Question 1

A perfectly competitive firm can

Accepted Answer

A)  sell all of its output at the prevailing market price. 
B)  set a higher price to customers who are willing to pay more. 
C)  raise its price in order to increase its total revenue. 
D)  sell additional output only by lowering its price. 
E)  usually not sell all the output it produces, but still "over-produces" because there are some periods when it can sell the extra output at very profitable prices. 
A)  sell all of its output at the prevailing market price. 
B)  set a higher price to customers who are willing to pay more. 
C)  raise its price in order to increase its total revenue. 
D)  sell additional output only by lowering its price. 
E)  usually not sell all the output it produces, but still "over-produces" because there are some periods when it can sell the extra output at very profitable prices. A

Question 2

A firm in perfect competition is a price taker because

Accepted Answer

A)  there are no good substitutes for its good. 
B)  many other firms produce identical products. 
C)  it is very large. 
D)  its demand curves are downward sloping. 
E)  it's demand curve is vertical at the profit-maximizing quantity. 
A)  there are no good substitutes for its good. 
B)  many other firms produce identical products. 
C)  it is very large. 
D)  its demand curves are downward sloping. 
E)  it's demand curve is vertical at the profit-maximizing quantity. B

Question 3

If a firm shuts down,it

Accepted Answer

A)  makes zero economic profit. 
B)  incurs an economic loss equal to its total variable cost. 
C)  incurs an economic loss equal to its total fixed cost. 
D)  makes a normal profit. 
E)  might make an economic profit, zero economic profit, or incur an economic loss. 
A)  makes zero economic profit. 
B)  incurs an economic loss equal to its total variable cost. 
C)  incurs an economic loss equal to its total fixed cost. 
D)  makes a normal profit. 
E)  might make an economic profit, zero economic profit, or incur an economic loss. C

Question 4

In the long run,existing firms exit a perfectly competitive market

Accepted Answer

A)  only if economic profits are zero. 
B)  if they make a positive economic profit. 
C)  if normal profits are greater than zero. 
D)  only if they incur an economic loss. 
E)  if they either make a normal profit or if they incur an economic loss. 
A)  only if economic profits are zero. 
B)  if they make a positive economic profit. 
C)  if normal profits are greater than zero. 
D)  only if they incur an economic loss. 
E)  if they either make a normal profit or if they incur an economic loss.

Question 5

Which of the following market types has the fewest number of firms?

Accepted Answer

A)  perfect competition 
B)  monopolistic competition 
C)  oligopoly 
D)  monopoly 
E)  perfect competition and monopolistic competition 
A)  perfect competition 
B)  monopolistic competition 
C)  oligopoly 
D)  monopoly 
E)  perfect competition and monopolistic competition

Question 6

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

Accepted Answer

If the demand for wheat decreases,the pr

Question 7

In the long run,a perfectly competitive firm makes

Accepted Answer

A)  a positive economic profit. 
B)  zero economic profit. 
C)  negative economic profit, that is, an economic loss. 
D)  zero accounting profit. 
E)  either a positive economic profit or a normal profit. 
A)  a positive economic profit. 
B)  zero economic profit. 
C)  negative economic profit, that is, an economic loss. 
D)  zero accounting profit. 
E)  either a positive economic profit or a normal profit.

Question 8

If perfectly competitive lawn care firms are making an economic profit,then

Accepted Answer

A)  wages will be bid up until the economic profit are gone. 
B)  the firms must be superior and will continue to make an economic profit. 
C)  new firms will enter the industry. 
D)  they are not equating marginal revenue to marginal cost. 
E)  government regulation will be imposed to decrease their profit. 
A)  wages will be bid up until the economic profit are gone. 
B)  the firms must be superior and will continue to make an economic profit. 
C)  new firms will enter the industry. 
D)  they are not equating marginal revenue to marginal cost. 
E)  government regulation will be imposed to decrease their profit.

Question 9

The figure above shows a firm's total revenue and total cost curves.
-To maximize its profit,the firm in the figure above produces ________ cans per day and ________.

