Question 1

Which of the following is the best example of a perfectly competitive market?

Accepted Answer

A)  farming 
B)  diamonds 
C)  athletic shoes 
D)  soft drinks 
E)  electricity distribution 
A)  farming 
B)  diamonds 
C)  athletic shoes 
D)  soft drinks 
E)  electricity distribution

Question 2

If demand for a seller's product is perfectly elastic,which of the following is true?
i.The firm will sell no output if it sets the price its product above the market price.
ii.There are many perfect substitutes for the seller's product.
iii.The firm will sell no output if it sets the price its product below the market price.

Accepted Answer

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

Question 3

What four conditions define a perfectly competitive market?

Accepted Answer

The four conditions are that:
a.many fir

Question 4

In a perfectly competitive market,the type of decision a firm has to make is different in the short run than in the long run.Which of the following is an example of a perfectly competitive firm's short-run decision?

Accepted Answer

A)  the profit-maximizing level of output 
B)  how much to spend on advertising and sales promotion 
C)  what price to charge buyers for the product 
D)  whether or not to enter or exit an industry 
E)  whether or not to change its plant size 
A)  the profit-maximizing level of output 
B)  how much to spend on advertising and sales promotion 
C)  what price to charge buyers for the product 
D)  whether or not to enter or exit an industry 
E)  whether or not to change its plant size

Question 5

Jerry's Jellybean Factory produces 2,000 pounds of jellybeans per month and sells them in a perfectly competitive market.The marginal cost is $3 per pound,the average variable cost is $2 per pound,and the beans sell for $4 per pound.Jerry

Accepted Answer

A)  is maximizing profit. 
B)  is incurring an economic loss and should shut down. 
C)  could increase his profit by producing more beans. 
D)  could increase his profit by producing fewer beans. 
E)  could increase his profit by raising the price of his beans. 
A)  is maximizing profit. 
B)  is incurring an economic loss and should shut down. 
C)  could increase his profit by producing more beans. 
D)  could increase his profit by producing fewer beans. 
E)  could increase his profit by raising the price of his beans.

Question 6

Describe how economic losses are eliminated in a perfectly competitive industry.

Accepted Answer

If firms are incurring economic losses,s

Question 7

A requirement of perfect competition is that
i.many firms sell an identical product to many buyers.
ii.there are no restrictions on entry into (or exit from)the market,and established firms have no advantage over new firms
iii.sellers and buyers are well informed about prices.

Accepted Answer

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

Question 8

-The above figure illustrates a perfectly competitive firm.If the market price is $40 a unit,to maximize its profit (or minimize its loss)the firm should

Accepted Answer

A)  shut down. 
B)  produce more than 10 and less than 30 units. 
C)  produce 30 units. 
D)  produce more than 30 units and less than 40 units.. 
E)  produce 40 units. 
A)  shut down. 
B)  produce more than 10 and less than 30 units. 
C)  produce 30 units. 
D)  produce more than 30 units and less than 40 units.. 
E)  produce 40 units.

Question 9

A perfectly competitive firm is producing 50 units of output and selling at the market price of $23.The firm's average total cost is $20.What is the firm's total cost?

Accepted Answer

A)  $23 
B)  $150 
C)  $1,000 
D)  $1,150 
E)  $20 
A)  $23 
B)  $150 
C)  $1,000 
D)  $1,150 
E)  $20

Question 10

Which of the following market types has only a few competing 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 11

If a perfectly competitive seller is maximizing profit and is making zero economic profit,which of the following will this seller do?

Accepted Answer

A)  go to work in the next-best earning opportunity 
B)  shut down, with a loss equal to total fixed cost 
C)  continue at the current output, making zero economic profit 
D)  increase production in order to make an economic profit 
E)  remain open but decrease production in order to make an economic profit 
A)  go to work in the next-best earning opportunity 
B)  shut down, with a loss equal to total fixed cost 
C)  continue at the current output, making zero economic profit 
D)  increase production in order to make an economic profit 
E)  remain open but decrease production in order to make an economic profit

Question 12

The figure above shows some of a firm's cost curves and its marginal revenue curve.
-The firm in the figure above is ________ that is equal to ________.

