Question 1

The market demand curve in a perfectly competitive market is ________ and the demand curve for a perfectly competitive firm's output is ________.

Accepted Answer

A) downward sloping; downward sloping 
B) downward sloping; horizontal 
C) horizontal; downward sloping 
D) horizontal; horizontal 
E) downward sloping; upward sloping 
A) downward sloping; downward sloping 
B) downward sloping; horizontal 
C) horizontal; downward sloping 
D) horizontal; horizontal 
E) downward sloping; upward sloping

Question 2

The figure above shows a firm's marginal revenue and marginal cost curves.
-The price of a can is $8; if the price increased to $12, then the firm would

Accepted Answer

A) produce zero cans. 
B) decrease the amount of cans produces it but not to zero. 
C) not change the amount of cans it produces. 
D) increase the amount of cans it produces. 
E) More information is needed to determine what action the firm will take. 
A) produce zero cans. 
B) decrease the amount of cans produces it but not to zero. 
C) not change the amount of cans it produces. 
D) increase the amount of cans it produces. 
E) More information is needed to determine what action the firm will take.

Question 3

Suppose the price of a can was $5.14.In this case, to maximize its profit the firm illustrated in the figure above would

Accepted Answer

A) increase its production and would make an economic profit. 
B) not change its production and would make a normal profit. 
C) not change its production and would make an economic profit. 
D) increase its production and would incur an economic loss. 
E) not change its production and would incur an economic loss. 
A) increase its production and would make an economic profit. 
B) not change its production and would make a normal profit. 
C) not change its production and would make an economic profit. 
D) increase its production and would incur an economic loss. 
E) not change its production and would incur an economic loss.

Question 4

The corn market is perfectly competitive, with thousands of corn farmers.In the 2000s, the price of corn soared so that new farmers entered the corn market.Initially, entry ________ the economic profit of the initial corn farmers and in the long run the initial corn farmers ________.

Accepted Answer

A) increased; made an even greater economic profit than initially 
B) decreased; made zero economic profit 
C) increased; made zero economic profit 
D) decreased; incurred an economic loss 
E) increased; made an economic profit 
A) increased; made an even greater economic profit than initially 
B) decreased; made zero economic profit 
C) increased; made zero economic profit 
D) decreased; incurred an economic loss 
E) increased; made an economic profit

Question 5

For a perfectly competitive firm, the price of its good is equal to the firm's marginal revenue because

Accepted Answer

A) information about price changes is hard to come by for small sellers. 
B) price and marginal revenue are the same economic concepts. 
C) individual perfectly competitive firms cannot influence the market price by changing their output. 
D) the firm's total revenue cannot be changed by anything the firms can do. 
E) there are only a small number of firms in the market. 
A) information about price changes is hard to come by for small sellers. 
B) price and marginal revenue are the same economic concepts. 
C) individual perfectly competitive firms cannot influence the market price by changing their output. 
D) the firm's total revenue cannot be changed by anything the firms can do. 
E) there are only a small number of firms in the market.

Question 6

Why are perfectly competitive ranchers in Montana price takers?

Accepted Answer

Because one farmer's beef is identical t

Question 7

When will new firms enter a perfectly competitive market? When does entry stop?

Accepted Answer

New firms will enter a perfectly competi

Question 8

Because perfectly competitive firms are price takers, each firm faces a demand that is

Accepted Answer

A) perfectly inelastic. 
B) perfectly elastic. 
C) highly inelastic but never is it perfectly inelastic. 
D) unit elastic. 
E) highly elastic but never is it perfectly elastic. 
A) perfectly inelastic. 
B) perfectly elastic. 
C) highly inelastic but never is it perfectly inelastic. 
D) unit elastic. 
E) highly elastic but never is it perfectly elastic.

Question 9

The firm in the figure above has a total revenue equal to ________.

