Question 1

A very large number of small sellers who sell identical products imply

Accepted Answer

A) a multitude of vastly different selling prices. 
B) a downward sloping demand for each seller's product. 
C) the inability of one seller to influence price. 
D) chaos in the market. 
A) a multitude of vastly different selling prices. 
B) a downward sloping demand for each seller's product. 
C) the inability of one seller to influence price. 
D) chaos in the market.

Question 2

In a perfectly competitive market the term "price taker" applies to

Accepted Answer

A) sellers and buyers. 
B) firms but not buyers. 
C) buyers but not sellers. 
D) only the smallest sellers and buyers. 
A) sellers and buyers. 
B) firms but not buyers. 
C) buyers but not sellers. 
D) only the smallest sellers and buyers.

Question 3

Figure 9-7
   
Figure 9-7 illustrates the cost curves of a perfectly competitive firm.
-Refer to Figure 9-7.If the market price is P₃ the firm

Accepted Answer

A) will break even. 
B) will make a profit. 
C) will earn enough revenue to cover its variable costs but not its fixed costs. 
D) will produce a quantity of Q₁. 
A) will break even. 
B) will make a profit. 
C) will earn enough revenue to cover its variable costs but not its fixed costs. 
D) will produce a quantity of Q₁.

Question 4

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 5

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

Accepted Answer

A) Restaurants do not sell identical products. 
B) Restaurants compete in small market areas-neighborhoods and cities-rather than in regional or national markets.Therefore, restaurants are not small relative to their market size. 
C) Restaurants usually have entry barriers in the form of zoning restrictions and health regulations. 
D) Restaurants have significant liability costs that perfectly competitive firms do not have; for example, customers may sue if they suffer from food poisoning. 
A) Restaurants do not sell identical products. 
B) Restaurants compete in small market areas-neighborhoods and cities-rather than in regional or national markets.Therefore, restaurants are not small relative to their market size. 
C) Restaurants usually have entry barriers in the form of zoning restrictions and health regulations. 
D) Restaurants have significant liability costs that perfectly competitive firms do not have; for example, customers may sue if they suffer from food poisoning.

Question 6

If a perfectly competitive firm's price is above its average total cost,the firm

Accepted Answer

A) is earning a profit. 
B) should shut down. 
C) is incurring a loss. 
D) is breaking even. 
A) is earning a profit. 
B) should shut down. 
C) is incurring a loss. 
D) is breaking even.

Question 7

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Accepted Answer

A) each seller is too small to affect market price. 
B) the price is set by the government. 
C) all the sellers get together and set the price. 
D) all the demanders get together and set the price. 
A) each seller is too small to affect market price. 
B) the price is set by the government. 
C) all the sellers get together and set the price. 
D) all the demanders get together and set the price.

Question 8

Figure 9-10
  
-Refer to Figure 9-10.At the profit-maximizing output level,the firm earns

Accepted Answer

A) zero economic profit. 
B) a profit of $600. 
C) a profit of $1,200. 
D) a profit of $2,700. 
A) zero economic profit. 
B) a profit of $600. 
C) a profit of $1,200. 
D) a profit of $2,700.

Question 9

What assumptions are necessary for a market to be perfectly competitive? Explain why each of these assumptions is important.

Accepted Answer

The assumptions necessary for a market t

Question 10

If,in a perfectly competitive industry,the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost,then

Accepted Answer

A) firms are breaking even. 
B) new firms are attracted to the industry. 
C) existing firms will exit the industry. 
D) market supply will remain constant. 
A) firms are breaking even. 
B) new firms are attracted to the industry. 
C) existing firms will exit the industry. 
D) market supply will remain constant.

Question 11

Mark Frost grows apples in a perfectly competitive market.If we drew a line in a graph that illustrates Mark's total revenue from selling apples,it would be

Accepted Answer

A) a straight, upward-sloping line. 
B) a horizontal line. 
C) a straight, downward-sloping line. 
D) a curve that is negatively sloped at low levels of output and positively sloped at higher levels of output. 
A) a straight, upward-sloping line. 
B) a horizontal line. 
C) a straight, downward-sloping line. 
D) a curve that is negatively sloped at low levels of output and positively sloped at higher levels of output.

Question 12

Figure 9-17
   
The graphs in Figure 9-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry.
-Refer to Figure 9-17.Which of the following statements is true?

Accepted Answer

A) The current market price is $3 but the firm will be able to increase the price in the future. 
B) The current market price is $3 but the price will fall in the long-run as a result of a decrease in demand. 
C) The current market price is $3 but the price will fall in the long-run as new firms enter the market. 
D) The current market price is $3 but the price will increase in the future as the market demand increases. 
A) The current market price is $3 but the firm will be able to increase the price in the future. 
B) The current market price is $3 but the price will fall in the long-run as a result of a decrease in demand. 
C) The current market price is $3 but the price will fall in the long-run as new firms enter the market. 
D) The current market price is $3 but the price will increase in the future as the market demand increases.

