Question 1

Which of the following would prevent a market from being classified as perfectly competitive?

Accepted Answer

A) there are many buyers and sellers in the market 
B) it is easy for new firms to enter the market 
C) it is easy for existing firms to exit the market 
D) buyers perceive significant differences among the products of different sellers 
E) each buyer purchases only a tiny fraction of the total market quantity 
A) there are many buyers and sellers in the market 
B) it is easy for new firms to enter the market 
C) it is easy for existing firms to exit the market 
D) buyers perceive significant differences among the products of different sellers 
E) each buyer purchases only a tiny fraction of the total market quantity

Question 2

The model of perfect competition cannot be fruitfully used to analyze markets that don't perfectly fit the description of this market type.

Accepted Answer

A) True 
 B)False

Question 3

Assume that a constant-cost,perfectly competitive market is initially in long-run equilibrium.After all long-run adjustments are made,which of the following would occur as a result of an increase in the price of a complement to this industry's product?

Accepted Answer

A) The market price would remain unchanged;the market quantity would rise. 
B) The market price would rise;the market quantity would fall. 
C) The market price would remain unchanged;the market quantity would fall. 
D) Both the market price and the market quantity would fall. 
E) Both the market price and the market quantity would rise. 
A) The market price would remain unchanged;the market quantity would rise. 
B) The market price would rise;the market quantity would fall. 
C) The market price would remain unchanged;the market quantity would fall. 
D) Both the market price and the market quantity would fall. 
E) Both the market price and the market quantity would rise.

Question 4

Assume that the producers of an input have substantial economies of scale in their production process.This input is purchased mainly by a group of firms in a perfectly competitive market that is initially in long-run equilibrium.After all long-run adjustments are made,which of the following would occur in the competitive output market as a result of shift in consumer tastes toward that market's product?

Accepted Answer

A) The market price would fall;the market quantity would rise. 
B) The market price would rise;the market quantity would fall. 
C) The market price would remain unchanged;the market quantity would fall. 
D) Both the market price and the market quantity would fall. 
E) Both the market price and the market quantity would rise. 
A) The market price would fall;the market quantity would rise. 
B) The market price would rise;the market quantity would fall. 
C) The market price would remain unchanged;the market quantity would fall. 
D) Both the market price and the market quantity would fall. 
E) Both the market price and the market quantity would rise.

Question 5

A perfectly competitive firm in long run equilibrium will earn

Accepted Answer

A) zero economic profit. 
B) a small positive economic profit. 
C) a large positive economic profit. 
D) zero accounting profit. 
A) zero economic profit. 
B) a small positive economic profit. 
C) a large positive economic profit. 
D) zero accounting profit.

Question 6

If there is an increase in market demand in a perfectly competitive market,then in the short run

Accepted Answer

A) there will be no change in the demand curves faced by individual firms in the market 
B) the demand curves for firms will shift downward 
C) the demand curves for firms will become more elastic 
D) market supply will fall 
E) profits will rise 
A) there will be no change in the demand curves faced by individual firms in the market 
B) the demand curves for firms will shift downward 
C) the demand curves for firms will become more elastic 
D) market supply will fall 
E) profits will rise

Question 7

Firms are assumed to

Accepted Answer

A) maximize profit per unit of output 
B) maximize total revenue 
C) maximize assets 
D) produce at the lowest point on their average total cost curve 
E) maximize profit 
A) maximize profit per unit of output 
B) maximize total revenue 
C) maximize assets 
D) produce at the lowest point on their average total cost curve 
E) maximize profit

Question 8

In a perfectly competitive market,firms will exit in the

Accepted Answer

A) short run if they are suffering economic losses 
B) short run if they are earning below-normal profit 
C) short run if price exceeds average total cost 
D) long run if they are earning above-normal profit 
E) long run if they are suffering economic losses 
A) short run if they are suffering economic losses 
B) short run if they are earning below-normal profit 
C) short run if price exceeds average total cost 
D) long run if they are earning above-normal profit 
E) long run if they are suffering economic losses

Question 9

-At which point in Figure 9-7 would a perfectly competitive firm earn the same profit,or suffer the same loss,by producing rather than by shutting down?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
E) F 
A) A 
B) B 
C) C 
D) D 
E) F

Question 10

Flora's Flowers operates in a perfectly competitive market.At the point where marginal cost equals marginal revenue,ATC = $10,AVC = $5,and the price per unit is $7.50.In this situation,

Accepted Answer

A) Flora earns positive profits in the short run 
B) Flora will shut down in the short run 
C) Flora's supply curve will shift to the left 
D) Flora's supply curve will shift to the right 
E) Flora earns negative profits in the short run but will remain open 
A) Flora earns positive profits in the short run 
B) Flora will shut down in the short run 
C) Flora's supply curve will shift to the left 
D) Flora's supply curve will shift to the right 
E) Flora earns negative profits in the short run but will remain open