Accepted Answer

A) $5.14 × 7 
B) $3.00 × 7 
C) ($5.14 - $3.00)× 7 
D) ($3.00 - $5.14)× 7 
E) None of the above answers are correct because more information is needed. 
A) $5.14 × 7 
B) $3.00 × 7 
C) ($5.14 - $3.00)× 7 
D) ($3.00 - $5.14)× 7 
E) None of the above answers are correct because more information is needed.

Question 10

Shama is producing candles in a perfectly competitive market.When she produces 500 candles, her total cost is $250.If she produces one additional candle, her total cost increases to $260.In order to maximize her profit, she should produce the additional candle

Accepted Answer

A) if the market price for a candle is $12. 
B) only if the market price exceeds $260 for a candle. 
C) only if the market price exceeds $250 for a candle. 
D) if the market price for a candle exceeds $0.50. 
E) if her price exceeds her average total cost. 
A) if the market price for a candle is $12. 
B) only if the market price exceeds $260 for a candle. 
C) only if the market price exceeds $250 for a candle. 
D) if the market price for a candle exceeds $0.50. 
E) if her price exceeds her average total cost.

Question 11

If new firms enter a perfectly competitive industry, the market supply

Accepted Answer

A) does not change. 
B) becomes more price elastic. 
C) becomes more price inelastic. 
D) increases. 
E) decreases because each firm produces less than before the entry. 
A) does not change. 
B) becomes more price elastic. 
C) becomes more price inelastic. 
D) increases. 
E) decreases because each firm produces less than before the entry.

Question 12

Jerry's Jellybean Factory produces 2,000 pounds of jellybeans per month and sells them in a perfectly competitive market.The marginal cost is $3 per pound, the average variable cost is $2 per pound, and the beans sell for $4 per pound.Jerry

Accepted Answer

A) is maximizing profit. 
B) is incurring an economic loss and should shut down. 
C) could increase his profit by producing more beans. 
D) could increase his profit by producing fewer beans. 
E) could increase his profit by raising the price of his beans. 
A) is maximizing profit. 
B) is incurring an economic loss and should shut down. 
C) could increase his profit by producing more beans. 
D) could increase his profit by producing fewer beans. 
E) could increase his profit by raising the price of his beans.

Question 13

Technology reduces the average cost of production, so in the long run
I∙perfectly competitive firms produce at a lower average cost.
Ii∙the market price of the good falls.
Iii∙firms with older plants either exit the market or adopt the new technology.

Accepted Answer

A) i only. 
B) i and ii. 
C) iii only. 
D) i and iii. 
E) i, ii, and iii. 
A) i only. 
B) i and ii. 
C) iii only. 
D) i and iii. 
E) i, ii, and iii.

Question 14

If the market price is less than a perfectly competitive firm's average total cost, what sort of profit or loss is the firm earning?

Accepted Answer

If the price is less

Question 15

Peter's Pencils is a perfectly competitive company producing pencils.Suppose Peter is producing 1,000 pencils an hour.If the total cost of 1,000 pencils is $500, the market price per pencil is $2, and the marginal cost is $2, then Peter

Accepted Answer

A) makes an economic profit because marginal revenue is equal to marginal cost at this output level. 
B) should decrease his output to increase his profit. 
C) is maximizing his profit and is making an economic profit. 
D) should increase his output to increase his profit. 
E) is not maximizing his profit but is making zero economic profit anyway. 
A) makes an economic profit because marginal revenue is equal to marginal cost at this output level. 
B) should decrease his output to increase his profit. 
C) is maximizing his profit and is making an economic profit. 
D) should increase his output to increase his profit. 
E) is not maximizing his profit but is making zero economic profit anyway.

Question 16

For a perfectly competitive sugar producer in Haiti, a short-run economic profit will occur if the price of each ton of sugar sold is

Accepted Answer

A) greater than the average total cost of producing sugar. 
B) equal to the average total cost of producing sugar. 
C) less than the average total cost of producing sugar. 
D) rising as more sugar is sold. 
E) greater than the marginal revenue of each ton of sugar. 
A) greater than the average total cost of producing sugar. 
B) equal to the average total cost of producing sugar. 
C) less than the average total cost of producing sugar. 
D) rising as more sugar is sold. 
E) greater than the marginal revenue of each ton of sugar.