Accepted Answer

A)  making an economic profit; $8.00 × 10 
B)  making an economic profit; $5.10 × 10 
C)  incurring an economic loss; $5.10 × 10 
D)  incurring an economic loss; ($8.00 - $5.10) × 10 
E)  making an economic profit; ($8.00 - $5.10) × 10 
A)  making an economic profit; $8.00 × 10 
B)  making an economic profit; $5.10 × 10 
C)  incurring an economic loss; $5.10 × 10 
D)  incurring an economic loss; ($8.00 - $5.10) × 10 
E)  making an economic profit; ($8.00 - $5.10) × 10

Question 13

In the long run,perfectly competitive firms will exit the market if the price is

Accepted Answer

A)  higher than average variable cost. 
B)  equal to average total cost. 
C)  less than average total cost. 
D)  equal to average fixed cost. 
E)  equal to marginal revenue. 
A)  higher than average variable cost. 
B)  equal to average total cost. 
C)  less than average total cost. 
D)  equal to average fixed cost. 
E)  equal to marginal revenue.

Question 14

Technological change

Accepted Answer

A)  usually requires an investment in a new plant. 
B)  is implemented in the short run. 
C)  almost always increases the costs of production. 
D)  almost always increases the variable costs of production. 
E)  cannot help a firm to earn an economic profit in either the short run or the long run. 
A)  usually requires an investment in a new plant. 
B)  is implemented in the short run. 
C)  almost always increases the costs of production. 
D)  almost always increases the variable costs of production. 
E)  cannot help a firm to earn an economic profit in either the short run or the long run.

Question 15

The above figure shows some a firm's cost curves and its marginal revenue curve.
-Based on the figure above,what is the price of a can?

Accepted Answer

A)  $0 
B)  $3.00 per can 
C)  $5.15 per can 
D)  None of the above prices is correct. 
E)  More information is needed to determine the price of a can. 
A)  $0 
B)  $3.00 per can 
C)  $5.15 per can 
D)  None of the above prices is correct. 
E)  More information is needed to determine the price of a can.

Question 16

A perfectly competitive firm is producing 50 units of output and selling at the market price of $23.The firm's average total cost is $20.What is the firm's economic profit?

Accepted Answer

A)  $23 
B)  $150 
C)  $1,000 
D)  $1,150 
E)  $50 
A)  $23 
B)  $150 
C)  $1,000 
D)  $1,150 
E)  $50

Question 17

Alice,Bud,and Celia can produce rubber bands in a perfectly competitive market.If they enter the market,the minimum average total cost for a bundle of rubber bands,for the three of them is $2,$3,and $4,respectively.If the market price is $2.10 per bundle,then

Accepted Answer

A)  all three of them will enter the market. 
B)  only Alice will enter the market. 
C)  Alice and Bud will enter the market. 
D)  Bud and Celia will enter the market. 
E)  Alice and Celia will enter the market. 
A)  all three of them will enter the market. 
B)  only Alice will enter the market. 
C)  Alice and Bud will enter the market. 
D)  Bud and Celia will enter the market. 
E)  Alice and Celia will enter the market.

Question 18

Entry by competitive firms decreases the market price,while exit by competitive firms increases the market price.Explain why firms enter or exit an industry and why these price changes occur.

Accepted Answer

Competitive firms will enter an industry

Question 19

Firms exit a competitive market when they incur an economic loss.In the long run,this exit means that the economic losses of the surviving firms

Accepted Answer

A)  increase. 
B)  decrease until they equal zero. 
C)  decrease until economic profits are earned. 
D)  do not change. 
E)  might change but more information is needed about what happens to the price of the good as the firms exit. 
A)  increase. 
B)  decrease until they equal zero. 
C)  decrease until economic profits are earned. 
D)  do not change. 
E)  might change but more information is needed about what happens to the price of the good as the firms exit.

Question 20

If the market price of a product is $14 and all sellers are price takers,then which of the following is correct?

Accepted Answer

A)  Each seller's total revenue line is graphed as an upward-sloping straight line. 
B)  The demand curve for each seller's product is a downward-sloping straight line. 
C)  Each seller can earn more total revenue by raising the price he or she charges above $14. 
D)  The demand curve for each seller's product is a downward-sloping but not necessarily a straight line. 
E)  Each seller's total revenue is graphed as an upside-down U-shaped curve. 
A)  Each seller's total revenue line is graphed as an upward-sloping straight line. 
B)  The demand curve for each seller's product is a downward-sloping straight line. 
C)  Each seller can earn more total revenue by raising the price he or she charges above $14. 
D)  The demand curve for each seller's product is a downward-sloping but not necessarily a straight line. 
E)  Each seller's total revenue is graphed as an upside-down U-shaped curve.

