Question 1

The entry of new firms into a perfectly competitive market shifts the demand curve outward.

Accepted Answer

A) True 
 B)False

Question 2

A perfectly competitive firm may, under some circumstances, be able to affect the market price.

Accepted Answer

A) True 
 B)False

Question 3

In perfect competition, marginal revenue always equals

Accepted Answer

A) total revenue. 
B) price. 
C) average cost. 
D) marginal fixed cost. 
A) total revenue. 
B) price. 
C) average cost. 
D) marginal fixed cost.

Question 4

Perfect competition is characterized by numerous firms.

Accepted Answer

A) True 
 B)False

Question 5

Figure 10-8
  
-In the long run, the perfectly competitive firm in Figure 10-8 will leave the industry if the price falls below

Accepted Answer

A) $10. 
B) $9. 
C) $5. 
D) $2. 
A) $10. 
B) $9. 
C) $5. 
D) $2.

Question 6

Figure 10-7
  
-In Figure 10-7, output at which point represents short-run but not long-run equilibrium?

Accepted Answer

A) A only 
B) B only 
C) both A and B 
D) both B and C 
A) A only 
B) B only 
C) both A and B 
D) both B and C

Question 7

In the long run, a perfectly competitive firm earns no accounting profits.

Accepted Answer

A) True 
 B)False

Question 8

For a perfectly competitive firm, marginal revenue equals average revenue because the

Accepted Answer

A) firm's supply curve is horizontal. 
B) industry's demand curve is horizontal. 
C) firm's demand curve is horizontal. 
D) industry's supply curve is horizontal. 
A) firm's supply curve is horizontal. 
B) industry's demand curve is horizontal. 
C) firm's demand curve is horizontal. 
D) industry's supply curve is horizontal.

Question 9

A perfectly competitive firm is a price

Accepted Answer

A) giver. 
B) taker. 
C) maker. 
D) leader. 
A) giver. 
B) taker. 
C) maker. 
D) leader.

Question 10

There are currently 1,000 firms in a competitive industry.Minimum long-run average cost is $80 and price $100.Explain what will happen to price, profit, and the number of firms in this industry over time.

Accepted Answer

Price exceeds minimum long-run average c

Question 11

What is the nature of the elasticity of the demand curve faced by perfectly competitive firm?

Accepted Answer

A) Perfectly inelastic 
B) Perfectly elastic 
C) Unit elastic 
D) Highly elastic 
A) Perfectly inelastic 
B) Perfectly elastic 
C) Unit elastic 
D) Highly elastic

Question 12

A perfectly competitive industry in long-run equilibrium is described as efficient because firms

Accepted Answer

A) produce at the low point on their average cost curve. 
B) produce where marginal cost yields a profit. 
C) earn no more than the cost of capital. 
D) are not profitable. 
A) produce at the low point on their average cost curve. 
B) produce where marginal cost yields a profit. 
C) earn no more than the cost of capital. 
D) are not profitable.

Question 13

Figure 10-9
  
-Figure 10-9 shows supply and demand conditions in a perfectly competitive industry and for a firm in that industry.Assume the industry initially has supply curve S₁ and demand curve D₁
)If demand shifts to D₂, then in the short run price will

Accepted Answer

A) rise to A. 
B) rise to some level between A and B. 
C) remain at B. 
D) fall to C. 
A) rise to A. 
B) rise to some level between A and B. 
C) remain at B. 
D) fall to C.

Question 14

What makes the demand curve of the perfectly competitive firm uniquely different from that of firms in other kinds of market structures?

Accepted Answer

The perfectly competitive firm's demand

Question 15

The market for toothpaste is a good example of perfect competition.

Accepted Answer

A) True 
 B)False

Question 16

In the long run, a perfectly competitive industry tends to develop differentiated products.

Accepted Answer

A) True 
 B)False

Question 17

A firm will shut down in the short run if

Accepted Answer

A) TR − TC > TFC. 
B) TR + TC > TFC. 
C) TC − TR > TFC. 
D) TFC + TVC > TR. 
A) TR − TC > TFC. 
B) TR + TC > TFC. 
C) TC − TR > TFC. 
D) TFC + TVC > TR.

Question 18

Figure 10-7
  
-In Figure 10-7, through which point must a horizontal demand curve pass to yield a long-run equilibrium?

Accepted Answer

A) A 
B) B 
C) C 
D) All of the above is correct. 
A) A 
B) B 
C) C 
D) All of the above is correct.

Question 19

In long-run equilibrium, a firm in perfect competition has no economic profit.

Accepted Answer

A) True 
 B)False

Question 20

Draw a graph illustrating a competitive firm in short-run equilibrium that is earning an economic profit.Be sure to label all curves and axes correctly.

Accepted Answer

The diagram should look like F

Exam 10: The Firm and the Industry Under Perfect Competition

The entry of new firms into a perfectly competitive market shifts the demand curve outward.

A perfectly competitive firm may, under some circumstances, be able to affect the market price.

In perfect competition, marginal revenue always equals

Perfect competition is characterized by numerous firms.

Figure 10-8 -In the long run, the perfectly competitive firm in Figure 10-8 will leave the industry if the price falls below

Figure 10-7 -In Figure 10-7, output at which point represents short-run but not long-run equilibrium?

In the long run, a perfectly competitive firm earns no accounting profits.

For a perfectly competitive firm, marginal revenue equals average revenue because the

A perfectly competitive firm is a price

There are currently 1,000 firms in a competitive industry.Minimum long-run average cost is $80 and price $100.Explain what will happen to price, profit, and the number of firms in this industry over time.

What is the nature of the elasticity of the demand curve faced by perfectly competitive firm?

A perfectly competitive industry in long-run equilibrium is described as efficient because firms

Figure 10-9 -Figure 10-9 shows supply and demand conditions in a perfectly competitive industry and for a firm in that industry.Assume the industry initially has supply curve S₁ and demand curve D₁ )If demand shifts to D₂, then in the short run price will

What makes the demand curve of the perfectly competitive firm uniquely different from that of firms in other kinds of market structures?

The market for toothpaste is a good example of perfect competition.

In the long run, a perfectly competitive industry tends to develop differentiated products.

A firm will shut down in the short run if

Figure 10-7 -In Figure 10-7, through which point must a horizontal demand curve pass to yield a long-run equilibrium?

In long-run equilibrium, a firm in perfect competition has no economic profit.

Draw a graph illustrating a competitive firm in short-run equilibrium that is earning an economic profit.Be sure to label all curves and axes correctly.

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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