Question 17

Suppose a perfectly competitive market is in long-run equilibrium and then there is a permanent increase in the demand for that product.The new long-run equilibrium will have

Accepted Answer

A) fewer firms in the market. 
B) more firms in the market. 
C) the same number of firms in the market. 
D) probably a different number of firms, but it is not possible to determine if there will be more or fewer firms. 
E) a permanent decrease in supply. 
A) fewer firms in the market. 
B) more firms in the market. 
C) the same number of firms in the market. 
D) probably a different number of firms, but it is not possible to determine if there will be more or fewer firms. 
E) a permanent decrease in supply.

Question 18

-Acme is a perfectly competitive firm.It has the total cost schedule given in the above table.Acme's product sells for $8.00 per unit.What amount of output is the most profitable and what is Acme's economic profit or economic loss?

Accepted Answer

Acme's profit-maximizing level of output

Question 19

-Computer memory chips are produced on wafers, each wafer having many separate chips that are separated and sold.The above table shows costs for a perfectly competitive producer of computer memory chips.If the market price of a wafer is $2,400 dollars, the firm is

Accepted Answer

A) making zero economic profit. 
B) making an economic profit of $12,000 an hour. 
C) incurring an economic loss of $2,800 an hour. 
D) incurring an economic loss of $2,000 an hour. 
E) making an economic profit of $2,400 an hour. 
A) making zero economic profit. 
B) making an economic profit of $12,000 an hour. 
C) incurring an economic loss of $2,800 an hour. 
D) incurring an economic loss of $2,000 an hour. 
E) making an economic profit of $2,400 an hour.

Question 20

If a firm in a perfectly competitive market faces an equilibrium price of $5, its marginal revenue

Accepted Answer

A) will be greater than $5. 
B) will be less than $5. 
C) maybe either greater or less than $5. 
D) will also be $5. 
E) will be any amount but $5. 
A) will be greater than $5. 
B) will be less than $5. 
C) maybe either greater or less than $5. 
D) will also be $5. 
E) will be any amount but $5.

The market demand curve in a perfectly competitive market is and the demand curve for a perfectly competitive firm's output is .

The figure above shows a firm's marginal revenue and marginal cost curves. -The price of a can is $8; if the price increased to $12, then the firm would

Suppose the price of a can was $5.14.In this case, to maximize its profit the firm illustrated in the figure above would

The corn market is perfectly competitive, with thousands of corn farmers.In the 2000s, the price of corn soared so that new farmers entered the corn market.Initially, entry the economic profit of the initial corn farmers and in the long run the initial corn farmers .

For a perfectly competitive firm, the price of its good is equal to the firm's marginal revenue because

Why are perfectly competitive ranchers in Montana price takers?

When will new firms enter a perfectly competitive market? When does entry stop?

Because perfectly competitive firms are price takers, each firm faces a demand that is

The firm in the figure above has a total revenue equal to ________.

Shama is producing candles in a perfectly competitive market.When she produces 500 candles, her total cost is $250.If she produces one additional candle, her total cost increases to $260.In order to maximize her profit, she should produce the additional candle

If new firms enter a perfectly competitive industry, the market supply

Jerry's Jellybean Factory produces 2,000 pounds of jellybeans per month and sells them in a perfectly competitive market.The marginal cost is $3 per pound, the average variable cost is $2 per pound, and the beans sell for $4 per pound.Jerry

Technology reduces the average cost of production, so in the long run I∙perfectly competitive firms produce at a lower average cost. Ii∙the market price of the good falls. Iii∙firms with older plants either exit the market or adopt the new technology.

If the market price is less than a perfectly competitive firm's average total cost, what sort of profit or loss is the firm earning?

