Question 1

The demand curve for an individual seller's product in perfect competition is

Accepted Answer

A) the same as market demand. 
B) downward sloping. 
C) vertical. 
D) horizontal. 
A) the same as market demand. 
B) downward sloping. 
C) vertical. 
D) horizontal.

Question 2

Figure 10.6
   
Figure 10.6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 10.6.At price P₂, the firm would produce

Accepted Answer

A) Q₂ units. 
B) Q₃ units. 
C) Q₄ units. 
D) zero units. 
A) Q₂ units. 
B) Q₃ units. 
C) Q₄ units. 
D) zero units.

Question 3

Which of the following statements is correct?

Accepted Answer

A) Economic profit takes into account all costs involved in producing a product. 
B) Accounting profit is not relevant in preparing the firm's financial statement. 
C) Economic profit always exceeds accounting profit. 
D) Accounting profit is the same as economic profit. 
A) Economic profit takes into account all costs involved in producing a product. 
B) Accounting profit is not relevant in preparing the firm's financial statement. 
C) Economic profit always exceeds accounting profit. 
D) Accounting profit is the same as economic profit.

Question 4

Figure 10.6
   
Figure 10.6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 10.6.At price P₃, the firm would

Accepted Answer

A) lose an amount equal to its fixed cost. 
B) lose an amount more than fixed cost. 
C) lose an amount less than fixed cost. 
D) break even. 
A) lose an amount equal to its fixed cost. 
B) lose an amount more than fixed cost. 
C) lose an amount less than fixed cost. 
D) break even.

Question 5

Figure 10.6
   
Figure 10.6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 10.6.At price P₃, the firm would produce

Accepted Answer

A) Q₂ units 
B) Q₃ units. 
C) Q₄ units. 
D) Q₅ units. 
A) Q₂ units 
B) Q₃ units. 
C) Q₄ units. 
D) Q₅ units.

Question 6

If a firm in a perfectly competitive industry introduces a lower-cost way of producing an existing product, the firm will be able to earn economic profits in the long run.

Accepted Answer

A) True 
 B)False

Question 7

Firms in perfect competition produce the productively efficient output level in the short run and in the long run.

Accepted Answer

A) True 
 B)False

Question 8

Perfect competition is characterized by all of the following except

Accepted Answer

A) heavy advertising by individual sellers. 
B) homogeneous products. 
C) sellers are price takers. 
D) a horizontal demand curve for individual sellers. 
A) heavy advertising by individual sellers. 
B) homogeneous products. 
C) sellers are price takers. 
D) a horizontal demand curve for individual sellers.

Question 9

If a typical firm in a perfectly competitive industry is incurring losses, then

Accepted Answer

A) all firms will continue to lose money. 
B) some firms will exit in the long run, causing market supply to decrease and market price to rise increasing profits for the remaining firms. 
C) some firms will exit in the long run, causing market supply to decrease and market price to fall increasing losses for the remaining firms. 
D) some firms will enter in the long run, causing market supply to increase and market price to rise increasing profit for all firms. 
A) all firms will continue to lose money. 
B) some firms will exit in the long run, causing market supply to decrease and market price to rise increasing profits for the remaining firms. 
C) some firms will exit in the long run, causing market supply to decrease and market price to fall increasing losses for the remaining firms. 
D) some firms will enter in the long run, causing market supply to increase and market price to rise increasing profit for all firms.

Question 10

If the market price is $25, the average revenue of selling five units is

Accepted Answer

A) $5. 
B) $12.50. 
C) $25. 
D) $125. 
A) $5. 
B) $12.50. 
C) $25. 
D) $125.

Question 11

If the long-run average cost curve is U-shaped, the optimal scale of production from society's viewpoint is

Accepted Answer

A) the minimum efficient scale. 
B) where maximum economic profit is earned by producers. 
C) where firm profit is large enough to finance research and development. 
D) one which guarantees economic profit. 
A) the minimum efficient scale. 
B) where maximum economic profit is earned by producers. 
C) where firm profit is large enough to finance research and development. 
D) one which guarantees economic profit.

Question 12

Both individual buyers and sellers in perfect competition

Accepted Answer

A) can influence the market price by their own individual actions. 
B) can influence the market price by joining with a few of their competitors. 
C) have to take the market price as a given. 
D) have the market price dictated to them by government. 
A) can influence the market price by their own individual actions. 
B) can influence the market price by joining with a few of their competitors. 
C) have to take the market price as a given. 
D) have the market price dictated to them by government.

Question 13

In perfect competition

Accepted Answer

A)  the market demand curve and the individual's demand are identical. 
B) the market demand curve is perfectly inelastic while demand for an individual seller's product is perfectly elastic. 
C) the market demand curve is perfectly elastic while demand for an individual seller's product is perfectly inelastic. 
D) the market demand curve is downward sloping while demand for an individual seller's product is perfectly elastic. 
A)  the market demand curve and the individual's demand are identical. 
B) the market demand curve is perfectly inelastic while demand for an individual seller's product is perfectly elastic. 
C) the market demand curve is perfectly elastic while demand for an individual seller's product is perfectly inelastic. 
D) the market demand curve is downward sloping while demand for an individual seller's product is perfectly elastic.

Question 14

Figure 10.5
   
Figure 10.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 10.5.If the market price is $20, what is the amount of the firm's profit?

