Question 1

Will a perfectly competitive firm ever produce in the short run even though it is suffering an economic loss?

Accepted Answer

Yes,a perfectly competitive firm will co

Question 2

-The above diagram shows the cost curves for a perfectly competitive wheat farmer.At what price does the wheat farmer shut down?

Accepted Answer

The wheat farmer shuts down if

Question 3

What is the difference between perfect competition and monopolistic competition?

Accepted Answer

A)  Perfect competition has a large number of small firms while monopolistic competition does not. 
B)  Perfect competition has barriers to entry while monopolistic competition does not. 
C)  Perfect competition has no barriers to entry, while monopolistic competition does. 
D)  In perfect competition, firms produce identical goods, while in monopolistic competition, firms produce slightly different goods. 
E)  In monopolistic competition, firms produce identical goods, while in perfect competition, firms produce slightly different goods. 
A)  Perfect competition has a large number of small firms while monopolistic competition does not. 
B)  Perfect competition has barriers to entry while monopolistic competition does not. 
C)  Perfect competition has no barriers to entry, while monopolistic competition does. 
D)  In perfect competition, firms produce identical goods, while in monopolistic competition, firms produce slightly different goods. 
E)  In monopolistic competition, firms produce identical goods, while in perfect competition, firms produce slightly different goods.

Question 4

If the technology associated with producing fiber-optic cable continues to advance,over time the cost of producing fiber-optic cable will

Accepted Answer

A)  decrease, firms that use the new technology will make an economic profit, and in the long run new firms will enter the market. 
B)  decrease, firms that use the new technology will incur an economic loss, and in the long run some firms will exit the industry. 
C)  increase, firms that use the new technology will make an economic profit, and in the long run new firms will enter the market. 
D)  increase, firms that use the new technology will incur an economic loss, and in the long run some firms will exit the industry. 
E)  decrease, firms that do not use the new technology will make an economic profit, and in the long run new firms will enter the market. 
A)  decrease, firms that use the new technology will make an economic profit, and in the long run new firms will enter the market. 
B)  decrease, firms that use the new technology will incur an economic loss, and in the long run some firms will exit the industry. 
C)  increase, firms that use the new technology will make an economic profit, and in the long run new firms will enter the market. 
D)  increase, firms that use the new technology will incur an economic loss, and in the long run some firms will exit the industry. 
E)  decrease, firms that do not use the new technology will make an economic profit, and in the long run new firms will enter the market.

Question 5

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

Accepted Answer

A)  $5.14 × 7 
B)  $3.00 × 7 
C)  ($5.14 - $3.00) × 7 
D)  ($3.00 - $5.14) × 7 
E)  None of the above answers are correct because more information is needed. 
A)  $5.14 × 7 
B)  $3.00 × 7 
C)  ($5.14 - $3.00) × 7 
D)  ($3.00 - $5.14) × 7 
E)  None of the above answers are correct because more information is needed.

Question 6

The price charged by a perfectly competitive firm is

Accepted Answer

A)  the same as the market price. 
B)  different than the price charged by competing firms. 
C)  lower the more the firm produces. 
D)  higher the more the firm produces. 
E)  indeterminate. 
A)  the same as the market price. 
B)  different than the price charged by competing firms. 
C)  lower the more the firm produces. 
D)  higher the more the firm produces. 
E)  indeterminate.

Question 7

If the wheat industry is perfectly competitive with a market price of $4 per bushel and Farmer Brown charged $5 per bushel,how many bushels would Farmer Brown sell?

Accepted Answer

A)  some, but fewer than he would at a price of $4 
B)  more than he would at a price of $4 
C)  just as many as he would at a price of $4 
D)  none 
E)  More information is needed about the prices charged by the other wheat farmers. 
A)  some, but fewer than he would at a price of $4 
B)  more than he would at a price of $4 
C)  just as many as he would at a price of $4 
D)  none 
E)  More information is needed about the prices charged by the other wheat farmers.

Question 8

The firm's supply curve is its

Accepted Answer

A)  marginal cost curve above the average variable cost curve. 
B)  marginal cost curve below the average variable cost curve. 
C)  average variable cost curve above the marginal cost curve. 
D)  average total cost curve above the marginal cost curve. 
E)  marginal revenue curve above the average total cost curve. 
A)  marginal cost curve above the average variable cost curve. 
B)  marginal cost curve below the average variable cost curve. 
C)  average variable cost curve above the marginal cost curve. 
D)  average total cost curve above the marginal cost curve. 
E)  marginal revenue curve above the average total cost curve.

