Question 1

The long-run industry supply curve in perfect competition is derived from the

Accepted Answer

A) short-run industry supply curve which shifts as new firms enter the industry. 
B) short-run industry supply curve which shifts as old firms exit the industry. 
C) freedom of firms from sunk costs so that new cost curves become long-run curves. 
D) All of the above reasons. 
A) short-run industry supply curve which shifts as new firms enter the industry. 
B) short-run industry supply curve which shifts as old firms exit the industry. 
C) freedom of firms from sunk costs so that new cost curves become long-run curves. 
D) All of the above reasons.

Question 2

One of the following is not a characteristic of perfect competition.Which is it?

Accepted Answer

A) Firms advertise to increase their market share. 
B) Profits are low in the long run. 
C) Consumers pay little attention to brand names. 
D) Firms pay no attention to their competitors' output levels. 
A) Firms advertise to increase their market share. 
B) Profits are low in the long run. 
C) Consumers pay little attention to brand names. 
D) Firms pay no attention to their competitors' output levels.

Question 3

If a firm shuts down in the short run, its losses are equal to

Accepted Answer

A) TC − TR. 
B) TFC. 
C) TVC. 
D) MC. 
A) TC − TR. 
B) TFC. 
C) TVC. 
D) MC.

Question 4

A perfectly competitive firm would be willing to remain in the industry in the long run at zero economic profit because

Accepted Answer

A) its total revenues would be positive. 
B) accounting profit would be negative. 
C) revenue is equal to all costs, including the opportunity cost of capital and labor. 
D) its fixed costs would prevent it from leaving the industry. 
A) its total revenues would be positive. 
B) accounting profit would be negative. 
C) revenue is equal to all costs, including the opportunity cost of capital and labor. 
D) its fixed costs would prevent it from leaving the industry.

Question 5

In perfect competition, a firm's marginal revenue equals the price of the product.

Accepted Answer

A) True 
 B)False

Question 6

Under the theory of perfect competition, firms and buyers know the availability and prices associated with all products in the market.

Accepted Answer

A) True 
 B)False

Question 7

The short-run supply curve for a perfectly competitive firm is that portion of the MC curve above the AVC curve.

Accepted Answer

A) True 
 B)False

Question 8

In the short run, if price is below AC, maximizing profits really means minimizing total losses.

Accepted Answer

A) True 
 B)False

Question 9

The short-run equilibrium output of a competitive firm is found by equating marginal cost with price.

Accepted Answer

A) True 
 B)False

Question 10

In the short run, a firm may have accounting losses and remain in operation.

Accepted Answer

A) True 
 B)False

Question 11

Perfect competition is the term used to describe

Accepted Answer

A) an industry in which all businessmen are honest and accommodating. 
B) an industry in which numerous firms produce identical products. 
C) an industry untouched by government regulation. 
D) the kind of industry any American would support. 
A) an industry in which all businessmen are honest and accommodating. 
B) an industry in which numerous firms produce identical products. 
C) an industry untouched by government regulation. 
D) the kind of industry any American would support.

Question 12

A subsidy to firms intended to reduce pollution in an industry would

Accepted Answer

A) shift the LRAC curve upward. 
B) have the same impact on the firm as a tax. 
C) likely drive some existing firms from the industry. 
D) likely have the paradoxical effect of increasing pollution in the industry in the long run. 
A) shift the LRAC curve upward. 
B) have the same impact on the firm as a tax. 
C) likely drive some existing firms from the industry. 
D) likely have the paradoxical effect of increasing pollution in the industry in the long run.

Question 13

Figure 10-5
  
-In Figure 10-5, points which lie on the firm's short-run supply curve are

Accepted Answer

A) A, B, C. 
B) C, D, H. 
C) F, E, G. 
D) A, C, H. 
A) A, B, C. 
B) C, D, H. 
C) F, E, G. 
D) A, C, H.

Question 14

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 S₁ , the firm is

Accepted Answer

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

Question 15

-In Table 10-1 are the short-run cost schedules of a perfectly competitive firm.If the market price of output is $50, the firm will produce ____ units and earn a profit of ____.

Accepted Answer

A) 6; $187.02 
B) 6; $48 
C) 8; $154.96 
D) 8; $245.04 
A) 6; $187.02 
B) 6; $48 
C) 8; $154.96 
D) 8; $245.04

Question 16

Which requirement for perfect competition rules out trade associations or other collusive arrangements in which firms work together to influence price?

Accepted Answer

A) Freedom of entry and exit. 
B) Homogeneity of product. 
C) Perfect information. 
D) Numerous small firms and customers. 
A) Freedom of entry and exit. 
B) Homogeneity of product. 
C) Perfect information. 
D) Numerous small firms and customers.

Question 17

In perfect competition there are differences in the products sold by various firms.

Accepted Answer

A) True 
 B)False

Question 18

Why does the supply curve of the perfectly competitive industry shift to the right whenever a new firm enters the industry?

Accepted Answer

The supply curve of the competitive indu

Question 19

Figure 10-5
  
-Figure 10-5 shows supply and demand conditions in a perfectly competitive industry and for a firm in that industry.At point C, the firm would

Accepted Answer

A) earn zero economic profit. 
B) earn negative economic profit. 
C) have a zero opportunity cost of capital. 
D) have a negative opportunity cost of capital. 
A) earn zero economic profit. 
B) earn negative economic profit. 
C) have a zero opportunity cost of capital. 
D) have a negative opportunity cost of capital.

Question 20

Which of the following most resembles a perfectly competitive market?

Accepted Answer

A) the stock market 
B) the publishing industry 
C) the steel industry 
D) the new car market 
A) the stock market 
B) the publishing industry 
C) the steel industry 
D) the new car market

Exam 10: The Firm and the Industry Under Perfect Competition

The long-run industry supply curve in perfect competition is derived from the

One of the following is not a characteristic of perfect competition.Which is it?

If a firm shuts down in the short run, its losses are equal to

A perfectly competitive firm would be willing to remain in the industry in the long run at zero economic profit because

In perfect competition, a firm's marginal revenue equals the price of the product.

Under the theory of perfect competition, firms and buyers know the availability and prices associated with all products in the market.

The short-run supply curve for a perfectly competitive firm is that portion of the MC curve above the AVC curve.

In the short run, if price is below AC, maximizing profits really means minimizing total losses.

The short-run equilibrium output of a competitive firm is found by equating marginal cost with price.

In the short run, a firm may have accounting losses and remain in operation.

Perfect competition is the term used to describe

A subsidy to firms intended to reduce pollution in an industry would

Figure 10-5 -In Figure 10-5, points which lie on the firm's short-run supply curve are

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 S₁ , the firm is

-In Table 10-1 are the short-run cost schedules of a perfectly competitive firm.If the market price of output is $50, the firm will produce ____ units and earn a profit of ____.

Which requirement for perfect competition rules out trade associations or other collusive arrangements in which firms work together to influence price?

In perfect competition there are differences in the products sold by various firms.

Why does the supply curve of the perfectly competitive industry shift to the right whenever a new firm enters the industry?

Figure 10-5 -Figure 10-5 shows supply and demand conditions in a perfectly competitive industry and for a firm in that industry.At point C, the firm would

Which of the following most resembles a perfectly competitive market?

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

Filters

-In Table 10-1 are the short-run cost schedules of a perfectly competitive firm.If the market price of output is $50, the firm will produce units and earn a profit of .