Question 11

Under perfect competition

Accepted Answer

A) the only major difference between firms is the mark-up they use to determine prices 
B) a single seller sets the price 
C) a small number of sellers offer a differentiated product 
D) sellers offer a standardized product 
E) a small number of buyers and sellers negotiate the market price 
A) the only major difference between firms is the mark-up they use to determine prices 
B) a single seller sets the price 
C) a small number of sellers offer a differentiated product 
D) sellers offer a standardized product 
E) a small number of buyers and sellers negotiate the market price

Question 12

A perfectly competitive firm can continue to earn above-normal profit in the long run

Accepted Answer

A) if it has a continued technical advantage over other firms in the market and it is able to keep that advantage a secret 
B) if it has employees that are substantially more efficient than other firms' workers 
C) if its centralized location reduces its transportation costs below those of other firms 
D) if it has easier access to necessary raw materials 
E) under no circumstances 
A) if it has a continued technical advantage over other firms in the market and it is able to keep that advantage a secret 
B) if it has employees that are substantially more efficient than other firms' workers 
C) if its centralized location reduces its transportation costs below those of other firms 
D) if it has easier access to necessary raw materials 
E) under no circumstances

Question 13

-Figure 9-7 shows cost curves for Penny's Parasols,a perfectly competitive firm.At which of the points would Penny's Parasols be certain to close down?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
E) E 
A) A 
B) B 
C) C 
D) D 
E) E

Question 14

In a perfectly competitive market,the price is currently above the minimum of each firm's long-run average total cost curve.Which of the following statements is correct?

Accepted Answer

A) The long-run average total cost curve will shift upward in the long run. 
B) Firms will alter their plant size in the short run. 
C) The market price will fall in the long run. 
D) The firms must be producing at an output level where price exceeds short-run marginal cost. 
E) The firms will earn above-normal profit in the long run. 
A) The long-run average total cost curve will shift upward in the long run. 
B) Firms will alter their plant size in the short run. 
C) The market price will fall in the long run. 
D) The firms must be producing at an output level where price exceeds short-run marginal cost. 
E) The firms will earn above-normal profit in the long run.

Question 15

In the short run,

Accepted Answer

A) economic profit is always zero 
B) economic loss is always zero 
C) some inputs are fixed 
D) the number of firms in an industry can vary 
E) technology is indeterminate 
A) economic profit is always zero 
B) economic loss is always zero 
C) some inputs are fixed 
D) the number of firms in an industry can vary 
E) technology is indeterminate

Question 16

Which of the following statements about perfectly competitive markets is not correct?

Accepted Answer

A) In the short run,firms can earn economic profits or suffer economic losses. 
B) The market demand curve is downward sloping. 
C) The demand curve facing an individual firm is perfectly elastic. 
D) In the long run,firms can earn economic profits or suffer economic losses. 
E) In the long run,firms can enter or exit the market. 
A) In the short run,firms can earn economic profits or suffer economic losses. 
B) The market demand curve is downward sloping. 
C) The demand curve facing an individual firm is perfectly elastic. 
D) In the long run,firms can earn economic profits or suffer economic losses. 
E) In the long run,firms can enter or exit the market.

Question 17

Under perfect competition,the demand curve facing a firm and the firm's marginal revenue curve are

Accepted Answer

A) vertical at the firm's chosen output level 
B) both vertical,but the demand curve is further to the right than the marginal revenue curve 
C) both vertical,but the marginal revenue curve is further to the right than the demand curve 
D) both horizontal at the level of the market price 
E) both horizontal,but the demand curve is above the marginal revenue curve 
A) vertical at the firm's chosen output level 
B) both vertical,but the demand curve is further to the right than the marginal revenue curve 
C) both vertical,but the marginal revenue curve is further to the right than the demand curve 
D) both horizontal at the level of the market price 
E) both horizontal,but the demand curve is above the marginal revenue curve

Question 18

When entry of new firms decreases input prices in an industry,it is a(n)

Accepted Answer

A) increasing cost industry. 
B) decreasing cost industry. 
C) constant cost industry. 
D) input elastic industry. 
A) increasing cost industry. 
B) decreasing cost industry. 
C) constant cost industry. 
D) input elastic industry.

