Question 1

In a perfectly competitive industry,in the long-run equilibrium

Accepted Answer

A) the typical firm is producing at the output where its long-run average total cost is not minimized. 
B) the typical firm is earning an accounting profit greater than its implicit costs. 
C) the typical firm earns zero profit. 
D) the typical firm is maximizing its revenue. 
A) the typical firm is producing at the output where its long-run average total cost is not minimized. 
B) the typical firm is earning an accounting profit greater than its implicit costs. 
C) the typical firm earns zero profit. 
D) the typical firm is maximizing its revenue.

Question 2

How are market price,average revenue,and marginal revenue related for a perfectly competitive firm and why?

Accepted Answer

They are all equal to each other.The mar

Question 3

If a firm shuts down it

Accepted Answer

A) will suffer a loss equal to its fixed costs. 
B) will produce nothing but must pay its variable costs. 
C) will produce nothing but must pay its fixed and variable costs. 
D) will earn enough revenue to cover its variable costs but not all of its fixed costs. 
A) will suffer a loss equal to its fixed costs. 
B) will produce nothing but must pay its variable costs. 
C) will produce nothing but must pay its fixed and variable costs. 
D) will earn enough revenue to cover its variable costs but not all of its fixed costs.

Question 4

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 5

For a given quantity,the total profit of a perfectly competitive firm is equal to the vertical distance between the firm's total revenue curve and its total cost curve.

Accepted Answer

A) True 
 B)False

Question 6

Suppose the equilibrium price in a perfectly competitive industry is $10 and a firm in the industry charges $12.Which of the following will happen?

Accepted Answer

A) The firm will sell more output than its competitors. 
B) The firm's revenue will increase. 
C) The firm will not sell any output. 
D) The firm's profits will increase. 
A) The firm will sell more output than its competitors. 
B) The firm's revenue will increase. 
C) The firm will not sell any output. 
D) The firm's profits will increase.

Question 7

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.The prevailing market price is $48.Assuming that this firm continues to produce in the long run,what happens to output level in the long run?

Accepted Answer

A) The firm's output falls. 
B) The firm's output increases. 
C) The firm produces the same output level. 
D)  There is insufficient information to answer the question. 
A) The firm's output falls. 
B) The firm's output increases. 
C) The firm produces the same output level. 
D)  There is insufficient information to answer the question.

Question 8

If a firm's fixed cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Accepted Answer

A) True 
 B)False

Question 9

Figure 9-4
   
Figure 9-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
-Refer to Figure 9-4.If the market price is $30,should the firm represented in the diagram continue to stay in business?

Accepted Answer

A) No, it should shut down because it is making a loss. 
B) No, it should shut down because it cannot cover its variable cost. 
C) Yes, because it is covering part of its fixed cost. 
D) Yes, because it is making a profit. 
A) No, it should shut down because it is making a loss. 
B) No, it should shut down because it cannot cover its variable cost. 
C) Yes, because it is covering part of its fixed cost. 
D) Yes, because it is making a profit.

Question 10

If,as a perfectly competitive industry expands,it can supply larger quantities at the same long-run market price,it is

Accepted Answer

A)  a constant-cost industry. 
B) an increasing-cost industry. 
C) a decreasing-cost industry. 
D) a fixed-cost industry. 
A)  a constant-cost industry. 
B) an increasing-cost industry. 
C) a decreasing-cost industry. 
D) a fixed-cost industry.

Question 11

What is meant by the term "long-run competitive equilibrium?

Accepted Answer

Long-run competitive equilibri

Question 12

In the short run,a profit-maximizing firm will shut down if its total revenue is greater than its variable costs.

Accepted Answer

A) True 
 B)False

Question 13

Figure 9-5
   
Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 9-5.If the market price is $20,what is the average profit at the profit-maximizing quantity?

Accepted Answer

A) $5 
B) $6 
C) $9 
D) $20 
A) $5 
B) $6 
C) $9 
D) $20

Question 14

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

Accepted Answer

A) Each firm produces up to the point where the price of the good equals the marginal cost of producing the last unit. 
B) Each firm produces up to the point where all scale economies are exhausted. 
C) Production occurs at the lowest average total cost. 
D) Firms use an input combination that minimizes cost and maximizes output. 
A) Each firm produces up to the point where the price of the good equals the marginal cost of producing the last unit. 
B) Each firm produces up to the point where all scale economies are exhausted. 
C) Production occurs at the lowest average total cost. 
D) Firms use an input combination that minimizes cost and maximizes output.

Question 15

In early 2007,Pioneer and JVC,two Japanese electronics firms,each announced that their profits were going to be lower than expected because they both had to cut prices for LCD and plasma television sets.Which of the following could explain why these firms did not simply raise their prices and increase their profits?

Accepted Answer

A) The move to cut prices is probably just a temporary one to gain market share.In the long run the firms will raise prices and be able to increase their profits. 
B) Most likely, intense competition between these two major producers probably pushed prices down.Thereafter, each feared that it would lose its customers to the other if it raised its prices. 
C) In perfect competition, prices are determined by the market and firms will keep lowering prices until there are no profits to be earned. 
D) The firms are still making profits, just not as high as expected so there is room to lower prices until one can force the other out of business. 
A) The move to cut prices is probably just a temporary one to gain market share.In the long run the firms will raise prices and be able to increase their profits. 
B) Most likely, intense competition between these two major producers probably pushed prices down.Thereafter, each feared that it would lose its customers to the other if it raised its prices. 
C) In perfect competition, prices are determined by the market and firms will keep lowering prices until there are no profits to be earned. 
D) The firms are still making profits, just not as high as expected so there is room to lower prices until one can force the other out of business.