Question 9

If perfectly competitive firms are making an economic profit,then

Accepted Answer

A)  the market must be in long-run equilibrium but cannot be in a short-run equilibrium. 
B)  some firms will exit the market. 
C)  new firms will enter the market. 
D)  the market might be in a long-run equilibrium but not a short-run equilibrium. 
E)  the market cannot be in either a short-run or a long-run equilibrium. 
A)  the market must be in long-run equilibrium but cannot be in a short-run equilibrium. 
B)  some firms will exit the market. 
C)  new firms will enter the market. 
D)  the market might be in a long-run equilibrium but not a short-run equilibrium. 
E)  the market cannot be in either a short-run or a long-run equilibrium.

Question 10

-The above figure illustrates a perfectly competitive firm.Curve B represents the

Accepted Answer

A)  MR curve. 
B)  ATC curve. 
C)  MC curve. 
D)  AVC curve. 
E)  AFC curve. 
A)  MR curve. 
B)  ATC curve. 
C)  MC curve. 
D)  AVC curve. 
E)  AFC curve.

Question 11

The corn market is perfectly competitive,with thousands of corn farmers.In the 2000s,the price of corn soared so that new farmers entered the corn market.Initially,entry ________ the economic profit of the initial corn farmers and in the long run the initial corn farmers ________.

Accepted Answer

A)  increased; made an even greater economic profit than initially 
B)  decreased; made zero economic profit 
C)  increased; made zero economic profit 
D)  decreased; incurred an economic loss 
E)  increased; made an economic profit 
A)  increased; made an even greater economic profit than initially 
B)  decreased; made zero economic profit 
C)  increased; made zero economic profit 
D)  decreased; incurred an economic loss 
E)  increased; made an economic profit

Question 12

"A perfectly competitive firm is called a price maker because all the firms together must make the market price." Is the previous statement correct or incorrect? Briefly explain your answer.

Accepted Answer

The statement is false.A perfe

Question 13

In the long run,a perfectly competitive firm

Accepted Answer

A)  can make either an economic profit or a normal profit. 
B)  incurs an economic loss. 
C)  makes zero economic profit. 
D)  can make an economic profit, zero economic profit, or incur an economic loss. 
E)  makes an economic profit. 
A)  can make either an economic profit or a normal profit. 
B)  incurs an economic loss. 
C)  makes zero economic profit. 
D)  can make an economic profit, zero economic profit, or incur an economic loss. 
E)  makes an economic profit.

Question 14

Suppose the bobby pin industry is perfectly competitive.The price of a packet of bobby pins is $2.00.Pins and Needles,Inc.is a firm in this industry and is producing 1,000 packets of bobby pins per day at the point where the MC = MR.The average cost of production at this output level is $1.50 per packet.
a.What is the marginal cost of the 1,000th packet?
b.Is this firm making an economic profit,zero economic profit,or an economic loss? How much?
c.Is the firm in long-run equilibrium? Why or why not?

Accepted Answer

a.The price per packet is $2,which is al

Question 15

Suppose a perfectly competitive firm's minimum average variable cost is $3 when it produces 50.If the price is $2 and the firm's marginal cost is $2,the firm should

Accepted Answer

A)  continue to produce, but produce more than 50. 
B)  continue to produce 50. 
C)  continue to produce, but produce less than 50. 
D)  shut down. 
E)  continue to operate, but to determine the amount of production needs more information than is given. 
A)  continue to produce, but produce more than 50. 
B)  continue to produce 50. 
C)  continue to produce, but produce less than 50. 
D)  shut down. 
E)  continue to operate, but to determine the amount of production needs more information than is given.

Question 16

In the short run,a perfectly competitive firm

Accepted Answer

A)  must make an economic profit. 
B)  must incur an economic loss. 
C)  must make zero economic profit. 
D)  might make an economic profit, zero economic profit, or incur an economic loss. 
E)  None of the above answers is correct. 
A)  must make an economic profit. 
B)  must incur an economic loss. 
C)  must make zero economic profit. 
D)  might make an economic profit, zero economic profit, or incur an economic loss. 
E)  None of the above answers is correct.

Question 17

-American restaurants receive their supply of baby back-ribs from American farms and from farms in Denmark.In the figures above,the left diagram shows the perfectly competitive market for baby back ribs in the United States.The right figure shows the situation at Premium Standard Farm in Kansas,one of the many U.S.farms supplying these ribs.
Now assume that the United States imposes a ban on European meat in response to the foot-and-mouth disease that has infected livestock in Europe.(Which the United States did a few years ago.)In particular,suppose that the U.S.ban decreases the supply by 40 tons a year.Using the figure on the left,show the impact of this ban on the baby back rib market.Using the figure on the right,show the impact on Premium Standard Farm in Kansas.