Question 19

In a perfectly competitive industry,

Accepted Answer

A) the market price is determined at the intersection of the market supply and demand curves 
B) the typical firm will just break even in the short run 
C) a rise in the market price will attract new entrants 
D) economics profits are a signal for new consumers to enter 
E) each firm faces the downward sloping market demand curve 
A) the market price is determined at the intersection of the market supply and demand curves 
B) the typical firm will just break even in the short run 
C) a rise in the market price will attract new entrants 
D) economics profits are a signal for new consumers to enter 
E) each firm faces the downward sloping market demand curve

Question 20

A perfectly competitive firm is operating where its total revenue equals its total cost.In the short run,if market demand increases,this firm will have an economic

Accepted Answer

A) loss and reduce output 
B) loss while expanding output 
C) profit and reduce output 
D) profit while expanding output 
E) profit,but will not change output 
A) loss and reduce output 
B) loss while expanding output 
C) profit and reduce output 
D) profit while expanding output 
E) profit,but will not change output

Which of the following would prevent a market from being classified as perfectly competitive?

The model of perfect competition cannot be fruitfully used to analyze markets that don't perfectly fit the description of this market type.

Assume that a constant-cost,perfectly competitive market is initially in long-run equilibrium.After all long-run adjustments are made,which of the following would occur as a result of an increase in the price of a complement to this industry's product?

A perfectly competitive firm in long run equilibrium will earn

If there is an increase in market demand in a perfectly competitive market,then in the short run

Firms are assumed to

In a perfectly competitive market,firms will exit in the

-At which point in Figure 9-7 would a perfectly competitive firm earn the same profit,or suffer the same loss,by producing rather than by shutting down?

Flora's Flowers operates in a perfectly competitive market.At the point where marginal cost equals marginal revenue,ATC = $10,AVC = $5,and the price per unit is $7.50.In this situation,

Under perfect competition

A perfectly competitive firm can continue to earn above-normal profit in the long run

-Figure 9-7 shows cost curves for Penny's Parasols,a perfectly competitive firm.At which of the points would Penny's Parasols be certain to close down?

In a perfectly competitive market,the price is currently above the minimum of each firm's long-run average total cost curve.Which of the following statements is correct?

In the short run,

Which of the following statements about perfectly competitive markets is not correct?

Under perfect competition,the demand curve facing a firm and the firm's marginal revenue curve are

When entry of new firms decreases input prices in an industry,it is a(n)

In a perfectly competitive industry,

A perfectly competitive firm is operating where its total revenue equals its total cost.In the short run,if market demand increases,this firm will have an economic

What Is Economics

Scarcity, choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

How Firms Make Decisions: Profit Maximization

B:Perfect Competition

Monopolistic Competition and Oligopoly

Monopoly

Labor Markets

B: Labor Markets

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

Filters

Exam 9: Perfect Competition

Which of the following would prevent a market from being classified as perfectly competitive?

The model of perfect competition cannot be fruitfully used to analyze markets that don't perfectly fit the description of this market type.

Assume that a constant-cost,perfectly competitive market is initially in long-run equilibrium.After all long-run adjustments are made,which of the following would occur as a result of an increase in the price of a complement to this industry's product?

A perfectly competitive firm in long run equilibrium will earn

If there is an increase in market demand in a perfectly competitive market,then in the short run

Firms are assumed to

In a perfectly competitive market,firms will exit in the

-At which point in Figure 9-7 would a perfectly competitive firm earn the same profit,or suffer the same loss,by producing rather than by shutting down?

Flora's Flowers operates in a perfectly competitive market.At the point where marginal cost equals marginal revenue,ATC = $10,AVC = $5,and the price per unit is $7.50.In this situation,

Under perfect competition

A perfectly competitive firm can continue to earn above-normal profit in the long run

-Figure 9-7 shows cost curves for Penny's Parasols,a perfectly competitive firm.At which of the points would Penny's Parasols be certain to close down?

In a perfectly competitive market,the price is currently above the minimum of each firm's long-run average total cost curve.Which of the following statements is correct?

In the short run,

Which of the following statements about perfectly competitive markets is not correct?

Under perfect competition,the demand curve facing a firm and the firm's marginal revenue curve are

When entry of new firms decreases input prices in an industry,it is a(n)

In a perfectly competitive industry,

A perfectly competitive firm is operating where its total revenue equals its total cost.In the short run,if market demand increases,this firm will have an economic

What Is Economics

Scarcity, choice, and Economic Systems

Supply and Demand

Working With Supply and Demand

Elasticity

Consumer Choice

Production and Cost

How Firms Make Decisions: Profit Maximization

B:Perfect Competition

Monopolistic Competition and Oligopoly

Monopoly

Labor Markets

B: Labor Markets

Capital and Financial Markets

Economic Efficiency and the Competitive Ideal

Governments Role in Economic Efficiency

Comparative Advantage and the Gains From International Trade

Filters