figure: Costs for a Firm

. Use the figure Costs for a Firm II. What price and quantity combination are part of this firm's long-run supply curve? ​ Figure: Costs for a Firm II

In a perfectly competitive market the market price is $4, and firms are producing 100 units. At a quantity of 100 units, average total cost is $4, and average variable cost is $3. In the long run, price will:

In a perfectly competitive market:

Suppose that Magma Motor Company has total revenue of $400,000, fixed costs of $100,000, and variable costs of $200,000. If Magma Motor company is known to be in a perfectly competitive market, which of the following is true?

How many buyers and sellers are there in a perfectly competitive market?

Which of the following is essential in perfect competition?

Foundations of Economics

Extension: Understanding Graphs

Markets and Economies

Demand

Supply

Market Equilibrium

Elasticity

Consumer Behavior

Production Costs

Market Power

Factor Markets

Market Failure and Government Failure

Measuring an Economys Performance

Aggregate Demand and Aggregate Supply

Fiscal Policy

Money and Banking

Monetary Policy

Economic Growth and Development

International Trade and Finance

Filters

Use the figure A Perfectly Competitive Market in the Short Run IV. If the price in this market persists, what will happen in the long run? Figure: A Perfectly Competitive Market in the Short Run IV

. Use the figure Costs for a Firm. What price makes this firm willing to operate in the short run but not in the long-run? Figure: Costs for a Firm

. Use the figure Costs for a Firm II. What price and quantity combination are part of this firm's long-run supply curve? Figure: Costs for a Firm II