Accepted Answer

@#IMG-DLM& 
 @#IMG-DLM& The ban on European meat decreases t

Question 18

In the long run,perfectly competitive firms cannot make an economic profit.Why?

Accepted Answer

An economic profit attracts entry by new

Question 19

In the long run,a perfectly competitive firm will

Accepted Answer

A)  be able to make an economic profit. 
B)  produce but incur an economic loss. 
C)  make zero economic profit. 
D)  not produce and will incur an economic loss equal to its total fixed cost. 
E)  not produce but not incur an economic loss. 
A)  be able to make an economic profit. 
B)  produce but incur an economic loss. 
C)  make zero economic profit. 
D)  not produce and will incur an economic loss equal to its total fixed cost. 
E)  not produce but not incur an economic loss.

Question 20

If a firm in a perfectly competitive market faces an equilibrium price of $5,its marginal revenue

Accepted Answer

A)  will be greater than $5. 
B)  will be less than $5. 
C)  maybe either greater or less than $5. 
D)  will also be $5. 
E)  will be any amount but $5. 
A)  will be greater than $5. 
B)  will be less than $5. 
C)  maybe either greater or less than $5. 
D)  will also be $5. 
E)  will be any amount but $5.

Will a perfectly competitive firm ever produce in the short run even though it is suffering an economic loss?

-The above diagram shows the cost curves for a perfectly competitive wheat farmer.At what price does the wheat farmer shut down?

What is the difference between perfect competition and monopolistic competition?

If the technology associated with producing fiber-optic cable continues to advance,over time the cost of producing fiber-optic cable will

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

The price charged by a perfectly competitive firm is

If the wheat industry is perfectly competitive with a market price of $4 per bushel and Farmer Brown charged $5 per bushel,how many bushels would Farmer Brown sell?

The firm's supply curve is its

If perfectly competitive firms are making an economic profit,then

-The above figure illustrates a perfectly competitive firm.Curve B represents the

The corn market is perfectly competitive,with thousands of corn farmers.In the 2000s,the price of corn soared so that new farmers entered the corn market.Initially,entry the economic profit of the initial corn farmers and in the long run the initial corn farmers .

"A perfectly competitive firm is called a price maker because all the firms together must make the market price." Is the previous statement correct or incorrect? Briefly explain your answer.

In the long run,a perfectly competitive firm

Suppose a perfectly competitive firm's minimum average variable cost is $3 when it produces 50.If the price is $2 and the firm's marginal cost is $2,the firm should

In the short run,a perfectly competitive firm

In the long run,perfectly competitive firms cannot make an economic profit.Why?

In the long run,a perfectly competitive firm will

If a firm in a perfectly competitive market faces an equilibrium price of $5,its marginal revenue

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

Will a perfectly competitive firm ever produce in the short run even though it is suffering an economic loss?

-The above diagram shows the cost curves for a perfectly competitive wheat farmer.At what price does the wheat farmer shut down?

What is the difference between perfect competition and monopolistic competition?

If the technology associated with producing fiber-optic cable continues to advance,over time the cost of producing fiber-optic cable will

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

The price charged by a perfectly competitive firm is

If the wheat industry is perfectly competitive with a market price of $4 per bushel and Farmer Brown charged $5 per bushel,how many bushels would Farmer Brown sell?

The firm's supply curve is its

If perfectly competitive firms are making an economic profit,then

-The above figure illustrates a perfectly competitive firm.Curve B represents the

The corn market is perfectly competitive,with thousands of corn farmers.In the 2000s,the price of corn soared so that new farmers entered the corn market.Initially,entry ________ the economic profit of the initial corn farmers and in the long run the initial corn farmers ________.

"A perfectly competitive firm is called a price maker because all the firms together must make the market price." Is the previous statement correct or incorrect? Briefly explain your answer.

In the long run,a perfectly competitive firm

Suppose a perfectly competitive firm's minimum average variable cost is $3 when it produces 50.If the price is $2 and the firm's marginal cost is $2,the firm should

In the short run,a perfectly competitive firm

In the long run,perfectly competitive firms cannot make an economic profit.Why?

In the long run,a perfectly competitive firm will

If a firm in a perfectly competitive market faces an equilibrium price of $5,its marginal revenue

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 corn market is perfectly competitive,with thousands of corn farmers.In the 2000s,the price of corn soared so that new farmers entered the corn market.Initially,entry the economic profit of the initial corn farmers and in the long run the initial corn farmers .