Accepted Answer

A)  0; incurs an economic loss of less than $20 
B)  between 3 to 5 cans; earns a normal profit 
C)  10; earns an economic profit of $2.90 
D)  10; earns an economic profit of $29 
E)  more than 10; earns an economic profit 
A)  0; incurs an economic loss of less than $20 
B)  between 3 to 5 cans; earns a normal profit 
C)  10; earns an economic profit of $2.90 
D)  10; earns an economic profit of $29 
E)  more than 10; earns an economic profit

Question 10

The figure above shows a firm's total revenue and total cost curves.
-When the firm maximizes its profit,it produces ________ cans per day.

Accepted Answer

A)  0 
B)  more than 0 and less than 5 
C)  5 or more but less than 10 
D)  10 
E)  more than 10 
A)  0 
B)  more than 0 and less than 5 
C)  5 or more but less than 10 
D)  10 
E)  more than 10

Question 11

-Bill owns a lawn-care company in Windermere,Florida,whose cost curves are illustrated in the above figure.The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed.At this price,how many lawns will Bill mow per week?

Accepted Answer

A)  more than 10 and less than 30 
B)  30 
C)  40 
D)  50 
E)  0 
A)  more than 10 and less than 30 
B)  30 
C)  40 
D)  50 
E)  0

Question 12

If a perfectly competitive firm's average total cost is less than the price,then the firm

Accepted Answer

A)  incurs an economic loss. 
B)  makes an economic profit. 
C)  makes zero economic profit. 
D)  makes either zero economic profit or an economic profit depending on whether the marginal revenue is equal to or greater than the price. 
E)  None of the above answers is correct because the relationship between the price and average total cost has nothing to do with the firm's profit. 
A)  incurs an economic loss. 
B)  makes an economic profit. 
C)  makes zero economic profit. 
D)  makes either zero economic profit or an economic profit depending on whether the marginal revenue is equal to or greater than the price. 
E)  None of the above answers is correct because the relationship between the price and average total cost has nothing to do with the firm's profit.

Question 13

-The above figure shows a perfectly competitive firm.If the market price is $5,the firm

Accepted Answer

A)  might shut down but more information is needed about the AVC. 
B)  is making an economic profit. 
C)  is making zero economic profit. 
D)  will immediately shut down. 
E)  will not shut down. 
A)  might shut down but more information is needed about the AVC. 
B)  is making an economic profit. 
C)  is making zero economic profit. 
D)  will immediately shut down. 
E)  will not shut down.

Question 14

In part,perfect competition arises if
i.each firm's minimum efficient scale is large relative to demand.
ii.each firm produces a good or service identical to those produced by its many competitors.
iii.there are significant barriers to entry.

Accepted Answer

A)  i only 
B)  ii only 
C)  i and ii 
D)  iii only 
E)  ii and iii 
A)  i only 
B)  ii only 
C)  i and ii 
D)  iii only 
E)  ii and iii

Question 15

-The above figure shows a perfectly competitive firm.If the market price is more than $20 per unit,the firm

Accepted Answer

A)  will definitely shut down to minimize its losses. 
B)  will stay open to produce and will make zero economic profit. 
C)  will stay open to produce and will incur an economic loss. 
D)  will stay open to produce and will make an economic profit. 
E)  might shut down but more information is needed about the fixed cost. 
A)  will definitely shut down to minimize its losses. 
B)  will stay open to produce and will make zero economic profit. 
C)  will stay open to produce and will incur an economic loss. 
D)  will stay open to produce and will make an economic profit. 
E)  might shut down but more information is needed about the fixed cost.

Question 16

Can a perfectly competitive firm make an economic profit in the short run? Can it incur an economic loss?

Accepted Answer

In the short run,a perfectly competitive

Question 17

If Henry,a perfectly competitive lime grower in Southern California,can sell his limes at a price greater than his average total cost,Henry will

Accepted Answer

A)  incur an economic loss. 
B)  incur an accounting loss. 
C)  have an incentive to shut down. 
D)  make an economic profit. 
E)  make zero economic profit. 
A)  incur an economic loss. 
B)  incur an accounting loss. 
C)  have an incentive to shut down. 
D)  make an economic profit. 
E)  make zero economic profit.

