Question 1

Why doesn't a perfectly competitive firm charge a price slightly higher than the industry price in order to earn extra profit?

Accepted Answer

A perfectly competitive firm is producin

Question 2

Perfectly competitive markets are not the most efficient type.

Accepted Answer

A) True 
 B)False

Question 3

Long-run average cost of the perfectly competitive firm includes the

Accepted Answer

A) cost of raw materials per unit of output. 
B) opportunity cost of labor per unit of output. 
C) opportunity cost of capital per unit of output. 
D) All of the above are correct. 
A) cost of raw materials per unit of output. 
B) opportunity cost of labor per unit of output. 
C) opportunity cost of capital per unit of output. 
D) All of the above are correct.

Question 4

In a perfectly competitive industry, influence over price is exerted by

Accepted Answer

A) individual sellers. 
B) individual buyers. 
C) the largest firms. 
D) the forces of supply and demand. 
A) individual sellers. 
B) individual buyers. 
C) the largest firms. 
D) the forces of supply and demand.

Question 5

At a firm's profit-maximizing level of output, its price is $200 and its short-run average total cost is $225.The firm

Accepted Answer

A) has a profit of $25 per unit of output. 
B) should shut down if its short-run average fixed cost is less than $25. 
C) has a loss of $100 per unit of output. 
D) should shut down if its short-run average variable cost exceeds $25. 
A) has a profit of $25 per unit of output. 
B) should shut down if its short-run average fixed cost is less than $25. 
C) has a loss of $100 per unit of output. 
D) should shut down if its short-run average variable cost exceeds $25.

Question 6

Explain the reasoning behind the shutdown rules.When is it appropriate to operate with a loss?

Accepted Answer

1.The firm will make a profit if total r

Question 7

At its long-run equilibrium level of output, the demand curve facing an individual perfectly competitive firm is tangent to its

Accepted Answer

A) total economic profit curve. 
B) long-run average cost curve. 
C) marginal cost curve. 
D) marginal profit curve. 
A) total economic profit curve. 
B) long-run average cost curve. 
C) marginal cost curve. 
D) marginal profit curve.

Question 8

Give a complete but concise definition of the following terms.
a.perfect competition
b.perfectly competitive firm's demand curve
c.shutdown point
d.long-run equilibrium in perfect competition

Accepted Answer

a.Perfect competition is a market struct

Question 9

Perfect competition displays the market mechanism at its best in many respects, yet most markets in operation today are monopolistic or oligopolistic, composed of a few large firms.Should government regulation break up those large firms into several smaller firms to try to achieve perfect competition?
 Why or why not?

Accepted Answer

Perfect competition prevents firms from

Question 10

A firm sells in a competitive market in which price is $12.Its marginal cost is 6 + .25Q.Determine the profit-maximizing level of output.

Accepted Answer

The solution requires equating

Question 11

Which of the following is closest to the economist's definition of perfect competition?

Accepted Answer

A) the airline industry 
B) the soft drink industry 
C) the fishing industry 
D) cellular telephone service 
A) the airline industry 
B) the soft drink industry 
C) the fishing industry 
D) cellular telephone service

Question 12

Figure 10-1
  
-If the profit-maximizing firm depicted in Figure 10-1 is perfectly competitive, how much output should it produce?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 13

If government forced a firm to charge a price equal to marginal cost in a situation where there are scale economies,

Accepted Answer

A) new firms would enter the industry. 
B) the firm would be forced to go bankrupt. 
C) positive economic profit would grow even larger. 
D) marginal cost would exceed average cost. 
A) new firms would enter the industry. 
B) the firm would be forced to go bankrupt. 
C) positive economic profit would grow even larger. 
D) marginal cost would exceed average cost.

Question 14

If the opportunity cost of capital is below the rate of return to capital in the perfectly competitive beauty salon industry,

Accepted Answer

A) resources will flow into the industry. 
B) beauty salon owners must be earning negative economic profit. 
C) the beauty salon industry cannot be in long-run equilibrium. 
D) beauty salon owners must be earning negative marginal revenue at their current levels of output. 
A) resources will flow into the industry. 
B) beauty salon owners must be earning negative economic profit. 
C) the beauty salon industry cannot be in long-run equilibrium. 
D) beauty salon owners must be earning negative marginal revenue at their current levels of output.

Question 15

The short-run supply curve for the perfectly competitive firm is that part of the marginal cost curve that lies above the average fixed cost curve.

Accepted Answer

A) True 
 B)False

Question 16

In a long-run equilibrium in a perfectly competitive market, the average firm earns positive economic profits.

Accepted Answer

A) True 
 B)False

Question 17

If there are no profits in competitive equilibrium, why do firms produce?
 How can they stay in business?

Accepted Answer

The "no profits" conclusion of competiti

Question 18

Figure 10-8
  
-In the short run, the firm in Figure 10-8 will shut down if the price falls below

Accepted Answer

A) $8. 
B) $6. 
C) $5. 
D) $1. 
A) $8. 
B) $6. 
C) $5. 
D) $1.

Question 19

In the short-run, only a limited number of new firms may enter a perfectly competitive market.

Accepted Answer

A) True 
 B)False

Question 20

Illustrate the cost curves and average revenue (demand) curve for the perfectly competitive firm in long-run equilibrium.

Accepted Answer

The illustration sho

Exam 10: The Firm and the Industry Under Perfect Competition

Why doesn't a perfectly competitive firm charge a price slightly higher than the industry price in order to earn extra profit?

Perfectly competitive markets are not the most efficient type.

Long-run average cost of the perfectly competitive firm includes the

In a perfectly competitive industry, influence over price is exerted by

At a firm's profit-maximizing level of output, its price is $200 and its short-run average total cost is $225.The firm

Explain the reasoning behind the shutdown rules.When is it appropriate to operate with a loss?

At its long-run equilibrium level of output, the demand curve facing an individual perfectly competitive firm is tangent to its

Give a complete but concise definition of the following terms. a.perfect competition b.perfectly competitive firm's demand curve c.shutdown point d.long-run equilibrium in perfect competition

A firm sells in a competitive market in which price is $12.Its marginal cost is 6 + .25Q.Determine the profit-maximizing level of output.

Which of the following is closest to the economist's definition of perfect competition?

Figure 10-1 -If the profit-maximizing firm depicted in Figure 10-1 is perfectly competitive, how much output should it produce?

If government forced a firm to charge a price equal to marginal cost in a situation where there are scale economies,

If the opportunity cost of capital is below the rate of return to capital in the perfectly competitive beauty salon industry,

The short-run supply curve for the perfectly competitive firm is that part of the marginal cost curve that lies above the average fixed cost curve.

In a long-run equilibrium in a perfectly competitive market, the average firm earns positive economic profits.

If there are no profits in competitive equilibrium, why do firms produce? How can they stay in business?

Figure 10-8 -In the short run, the firm in Figure 10-8 will shut down if the price falls below

In the short-run, only a limited number of new firms may enter a perfectly competitive market.

Illustrate the cost curves and average revenue (demand) curve for the perfectly competitive firm in long-run equilibrium.

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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