Which of the following is the best example of a perfectly competitive market?

What four conditions define a perfectly competitive market?

In a perfectly competitive market,the type of decision a firm has to make is different in the short run than in the long run.Which of the following is an example of a perfectly competitive firm's short-run decision?

Jerry's Jellybean Factory produces 2,000 pounds of jellybeans per month and sells them in a perfectly competitive market.The marginal cost is $3 per pound,the average variable cost is $2 per pound,and the beans sell for $4 per pound.Jerry

Describe how economic losses are eliminated in a perfectly competitive industry.

A requirement of perfect competition is that i.many firms sell an identical product to many buyers. ii.there are no restrictions on entry into (or exit from)the market,and established firms have no advantage over new firms iii.sellers and buyers are well informed about prices.

-The above figure illustrates a perfectly competitive firm.If the market price is $40 a unit,to maximize its profit (or minimize its loss)the firm should

A perfectly competitive firm is producing 50 units of output and selling at the market price of $23.The firm's average total cost is $20.What is the firm's total cost?

Which of the following market types has only a few competing firms?

If a perfectly competitive seller is maximizing profit and is making zero economic profit,which of the following will this seller do?

The figure above shows some of a firm's cost curves and its marginal revenue curve. -The firm in the figure above is that is equal to .

In the long run,perfectly competitive firms will exit the market if the price is

Technological change

The above figure shows some a firm's cost curves and its marginal revenue curve. -Based on the figure above,what is the price of a can?

A perfectly competitive firm is producing 50 units of output and selling at the market price of $23.The firm's average total cost is $20.What is the firm's economic profit?

Alice,Bud,and Celia can produce rubber bands in a perfectly competitive market.If they enter the market,the minimum average total cost for a bundle of rubber bands,for the three of them is $2,$3,and $4,respectively.If the market price is $2.10 per bundle,then

Entry by competitive firms decreases the market price,while exit by competitive firms increases the market price.Explain why firms enter or exit an industry and why these price changes occur.

Firms exit a competitive market when they incur an economic loss.In the long run,this exit means that the economic losses of the surviving firms

If the market price of a product is $14 and all sellers are price takers,then which of the following is correct?

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

Which of the following is the best example of a perfectly competitive market?

What four conditions define a perfectly competitive market?

In a perfectly competitive market,the type of decision a firm has to make is different in the short run than in the long run.Which of the following is an example of a perfectly competitive firm's short-run decision?

Jerry's Jellybean Factory produces 2,000 pounds of jellybeans per month and sells them in a perfectly competitive market.The marginal cost is $3 per pound,the average variable cost is $2 per pound,and the beans sell for $4 per pound.Jerry

Describe how economic losses are eliminated in a perfectly competitive industry.

A requirement of perfect competition is that i.many firms sell an identical product to many buyers. ii.there are no restrictions on entry into (or exit from)the market,and established firms have no advantage over new firms iii.sellers and buyers are well informed about prices.

-The above figure illustrates a perfectly competitive firm.If the market price is $40 a unit,to maximize its profit (or minimize its loss)the firm should

A perfectly competitive firm is producing 50 units of output and selling at the market price of $23.The firm's average total cost is $20.What is the firm's total cost?

Which of the following market types has only a few competing firms?

If a perfectly competitive seller is maximizing profit and is making zero economic profit,which of the following will this seller do?

The figure above shows some of a firm's cost curves and its marginal revenue curve. -The firm in the figure above is ________ that is equal to ________.

In the long run,perfectly competitive firms will exit the market if the price is

Technological change

The above figure shows some a firm's cost curves and its marginal revenue curve. -Based on the figure above,what is the price of a can?

A perfectly competitive firm is producing 50 units of output and selling at the market price of $23.The firm's average total cost is $20.What is the firm's economic profit?

Alice,Bud,and Celia can produce rubber bands in a perfectly competitive market.If they enter the market,the minimum average total cost for a bundle of rubber bands,for the three of them is $2,$3,and $4,respectively.If the market price is $2.10 per bundle,then

Entry by competitive firms decreases the market price,while exit by competitive firms increases the market price.Explain why firms enter or exit an industry and why these price changes occur.

Firms exit a competitive market when they incur an economic loss.In the long run,this exit means that the economic losses of the surviving firms

If the market price of a product is $14 and all sellers are price takers,then which of the following is correct?

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 some of a firm's cost curves and its marginal revenue curve. -The firm in the figure above is that is equal to .