Question 18

A firm's marginal revenue is

Accepted Answer

A)  the change in total revenue that results from a one-unit increase in the quantity sold. 
B)  total revenue minus total cost. 
C)  the change in total revenue minus the change in total cost. 
D)  the change in total revenue that results from an increase in the demand for the good or service. 
E)  less than the market price for a perfectly competitive firm. 
A)  the change in total revenue that results from a one-unit increase in the quantity sold. 
B)  total revenue minus total cost. 
C)  the change in total revenue minus the change in total cost. 
D)  the change in total revenue that results from an increase in the demand for the good or service. 
E)  less than the market price for a perfectly competitive firm.

Question 19

"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect.

Accepted Answer

The statement is incorrect.Perfectly com

Question 20

Why do you never see firms in a perfectly competitive market advertise their product?

Accepted Answer

Advertising has costs and benefits for t

A perfectly competitive firm can

A firm in perfect competition is a price taker because

If a firm shuts down,it

In the long run,existing firms exit a perfectly competitive market

Which of the following market types has the fewest number of firms?

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

In the long run,a perfectly competitive firm makes

If perfectly competitive lawn care firms are making an economic profit,then

The figure above shows a firm's total revenue and total cost curves. -To maximize its profit,the firm in the figure above produces cans per day and .

The figure above shows a firm's total revenue and total cost curves. -When the firm maximizes its profit,it produces ________ cans per day.

-Bill owns a lawn-care company in Windermere,Florida,whose cost curves are illustrated in the above figure.The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed.At this price,how many lawns will Bill mow per week?

If a perfectly competitive firm's average total cost is less than the price,then the firm

-The above figure shows a perfectly competitive firm.If the market price is $5,the firm

In part,perfect competition arises if i.each firm's minimum efficient scale is large relative to demand. ii.each firm produces a good or service identical to those produced by its many competitors. iii.there are significant barriers to entry.

-The above figure shows a perfectly competitive firm.If the market price is more than $20 per unit,the firm

Can a perfectly competitive firm make an economic profit in the short run? Can it incur an economic loss?

If Henry,a perfectly competitive lime grower in Southern California,can sell his limes at a price greater than his average total cost,Henry will

A firm's marginal revenue is

"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect.

Why do you never see firms in a perfectly competitive market advertise their product?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 15: Perfect Competition

A perfectly competitive firm can

A firm in perfect competition is a price taker because

If a firm shuts down,it

In the long run,existing firms exit a perfectly competitive market

Which of the following market types has the fewest number of firms?

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

In the long run,a perfectly competitive firm makes

If perfectly competitive lawn care firms are making an economic profit,then

The figure above shows a firm's total revenue and total cost curves. -To maximize its profit,the firm in the figure above produces ________ cans per day and ________.

The figure above shows a firm's total revenue and total cost curves. -When the firm maximizes its profit,it produces ________ cans per day.

-Bill owns a lawn-care company in Windermere,Florida,whose cost curves are illustrated in the above figure.The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed.At this price,how many lawns will Bill mow per week?

If a perfectly competitive firm's average total cost is less than the price,then the firm

-The above figure shows a perfectly competitive firm.If the market price is $5,the firm

In part,perfect competition arises if i.each firm's minimum efficient scale is large relative to demand. ii.each firm produces a good or service identical to those produced by its many competitors. iii.there are significant barriers to entry.

-The above figure shows a perfectly competitive firm.If the market price is more than $20 per unit,the firm

Can a perfectly competitive firm make an economic profit in the short run? Can it incur an economic loss?

If Henry,a perfectly competitive lime grower in Southern California,can sell his limes at a price greater than his average total cost,Henry will

A firm's marginal revenue is

"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect.

Why do you never see firms in a perfectly competitive market advertise their product?

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

The figure above shows a firm's total revenue and total cost curves. -To maximize its profit,the firm in the figure above produces cans per day and .