Accepted Answer

A) $5,400 
B) $6,750 
C) $8,100 
D) $16,200 
A) $5,400 
B) $6,750 
C) $8,100 
D) $16,200

Question 15

Table 10.1
 $\begin{array}{|c|c|c|}
\hline \text { Quantity } & \begin{array}{c}
\text { Total Cost } \
\text { (dollars) }
\end{array} & \begin{array}{c}
\text { Variable Cost } \
\text { (dollars) }
\end{array} \
\hline 0 & \$ 1,000 & \$ 0 \
\hline 100 & 1,360 & 360 \
\hline 200 & 1,560 & 560 \
\hline 300 & 1,960 & 960 \
\hline 400 & 2,760 & 1,760 \
\hline 500 & 4,000 & 3,000 \
\hline 600 & 5,800 & 4,800 \
\hline
\end{array}$ 
Table 10.1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
-Refer to Table 10.1.What is the fixed cost of production?

Accepted Answer

A) $0 
B) $500 
C) $1,000 
D) It cannot be determined. 
A) $0 
B) $500 
C) $1,000 
D) It cannot be determined.

Question 16

Assume the market for organically-grown produce is perfectly competitive.All else equal, as farmers find it less profitable to produce and sell organic produce in this market,

Accepted Answer

A) the demand curve will shift to the left and the equilibrium price will decrease. 
B) the supply curve will shift to the left and the equilibrium price will increase. 
C) the supply curve will shift to the right, the demand curve will shift to the left, and the equilibrium price will decrease. 
D) the supply curve will shift to the left, the demand curve will shift to the left, and the equilibrium price will increase. 
A) the demand curve will shift to the left and the equilibrium price will decrease. 
B) the supply curve will shift to the left and the equilibrium price will increase. 
C) the supply curve will shift to the right, the demand curve will shift to the left, and the equilibrium price will decrease. 
D) the supply curve will shift to the left, the demand curve will shift to the left, and the equilibrium price will increase.

Question 17

All of the following can be used to compute average profit except

Accepted Answer

A) marginal profit minus marginal cost. 
B) total profit divided by quantity. 
C) average revenue minus average total cost 
D) price minus average total cost. 
A) marginal profit minus marginal cost. 
B) total profit divided by quantity. 
C) average revenue minus average total cost 
D) price minus average total cost.

Question 18

In the long run, a perfectly competitive market will

Accepted Answer

A) produce only the quantity of output that yields a long-run profit for the typical firm. 
B) supply whatever amount consumers will buy at a price which earns the market an economic profit. 
C) supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve. 
D) generate a long-run equilibrium where the typical firm operates at a loss. 
A) produce only the quantity of output that yields a long-run profit for the typical firm. 
B) supply whatever amount consumers will buy at a price which earns the market an economic profit. 
C) supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve. 
D) generate a long-run equilibrium where the typical firm operates at a loss.

Question 19

What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency?

Accepted Answer

Productive efficiency refers to a the si

Question 20

BlackBerry Limited (formerly known as Research In Motion)had 16,000 apps for BlackBerry devices available in January of 2011.By January of 2012 over 60,000 apps were available, climbing to over 70,000 in February that same year.There were over 105,000 apps by September of 2012.This is an indication that in a competitive market

Accepted Answer

A) the ease at which a new firm can enter a competitive market is low. 
B) the ease at which a new firm can enter a competitive market is high. 
C) entry into the market is blocked. 
D) entry into the market is restricted in the short run, but becomes easier in the long run. 
A) the ease at which a new firm can enter a competitive market is low. 
B) the ease at which a new firm can enter a competitive market is high. 
C) entry into the market is blocked. 
D) entry into the market is restricted in the short run, but becomes easier in the long run.

The demand curve for an individual seller's product in perfect competition is

Figure 10.6 Figure 10.6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 10.6.At price P₂, the firm would produce

Which of the following statements is correct?

Figure 10.6 Figure 10.6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 10.6.At price P₃, the firm would

Figure 10.6 Figure 10.6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 10.6.At price P₃, the firm would produce

If a firm in a perfectly competitive industry introduces a lower-cost way of producing an existing product, the firm will be able to earn economic profits in the long run.

Firms in perfect competition produce the productively efficient output level in the short run and in the long run.

Perfect competition is characterized by all of the following except

If a typical firm in a perfectly competitive industry is incurring losses, then

If the market price is $25, the average revenue of selling five units is

If the long-run average cost curve is U-shaped, the optimal scale of production from society's viewpoint is

Both individual buyers and sellers in perfect competition

In perfect competition

Figure 10.5 Figure 10.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 10.5.If the market price is $20, what is the amount of the firm's profit?

Assume the market for organically-grown produce is perfectly competitive.All else equal, as farmers find it less profitable to produce and sell organic produce in this market,

All of the following can be used to compute average profit except

In the long run, a perfectly competitive market will

What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters

Exam 10: Firms in Perfectly Competitive Markets

The demand curve for an individual seller's product in perfect competition is

Figure 10.6 Figure 10.6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 10.6.At price P₂, the firm would produce

Which of the following statements is correct?

Figure 10.6 Figure 10.6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 10.6.At price P₃, the firm would

Figure 10.6 Figure 10.6 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 10.6.At price P₃, the firm would produce

If a firm in a perfectly competitive industry introduces a lower-cost way of producing an existing product, the firm will be able to earn economic profits in the long run.

Firms in perfect competition produce the productively efficient output level in the short run and in the long run.

Perfect competition is characterized by all of the following except

If a typical firm in a perfectly competitive industry is incurring losses, then

If the market price is $25, the average revenue of selling five units is

If the long-run average cost curve is U-shaped, the optimal scale of production from society's viewpoint is

Both individual buyers and sellers in perfect competition

In perfect competition

Figure 10.5 Figure 10.5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 10.5.If the market price is $20, what is the amount of the firm's profit?

Assume the market for organically-grown produce is perfectly competitive.All else equal, as farmers find it less profitable to produce and sell organic produce in this market,

All of the following can be used to compute average profit except

In the long run, a perfectly competitive market will

What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency?

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

The Markets for Labour and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Pricing Strategy

Firms, the Stock Market, and Corporate Governance

Filters