Question 16

In the short run,a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

Accepted Answer

A) True 
 B)False

Question 17

Figure 9-11
  
-Refer to Figure 9-11.Suppose the prevailing price is $20 and the firm is currently producing 1,350 units.In the long-run equilibrium,the firm represented in the diagram

Accepted Answer

A) will continue to produce the same quantity. 
B) will reduce its output to 1,100 units. 
C) will reduce its output to 750 units. 
D) will cease to exist. 
A) will continue to produce the same quantity. 
B) will reduce its output to 1,100 units. 
C) will reduce its output to 750 units. 
D) will cease to exist.

Question 18

In the long run,perfectly competitive firms earn zero economic profit.Why do firms enter an industry when they know that in the long-run they will not earn any profit?

Accepted Answer

Even though in the long run firms earn z

Question 19

If a firm's total variable cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following characteristics of a farmers' market make it a good example of a perfectly competitive market?

Accepted Answer

A) Selling product at a farmers' market was very profitable for farmers in the early 2000s.As result, many farmers sold their farms to larger firms. 
B) Farmers who sell product at a farmers' market are similar to other entrepreneurs who introduce products that earn short-run profits but invite competition that drives down prices and profits in the long run. 
C) Farmers who sell product at a farmers' market are similar to other business owners who take advantage of the willingness of some consumers to pay high prices for new and different products. 
D) Farmers selling product at a farmers' market provide a product that is a necessity, rather than a luxury. 
A) Selling product at a farmers' market was very profitable for farmers in the early 2000s.As result, many farmers sold their farms to larger firms. 
B) Farmers who sell product at a farmers' market are similar to other entrepreneurs who introduce products that earn short-run profits but invite competition that drives down prices and profits in the long run. 
C) Farmers who sell product at a farmers' market are similar to other business owners who take advantage of the willingness of some consumers to pay high prices for new and different products. 
D) Farmers selling product at a farmers' market provide a product that is a necessity, rather than a luxury.

In a perfectly competitive industry,in the long-run equilibrium

How are market price,average revenue,and marginal revenue related for a perfectly competitive firm and why?

If a firm shuts down it

Perfect competition is characterized by all of the following except

For a given quantity,the total profit of a perfectly competitive firm is equal to the vertical distance between the firm's total revenue curve and its total cost curve.

Suppose the equilibrium price in a perfectly competitive industry is $10 and a firm in the industry charges $12.Which of the following will happen?

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.The prevailing market price is $48.Assuming that this firm continues to produce in the long run,what happens to output level in the long run?

If a firm's fixed cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Figure 9-4 Figure 9-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. -Refer to Figure 9-4.If the market price is $30,should the firm represented in the diagram continue to stay in business?

If,as a perfectly competitive industry expands,it can supply larger quantities at the same long-run market price,it is

What is meant by the term "long-run competitive equilibrium?

In the short run,a profit-maximizing firm will shut down if its total revenue is greater than its variable costs.

Figure 9-5 Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 9-5.If the market price is $20,what is the average profit at the profit-maximizing quantity?

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

In the short run,a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

Figure 9-11 -Refer to Figure 9-11.Suppose the prevailing price is $20 and the firm is currently producing 1,350 units.In the long-run equilibrium,the firm represented in the diagram

In the long run,perfectly competitive firms earn zero economic profit.Why do firms enter an industry when they know that in the long-run they will not earn any profit?

If a firm's total variable cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Which of the following characteristics of a farmers' market make it a good example of a perfectly competitive market?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 9: Firms in Perfectly Competitive Markets

In a perfectly competitive industry,in the long-run equilibrium

How are market price,average revenue,and marginal revenue related for a perfectly competitive firm and why?

If a firm shuts down it

Perfect competition is characterized by all of the following except

For a given quantity,the total profit of a perfectly competitive firm is equal to the vertical distance between the firm's total revenue curve and its total cost curve.

Suppose the equilibrium price in a perfectly competitive industry is $10 and a firm in the industry charges $12.Which of the following will happen?

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.The prevailing market price is $48.Assuming that this firm continues to produce in the long run,what happens to output level in the long run?

If a firm's fixed cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Figure 9-4 Figure 9-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. -Refer to Figure 9-4.If the market price is $30,should the firm represented in the diagram continue to stay in business?

If,as a perfectly competitive industry expands,it can supply larger quantities at the same long-run market price,it is

What is meant by the term "long-run competitive equilibrium?

In the short run,a profit-maximizing firm will shut down if its total revenue is greater than its variable costs.

Figure 9-5 Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 9-5.If the market price is $20,what is the average profit at the profit-maximizing quantity?

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

In the short run,a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

Figure 9-11 -Refer to Figure 9-11.Suppose the prevailing price is $20 and the firm is currently producing 1,350 units.In the long-run equilibrium,the firm represented in the diagram

In the long run,perfectly competitive firms earn zero economic profit.Why do firms enter an industry when they know that in the long-run they will not earn any profit?

If a firm's total variable cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Which of the following characteristics of a farmers' market make it a good example of a perfectly competitive market?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Elasticity

Technology, production, and Costs

Monopoly and Antitrust Policy

Monopolistic Competition and Oligopoly

Gdp: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters