Question 1

Which of the following is a characteristic of a firm in a perfectly competitive market?

Accepted Answer

A) The firm cannot make a profit in the short run because it is too small a part of the total market. 
B) The firm can make a profit in the long run but not in the short run. 
C) The firm can sell as much as it wants without having to lower its price. 
D) The firm must lower its price in order to increase quantity demanded. 
A) The firm cannot make a profit in the short run because it is too small a part of the total market. 
B) The firm can make a profit in the long run but not in the short run. 
C) The firm can sell as much as it wants without having to lower its price. 
D) The firm must lower its price in order to increase quantity demanded.

Question 2

If a perfectly competitive firm's price is above its average total cost, the firm

Accepted Answer

A) is earning a profit. 
B) should shut down. 
C) is incurring a loss. 
D) is breaking even. 
A) is earning a profit. 
B) should shut down. 
C) is incurring a loss. 
D) is breaking even.

Question 3

The price a perfectly competitive firm receives for its output

Accepted Answer

A) is determined by the interaction of the firm and all of the consumers who buy from the firm. 
B) is determined by the interaction of all sellers and all buyers in the firm's market. 
C) will not change in response to changes in market demand and supply because the firm is a price taker. 
D) will be lowered by the firm in order to sell more output. 
A) is determined by the interaction of the firm and all of the consumers who buy from the firm. 
B) is determined by the interaction of all sellers and all buyers in the firm's market. 
C) will not change in response to changes in market demand and supply because the firm is a price taker. 
D) will be lowered by the firm in order to sell more output.

Question 4

Figure 12-10
  
-Refer to Figure 12-10.The total cost at the profit-maximizing output level equals

Accepted Answer

A) $4,800. 
B) $3,300. 
C) $2,500. 
D) $1,800. 
A) $4,800. 
B) $3,300. 
C) $2,500. 
D) $1,800.

Question 5

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.If the market price is $20, what is the amount of the firm's profit?

Accepted Answer

A) $5,400 
B) $6,750 
C) $8,100 
D) $16,200 
A) $5,400 
B) $6,750 
C) $8,100 
D) $16,200

Question 6

Figure 12-14
  
-Refer to Figure 12-14.Consider a typical firm in a perfectly competitive industry which is incurring short-run losses.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Accepted Answer

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

Question 7

The demand curve for an individual seller's product in perfect competition is

Accepted Answer

A) the same as market demand. 
B) downward sloping. 
C) vertical. 
D) horizontal. 
A) the same as market demand. 
B) downward sloping. 
C) vertical. 
D) horizontal.

Question 8

What is meant by allocative efficiency? How does a perfectly competitive firm achieve allocative efficiency?

Accepted Answer

Allocative efficiency refers to a state

Question 9

What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency?

Accepted Answer

Productive efficiency refers to the situ

Question 10

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit, then

Accepted Answer

A) marginal revenue is less than price. 
B) average total cost is at a minimum. 
C) total revenue equals total cost. 
D) price exceeds average total cost. 
A) marginal revenue is less than price. 
B) average total cost is at a minimum. 
C) total revenue equals total cost. 
D) price exceeds average total cost.

Question 11

What is meant by the term "long-run competitive equilibrium?

Accepted Answer

Long-run competitive equilibri

Question 12

A perfectly competitive industry achieves allocative efficiency because

Accepted Answer

A) goods and services are produced at the lowest possible cost. 
B) goods and services are produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it. 
C) it produces where market price equals marginal production cost. 
D) firms carry production surpluses. 
A) goods and services are produced at the lowest possible cost. 
B) goods and services are produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it. 
C) it produces where market price equals marginal production cost. 
D) firms carry production surpluses.

Question 13

A firm's total profit can be calculated as all of the following except

Accepted Answer

A) total revenue minus total cost. 
B) average profit per unit times quantity sold. 
C) (price minus average total cost)times quantity sold. 
D) marginal profit times quantity sold. 
A) total revenue minus total cost. 
B) average profit per unit times quantity sold. 
C) (price minus average total cost)times quantity sold. 
D) marginal profit times quantity sold.

Question 14

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

Accepted Answer

A) MR AVC. C) MR > AVC. D) AFC < AVC. A) MR AVC. C) MR > AVC. D) AFC < AVC.

Question 15

If a firm shuts down in the short run

Accepted Answer

A) its loss equals zero. 
B) its loss equals its fixed cost. 
C) is makes zero economic profit. 
D) its total revenue is not large enough to cover its fixed cost. 
A) its loss equals zero. 
B) its loss equals its fixed cost. 
C) is makes zero economic profit. 
D) its total revenue is not large enough to cover its fixed cost.

