Question 1

Economists study perfect competition

Accepted Answer

A) because many markets are perfectly competitive. 
B) for its descriptive realism. 
C) to establish a benchmark by which to measure the performance of the economy. 
D) All of the above are correct. 
A) because many markets are perfectly competitive. 
B) for its descriptive realism. 
C) to establish a benchmark by which to measure the performance of the economy. 
D) All of the above are correct. C

Question 2

Figure 10-4
  
-Figure 10-4 shows the industry's supply and demand curves in panel (1) and the cost curves of a firm in the industry in panel (2).At S₂, the firm is

Accepted Answer

A) going to shut down. 
B) incurring losses. 
C) earning zero economic profits. 
D) earning economic profit greater than zero. 
A) going to shut down. 
B) incurring losses. 
C) earning zero economic profits. 
D) earning economic profit greater than zero. C

Question 3

Which of the following decisions cannot be taken by a firm in a perfectly competitive market?

Accepted Answer

A) Market exit decision 
B) Market price of the product 
C) Quantity of output it can produce 
D) Entering a market 
A) Market exit decision 
B) Market price of the product 
C) Quantity of output it can produce 
D) Entering a market B

Question 4

A perfectly competitive firm is a "price taker" because it cannot sell its product for more than the market price.

Accepted Answer

A) True 
 B)False

Question 5

Figure 10-2
  
-Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm.In the short run, this firm would

Accepted Answer

A) earn positive economic profits. 
B) earn economic losses. 
C) go out of business. 
D) Cannot be determined with the information given. 
A) earn positive economic profits. 
B) earn economic losses. 
C) go out of business. 
D) Cannot be determined with the information given.

Question 6

The perfectly competitive firm has no influence over price because

Accepted Answer

A) its output is so insignificant relative to the market as a whole. 
B) anti-trust laws constrain perfectly competitive firms. 
C) consumers establish the prices of products. 
D) it doesn't know its demand curve. 
A) its output is so insignificant relative to the market as a whole. 
B) anti-trust laws constrain perfectly competitive firms. 
C) consumers establish the prices of products. 
D) it doesn't know its demand curve.

Question 7

In the short-run if TR < TC, a perfectly competitive firm will always shut down.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is not a characteristic of perfect competition?

Accepted Answer

A) Firms and consumers all have perfect information about the good and market. 
B) Sellers can enter the market easily. 
C) All goods sold are identical. 
D) All consumers have identical individual demand curves. 
A) Firms and consumers all have perfect information about the good and market. 
B) Sellers can enter the market easily. 
C) All goods sold are identical. 
D) All consumers have identical individual demand curves.

Question 9

The short-run market demand schedule in perfect competition is positively sloped.

Accepted Answer

A) True 
 B)False

Question 10

It is relatively easy for a firm to enter a perfectly competitive market.

Accepted Answer

A) True 
 B)False

Question 11

The perfectly competitive firm's short-run shutdown rule is to shut down immediately if

Accepted Answer

A) TR  Q. 
A) TR  Q.

Question 12

Why do economists consider perfect competition to be the most efficient market structure?

Accepted Answer

Perfect competition is the most efficien

Question 13

In the long run, any firm may enter or leave a perfectly competitive market.

Accepted Answer

A) True 
 B)False

Question 14

How does a firm that is losing money in the short run decide whether to shut down or continue to produce to minimize its losses?

Accepted Answer

The firm should continue to pr

Question 15

Figure 10-6
  
-In Figure 10-6, the price at long-run equilibrium is

Accepted Answer

A) $5. 
B) $10. 
C) $20. 
D) $35. 
A) $5. 
B) $10. 
C) $20. 
D) $35.

Question 16

Which of the following statements is not true in a perfectly competitive industry in long-run equilibrium?

Accepted Answer

A) A profit-maximizing firm may produce any output level at which P < LRAC. 
B) Every firm produces at an output level at which MC = LRAC. 
C) There is no entry or exit from the industry. 
D) No firm earns an economic profit. 
A) A profit-maximizing firm may produce any output level at which P < LRAC. 
B) Every firm produces at an output level at which MC = LRAC. 
C) There is no entry or exit from the industry. 
D) No firm earns an economic profit.

Question 17

The demand curve of a perfectly competitive firm is vertical.

Accepted Answer

A) True 
 B)False

Question 18

An industry supply curve is the horizontal summation of the supply curves of all of the individual firms.

Accepted Answer

A) True 
 B)False

Question 19

The market for a perfectly competitive industry clears at a price of $3, and the minimum average cost for all firms is $2.50.In the long run, we would expect an increase in

Accepted Answer

A) each firm's output. 
B) the number of firms. 
C) each firm's profit. 
D) each firm's average cost. 
A) each firm's output. 
B) the number of firms. 
C) each firm's profit. 
D) each firm's average cost.

Question 20

The entry of firms into a perfectly competitive industry causes the supply curve to

Accepted Answer

A) increase its slope. 
B) decrease its slope. 
C) move toward the right. 
D) move toward the left. 
A) increase its slope. 
B) decrease its slope. 
C) move toward the right. 
D) move toward the left.

Exam 10: The Firm and the Industry Under Perfect Competition

Economists study perfect competition

Figure 10-4 -Figure 10-4 shows the industry's supply and demand curves in panel (1) and the cost curves of a firm in the industry in panel (2).At S₂, the firm is

Which of the following decisions cannot be taken by a firm in a perfectly competitive market?

A perfectly competitive firm is a "price taker" because it cannot sell its product for more than the market price.

Figure 10-2 -Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm.In the short run, this firm would

The perfectly competitive firm has no influence over price because

In the short-run if TR < TC, a perfectly competitive firm will always shut down.

Which of the following is not a characteristic of perfect competition?

The short-run market demand schedule in perfect competition is positively sloped.

It is relatively easy for a firm to enter a perfectly competitive market.

The perfectly competitive firm's short-run shutdown rule is to shut down immediately if

Why do economists consider perfect competition to be the most efficient market structure?

In the long run, any firm may enter or leave a perfectly competitive market.

How does a firm that is losing money in the short run decide whether to shut down or continue to produce to minimize its losses?

Figure 10-6 -In Figure 10-6, the price at long-run equilibrium is

Which of the following statements is not true in a perfectly competitive industry in long-run equilibrium?

The demand curve of a perfectly competitive firm is vertical.

An industry supply curve is the horizontal summation of the supply curves of all of the individual firms.

The market for a perfectly competitive industry clears at a price of $3, and the minimum average cost for all firms is $2.50.In the long run, we would expect an increase in

The entry of firms into a perfectly competitive industry causes the supply curve to

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

Monopoly

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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