Question 1

A perfectly competitive firm's supply curve is its

Accepted Answer

A) marginal cost curve. 
B) marginal cost curve above its minimum average total cost. 
C) marginal cost curve above its minimum average variable cost. 
D) marginal cost curve above its minimum average fixed cost. 
A) marginal cost curve. 
B) marginal cost curve above its minimum average total cost. 
C) marginal cost curve above its minimum average variable cost. 
D) marginal cost curve above its minimum average fixed cost.

Question 2

What characteristic of a competitive market has made the "long run pretty short" in the market for iPhone applications?

Accepted Answer

A) few firms in the market 
B) identical products 
C) ease of entry 
D) blocked entry 
A) few firms in the market 
B) identical products 
C) ease of entry 
D) blocked entry

Question 3

Perfectly competitive industries tend to produce low-priced, low-technology products.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following arguments could be made as evidence that the market for cage-free eggs is perfectly competitive?

Accepted Answer

A) The U.S. Department of Agriculture has established standards for the labeling of cage-free eggs. 
B) Sales of cage-free eggs have increased at a rate of 20 percent per year. 
C) As more farmers began selling cage-free eggs, the increase in supply has driven down prices to the point where they just cover the cost of production. 
D) The profits earned by farmers who sell cage-free eggs have continued to grow, despite the increasing number of farmers entering this market. 
A) The U.S. Department of Agriculture has established standards for the labeling of cage-free eggs. 
B) Sales of cage-free eggs have increased at a rate of 20 percent per year. 
C) As more farmers began selling cage-free eggs, the increase in supply has driven down prices to the point where they just cover the cost of production. 
D) The profits earned by farmers who sell cage-free eggs have continued to grow, despite the increasing number of farmers entering this market.

Question 5

A perfectly competitive firm in a constant-cost industry produces 3,000 units of a good at a total cost of $36,000.The prevailing market price is $15.What will happen to the number of firms in the industry and to the industry's output in the long run?

Accepted Answer

A) The number of firms and the industry's output increase. 
B) The number of firms and the industry's output decrease. 
C) The number of firms remains constant and the industry's output increases. 
D)  The number of firms remains constant and the industry's output decreases. 
A) The number of firms and the industry's output increase. 
B) The number of firms and the industry's output decrease. 
C) The number of firms remains constant and the industry's output increases. 
D)  The number of firms remains constant and the industry's output decreases.

Question 6

A perfectly competitive firm's marginal revenue

Accepted Answer

A) is greater than price. 
B) is less than price because a firm must lower its price to sell more. 
C) is equal to price. 
D) may be either greater or less than price, depending on the quantity sold. 
A) is greater than price. 
B) is less than price because a firm must lower its price to sell more. 
C) is equal to price. 
D) may be either greater or less than price, depending on the quantity sold.

Question 7

Under what conditions should a competitive firm shut down in the short run?

Accepted Answer

When market price is below ave

Question 8

Suppose Veronica sells teapots in the perfectly competitive teapot market.Her output per day and her costs are as follows:
   
Suppose the current equilibrium price in the teapot market is $15.To maximize profit, how many teapots will Veronica produce, what price will she charge, and how much profit (or loss)will she make? Draw a graph to illustrate your answer.Your graph should include Veronica's demand, ATC, AVC, MC, and MR curves, the price she is charging, the quantity she is producing, and the area representing her profit (or loss).

Accepted Answer

Veronica will produce 5 teapot

Question 9

In a perfectly competitive industry, in the long-run equilibrium

Accepted Answer

A) the typical firm is producing at the output where its long-run average total cost is not minimized. 
B) the typical firm is earning an accounting profit greater than its implicit costs. 
C) the typical firm earns zero profit. 
D) the typical firm is maximizing its revenue. 
A) the typical firm is producing at the output where its long-run average total cost is not minimized. 
B) the typical firm is earning an accounting profit greater than its implicit costs. 
C) the typical firm earns zero profit. 
D) the typical firm is maximizing its revenue.

Question 10

Assume the market for cage-free eggs is perfectly competitive.All else equal, as more farmers choose to produce and sell cage-free eggs, what is likely to happen to the equilibrium price of the eggs and profits of these farmers in the long run?