Question 16

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

Accepted Answer

A) implicit costs. 
B) capital costs. 
C) nonmonetary opportunity costs. 
D) sunk costs. 
A) implicit costs. 
B) capital costs. 
C) nonmonetary opportunity costs. 
D) sunk costs.

Question 17

Why are individual buyers and sellers in perfect competition called price takers?

Accepted Answer

They are called price takers b

Question 18

To maximize profit, a perfectly competitive firm

Accepted Answer

A) should sell the quantity of output determined by the interaction between industry demand and supply. 
B) should sell the quantity of output that results in a value for total revenue that is equal to total cost. 
C) should produce the quantity of output that results in the greatest difference between total revenue and total cost. 
D) should produce the quantity of output that results in the greatest difference between marginal revenue and marginal cost. 
A) should sell the quantity of output determined by the interaction between industry demand and supply. 
B) should sell the quantity of output that results in a value for total revenue that is equal to total cost. 
C) should produce the quantity of output that results in the greatest difference between total revenue and total cost. 
D) should produce the quantity of output that results in the greatest difference between marginal revenue and marginal cost.

Question 19

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Accepted Answer

A) each seller is too small to affect market price. 
B) the price is set by the government. 
C) all the sellers get together and set the price. 
D) all the demanders get together and set the price. 
A) each seller is too small to affect market price. 
B) the price is set by the government. 
C) all the sellers get together and set the price. 
D) all the demanders get together and set the price.

Question 20

Assume the market for cage-free eggs is perfectly competitive.All else equal, as farmers find it less profitable to produce and sell cage-free eggs in this market

Accepted Answer

A) the demand curve will shift to the left and the equilibrium price will decrease. 
B) the supply curve will shift to the left and the equilibrium price will increase. 
C) the supply curve will shift to the right, the demand curve will shift to the left, and the equilibrium price will decrease. 
D) the supply curve will shift to the left, the demand curve will shift to the left, and the equilibrium price will increase. 
A) the demand curve will shift to the left and the equilibrium price will decrease. 
B) the supply curve will shift to the left and the equilibrium price will increase. 
C) the supply curve will shift to the right, the demand curve will shift to the left, and the equilibrium price will decrease. 
D) the supply curve will shift to the left, the demand curve will shift to the left, and the equilibrium price will increase.

Which of the following is a characteristic of a firm in a perfectly competitive market?

If a perfectly competitive firm's price is above its average total cost, the firm

The price a perfectly competitive firm receives for its output

Figure 12-10 -Refer to Figure 12-10.The total cost at the profit-maximizing output level equals

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.If the market price is $20, what is the amount of the firm's profit?

Figure 12-14 -Refer to Figure 12-14.Consider a typical firm in a perfectly competitive industry which is incurring short-run losses.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

The demand curve for an individual seller's product in perfect competition is

What is meant by allocative efficiency? How does a perfectly competitive firm achieve allocative efficiency?

What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency?

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit, then

What is meant by the term "long-run competitive equilibrium?

A perfectly competitive industry achieves allocative efficiency because

A firm's total profit can be calculated as all of the following except

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

If a firm shuts down in the short run

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

Why are individual buyers and sellers in perfect competition called price takers?

To maximize profit, a perfectly competitive firm

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Assume the market for cage-free eggs is perfectly competitive.All else equal, as farmers find it less profitable to produce and sell cage-free eggs in this market

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

Exam 12: Firms in Perfectly Competitive Markets

Which of the following is a characteristic of a firm in a perfectly competitive market?

If a perfectly competitive firm's price is above its average total cost, the firm

The price a perfectly competitive firm receives for its output

Figure 12-10 -Refer to Figure 12-10.The total cost at the profit-maximizing output level equals

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.If the market price is $20, what is the amount of the firm's profit?

Figure 12-14 -Refer to Figure 12-14.Consider a typical firm in a perfectly competitive industry which is incurring short-run losses.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

The demand curve for an individual seller's product in perfect competition is

What is meant by allocative efficiency? How does a perfectly competitive firm achieve allocative efficiency?

What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency?

If price = marginal cost at the output produced by a perfectly competitive firm and the firm is earning an economic profit, then

What is meant by the term "long-run competitive equilibrium?

A perfectly competitive industry achieves allocative efficiency because

A firm's total profit can be calculated as all of the following except

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

If a firm shuts down in the short run

In analyzing the decision to shut down in the short run we assume that the firm's fixed costs are

Why are individual buyers and sellers in perfect competition called price takers?

To maximize profit, a perfectly competitive firm

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Assume the market for cage-free eggs is perfectly competitive.All else equal, as farmers find it less profitable to produce and sell cage-free eggs in this market

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