Peter's Pencils is a perfectly competitive company producing pencils.Suppose Peter is producing 1,000 pencils an hour.If the total cost of 1,000 pencils is $500, the market price per pencil is $2, and the marginal cost is $2, then Peter

For a perfectly competitive sugar producer in Haiti, a short-run economic profit will occur if the price of each ton of sugar sold is

Suppose a perfectly competitive market is in long-run equilibrium and then there is a permanent increase in the demand for that product.The new long-run equilibrium will have

-Acme is a perfectly competitive firm.It has the total cost schedule given in the above table.Acme's product sells for $8.00 per unit.What amount of output is the most profitable and what is Acme's economic profit or economic loss?

-Computer memory chips are produced on wafers, each wafer having many separate chips that are separated and sold.The above table shows costs for a perfectly competitive producer of computer memory chips.If the market price of a wafer is $2,400 dollars, the firm is

If a firm in a perfectly competitive market faces an equilibrium price of $5, its marginal revenue

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 15: Perfect Competition

The market demand curve in a perfectly competitive market is ________ and the demand curve for a perfectly competitive firm's output is ________.

The figure above shows a firm's marginal revenue and marginal cost curves. -The price of a can is $8; if the price increased to $12, then the firm would

Suppose the price of a can was $5.14.In this case, to maximize its profit the firm illustrated in the figure above would

The corn market is perfectly competitive, with thousands of corn farmers.In the 2000s, the price of corn soared so that new farmers entered the corn market.Initially, entry ________ the economic profit of the initial corn farmers and in the long run the initial corn farmers ________.

For a perfectly competitive firm, the price of its good is equal to the firm's marginal revenue because

Why are perfectly competitive ranchers in Montana price takers?

When will new firms enter a perfectly competitive market? When does entry stop?

Because perfectly competitive firms are price takers, each firm faces a demand that is

The firm in the figure above has a total revenue equal to ________.

Shama is producing candles in a perfectly competitive market.When she produces 500 candles, her total cost is $250.If she produces one additional candle, her total cost increases to $260.In order to maximize her profit, she should produce the additional candle

If new firms enter a perfectly competitive industry, the market supply

Jerry's Jellybean Factory produces 2,000 pounds of jellybeans per month and sells them in a perfectly competitive market.The marginal cost is $3 per pound, the average variable cost is $2 per pound, and the beans sell for $4 per pound.Jerry

Technology reduces the average cost of production, so in the long run I∙perfectly competitive firms produce at a lower average cost. Ii∙the market price of the good falls. Iii∙firms with older plants either exit the market or adopt the new technology.

If the market price is less than a perfectly competitive firm's average total cost, what sort of profit or loss is the firm earning?

Peter's Pencils is a perfectly competitive company producing pencils.Suppose Peter is producing 1,000 pencils an hour.If the total cost of 1,000 pencils is $500, the market price per pencil is $2, and the marginal cost is $2, then Peter

For a perfectly competitive sugar producer in Haiti, a short-run economic profit will occur if the price of each ton of sugar sold is

Suppose a perfectly competitive market is in long-run equilibrium and then there is a permanent increase in the demand for that product.The new long-run equilibrium will have

-Acme is a perfectly competitive firm.It has the total cost schedule given in the above table.Acme's product sells for $8.00 per unit.What amount of output is the most profitable and what is Acme's economic profit or economic loss?

-Computer memory chips are produced on wafers, each wafer having many separate chips that are separated and sold.The above table shows costs for a perfectly competitive producer of computer memory chips.If the market price of a wafer is $2,400 dollars, the firm is

If a firm in a perfectly competitive market faces an equilibrium price of $5, its marginal revenue

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Monopoly

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

The market demand curve in a perfectly competitive market is and the demand curve for a perfectly competitive firm's output is .

The corn market is perfectly competitive, with thousands of corn farmers.In the 2000s, the price of corn soared so that new farmers entered the corn market.Initially, entry the economic profit of the initial corn farmers and in the long run the initial corn farmers .