Accepted Answer

A) The equilibrium price is likely to increase and profits are likely to remain unchanged. 
B) The equilibrium price is likely to remain unchanged and profits are likely to increase. 
C) The equilibrium price is likely to decrease and profits are likely to decrease. 
D) The equilibrium price is likely to increase and profits are likely to increase. 
A) The equilibrium price is likely to increase and profits are likely to remain unchanged. 
B) The equilibrium price is likely to remain unchanged and profits are likely to increase. 
C) The equilibrium price is likely to decrease and profits are likely to decrease. 
D) The equilibrium price is likely to increase and profits are likely to increase.

Question 11

Figure 12-20
  
-Refer to Figure 12-20.If the market price is P₁, what is the allocatively efficient output level?

Accepted Answer

A) Q₀ 
B) Q₁ 
C) Q₂ 
D) There is no allocatively efficient output level because the firm is making a loss. 
A) Q₀ 
B) Q₁ 
C) Q₂ 
D) There is no allocatively efficient output level because the firm is making a loss.

Question 12

If, for a perfectly competitive firm, price exceeds the marginal cost of production, the firm should

Accepted Answer

A) increase its output. 
B) reduce its output. 
C) keep output constant and enjoy the above normal profit. 
D) lower the price. 
A) increase its output. 
B) reduce its output. 
C) keep output constant and enjoy the above normal profit. 
D) lower the price.

Question 13

Perfect competition is characterized by all of the following except

Accepted Answer

A) heavy advertising by individual sellers. 
B) homogeneous products. 
C) sellers are price takers. 
D) a horizontal demand curve for individual sellers. 
A) heavy advertising by individual sellers. 
B) homogeneous products. 
C) sellers are price takers. 
D) a horizontal demand curve for individual sellers.

Question 14

Figure 12-5
   
Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 12-5.The firm's manager suggests that the firm's goal should be to maximize average profit.In that case, what is the output level and what is the average profit that will achieve the manager's goal?

Accepted Answer

A) Q = 1,350 units, average profit = $5 
B) Q = 1,100 units, average profit = $6 
C) Q = 1,350 units, average profit = $9 
D) Q = 1,800 units, average profit = $20 
A) Q = 1,350 units, average profit = $5 
B) Q = 1,100 units, average profit = $6 
C) Q = 1,350 units, average profit = $9 
D) Q = 1,800 units, average profit = $20

Question 15

Why would a company continue to operate for many years while never once turning a profit rather than shut down immediately? Using revenue and cost analysis, explain when the company would shut down.

Accepted Answer

A company would continue to op

Question 16

In an increasing-cost industry the long-run supply curve is upward sloping.

Accepted Answer

A) True 
 B)False

Question 17

Figure 12-13
  
-Refer to Figure 12-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.If the firm represented in the diagram continues to stay in business, in the long-run equilibrium

Accepted Answer

A) it will reduce its output to Q₀ and face a price of P₀. 
B) it will continue to produce Q₁ but faces the higher price of P₂. 
C) it will expand its output to Q₂ and face a price of P₂. 
D) it will expand its output to Q₃ and face a price of P₁. 
A) it will reduce its output to Q₀ and face a price of P₀. 
B) it will continue to produce Q₁ but faces the higher price of P₂. 
C) it will expand its output to Q₂ and face a price of P₂. 
D) it will expand its output to Q₃ and face a price of P₁.

Question 18

Table 12-3
   
Arnie sells basketballs in a perfectly competitive market.Table 12-3 summarizes Arnie's output per day (Q), total cost (TC), average total cost (ATC)and marginal cost (MC).
-Refer to Table 12-3.What will Arnie's output be and how much profit will he earn if the market price of basketballs is $5.00?

Accepted Answer

A) Q = 1; profit = -$10. 
B) Q = 3; profit = -$7.50 
C) Q = 0; profit = -$10.00 
D) Price and profit cannot be determined from the information given. 
A) Q = 1; profit = -$10. 
B) Q = 3; profit = -$7.50 
C) Q = 0; profit = -$10.00 
D) Price and profit cannot be determined from the information given.