Question 13

Assuming a market price of $4,fill in the columns in the following table.What is the profit-maximizing level of production? What are the two ways to determine the profit-maximizing level of production?
 $$\begin{array} { | c | c | c | c | c | c | } 
\hline \text { Quantity } & \begin{array} { c } 
\text { Total } \
\text { Revenue } \
\text { (TR) }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Cost } \
\text { (TC) }
\end{array} & \text { Profit } & \begin{array} { c } 
\text { Marginal } \
\text { Revenue } \
( M R )
\end{array} & \begin{array} { c } 
\text { Marginnl } \
\text { Cast } ( M C )
\end{array} \
\hline 0 & & 3 & & & \
\hline 1 & & 5 & & & \
\hline 2 & & 6 & & & \
\hline 3 & & 9 & & & \
\hline 4 & & 14 & & & \
\hline 5 & & 20 & & & \
\hline 6 & & 28 & & & \
\hline 7 & & 40 & & & \
\hline
\end{array}$$

Accepted Answer

\[\begin{array} { | c | c | c | c | c |

Question 14

Using two graphs,illustrate how a positive technological change in the market for notebook computers could eliminate short-run economic profit for a firm in that market.On the first graph,use a supply and demand graph to illustrate the positive technological change.On the second graph,use demand,ATC,MC and MR curves to illustrate the elimination of economic profit resulting from the positive technological change.Explain what is taking place in each graph.

Accepted Answer

On the first graph,supply shifts to the

Question 15

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

Accepted Answer

A) wheat production 
B) steel production 
C) electricity production 
D) airplane production 
A) wheat production 
B) steel production 
C) electricity production 
D) airplane production

Question 16

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000.The fixed cost of production is $20,000.The price of each good is $10.Should the firm continue to produce in the short run?

Accepted Answer

A) No, it should shut down because it is making a loss. 
B) Yes, it should continue to produce because its price exceeds its average fixed cost. 
C) Yes, it should continue to produce because it is minimizing its loss. 
D) There is insufficient information to answer the question. 
A) No, it should shut down because it is making a loss. 
B) Yes, it should continue to produce because its price exceeds its average fixed cost. 
C) Yes, it should continue to produce because it is minimizing its loss. 
D) There is insufficient information to answer the question.

Question 17

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102,then the firm is probably producing more than its profit-maximizing quantity.

Accepted Answer

A) True 
 B)False

Question 18

If total variable cost exceeds total revenue at all output levels,a perfectly competitive firm

Accepted Answer

A) should produce in the short run. 
B) is making short-run profits. 
C) should shut down in the short run. 
D) has covered its fixed cost. 
A) should produce in the short run. 
B) is making short-run profits. 
C) should shut down in the short run. 
D) has covered its fixed cost.

Question 19

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.What is the amount of the firm's fixed cost of production?

Accepted Answer

A) $5,400 
B) $6,750 
C) $8,100 
D) It cannot be determined. 
A) $5,400 
B) $6,750 
C) $8,100 
D) It cannot be determined.

Question 20

Assume that the tuna fishing industry is perfectly competitive.Which of the following best characterizes the industry if,as demand for tuna increases,fishing boats have to go farther into the ocean to harvest tuna?

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

A very large number of small sellers who sell identical products imply

In a perfectly competitive market the term "price taker" applies to

Figure 9-7 Figure 9-7 illustrates the cost curves of a perfectly competitive firm. -Refer to Figure 9-7.If the market price is P₃ the firm

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

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

If a perfectly competitive firm's price is above its average total cost,the firm

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Figure 9-10 -Refer to Figure 9-10.At the profit-maximizing output level,the firm earns

What assumptions are necessary for a market to be perfectly competitive? Explain why each of these assumptions is important.

If,in a perfectly competitive industry,the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost,then

Mark Frost grows apples in a perfectly competitive market.If we drew a line in a graph that illustrates Mark's total revenue from selling apples,it would be

Figure 9-17 The graphs in Figure 9-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry. -Refer to Figure 9-17.Which of the following statements is true?

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

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000.The fixed cost of production is $20,000.The price of each good is $10.Should the firm continue to produce in the short run?

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102,then the firm is probably producing more than its profit-maximizing quantity.

If total variable cost exceeds total revenue at all output levels,a perfectly competitive firm

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.What is the amount of the firm's fixed cost of production?

Assume that the tuna fishing industry is perfectly competitive.Which of the following best characterizes the industry if,as demand for tuna increases,fishing boats have to go farther into the ocean to harvest tuna?

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

A very large number of small sellers who sell identical products imply

In a perfectly competitive market the term "price taker" applies to

Figure 9-7 Figure 9-7 illustrates the cost curves of a perfectly competitive firm. -Refer to Figure 9-7.If the market price is P₃ the firm

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

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

If a perfectly competitive firm's price is above its average total cost,the firm

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Figure 9-10 -Refer to Figure 9-10.At the profit-maximizing output level,the firm earns

What assumptions are necessary for a market to be perfectly competitive? Explain why each of these assumptions is important.

If,in a perfectly competitive industry,the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost,then

Mark Frost grows apples in a perfectly competitive market.If we drew a line in a graph that illustrates Mark's total revenue from selling apples,it would be

Figure 9-17 The graphs in Figure 9-17 represent the perfectly competitive market demand and supply curves for the apple industry and demand and cost curves for a typical firm in the industry. -Refer to Figure 9-17.Which of the following statements is true?

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

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000.The fixed cost of production is $20,000.The price of each good is $10.Should the firm continue to produce in the short run?

Assume that price is greater than average variable cost.If a perfectly competitive firm is producing at an output where price is $114 and the marginal cost is $102,then the firm is probably producing more than its profit-maximizing quantity.

If total variable cost exceeds total revenue at all output levels,a perfectly competitive firm

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.What is the amount of the firm's fixed cost of production?

Assume that the tuna fishing industry is perfectly competitive.Which of the following best characterizes the industry if,as demand for tuna increases,fishing boats have to go farther into the ocean to harvest tuna?

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