Question 19

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21.Which of the following will happen?

Accepted Answer

A) The firm's profits will increase. 
B) The firm's revenue will increase. 
C) The firm will not sell any output. 
D) The firm will sell more output than its competitors. 
A) The firm's profits will increase. 
B) The firm's revenue will increase. 
C) The firm will not sell any output. 
D) The firm will sell more output than its competitors.

Question 20

In the long run, a perfectly competitive market will

Accepted Answer

A) produce only the quantity of output that yields a long-run profit for the typical firm. 
B) supply whatever amount consumers will buy at a price which earns the market an economic profit. 
C) supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve. 
D) generate a long-run equilibrium where the typical firm operates at a loss. 
A) produce only the quantity of output that yields a long-run profit for the typical firm. 
B) supply whatever amount consumers will buy at a price which earns the market an economic profit. 
C) supply whatever amount consumers demand at a price determined by the minimum point on the typical firm's average total cost curve. 
D) generate a long-run equilibrium where the typical firm operates at a loss.

A perfectly competitive firm's supply curve is its

What characteristic of a competitive market has made the "long run pretty short" in the market for iPhone applications?

Perfectly competitive industries tend to produce low-priced, low-technology products.

Which of the following arguments could be made as evidence that the market for cage-free eggs is perfectly competitive?

A perfectly competitive firm in a constant-cost industry produces 3,000 units of a good at a total cost of $36,000.The prevailing market price is $15.What will happen to the number of firms in the industry and to the industry's output in the long run?

A perfectly competitive firm's marginal revenue

Under what conditions should a competitive firm shut down in the short run?

In a perfectly competitive industry, in the long-run equilibrium

Assume the market for cage-free eggs is perfectly competitive.All else equal, as more farmers choose to produce and sell cage-free eggs, what is likely to happen to the equilibrium price of the eggs and profits of these farmers in the long run?

Figure 12-20 -Refer to Figure 12-20.If the market price is P₁, what is the allocatively efficient output level?

If, for a perfectly competitive firm, price exceeds the marginal cost of production, the firm should

Perfect competition is characterized by all of the following except

Why would a company continue to operate for many years while never once turning a profit rather than shut down immediately? Using revenue and cost analysis, explain when the company would shut down.

In an increasing-cost industry the long-run supply curve is upward sloping.

Figure 12-13 -Refer to Figure 12-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.If the firm represented in the diagram continues to stay in business, in the long-run equilibrium

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21.Which of the following will happen?

In the long run, a perfectly competitive market will

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

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Exam 12: Firms in Perfectly Competitive Markets

A perfectly competitive firm's supply curve is its

What characteristic of a competitive market has made the "long run pretty short" in the market for iPhone applications?

Perfectly competitive industries tend to produce low-priced, low-technology products.

Which of the following arguments could be made as evidence that the market for cage-free eggs is perfectly competitive?

A perfectly competitive firm in a constant-cost industry produces 3,000 units of a good at a total cost of $36,000.The prevailing market price is $15.What will happen to the number of firms in the industry and to the industry's output in the long run?

A perfectly competitive firm's marginal revenue

Under what conditions should a competitive firm shut down in the short run?

In a perfectly competitive industry, in the long-run equilibrium

Assume the market for cage-free eggs is perfectly competitive.All else equal, as more farmers choose to produce and sell cage-free eggs, what is likely to happen to the equilibrium price of the eggs and profits of these farmers in the long run?

Figure 12-20 -Refer to Figure 12-20.If the market price is P₁, what is the allocatively efficient output level?

If, for a perfectly competitive firm, price exceeds the marginal cost of production, the firm should

Perfect competition is characterized by all of the following except

Why would a company continue to operate for many years while never once turning a profit rather than shut down immediately? Using revenue and cost analysis, explain when the company would shut down.

In an increasing-cost industry the long-run supply curve is upward sloping.

Figure 12-13 -Refer to Figure 12-13.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.If the firm represented in the diagram continues to stay in business, in the long-run equilibrium

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21.Which of the following will happen?

In the long run, a perfectly competitive market will

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

Filters