Question 1

In perfect competition, marginal revenue

Accepted Answer

A) increases as more is sold. 
B) decreases as more is sold. 
C) is equal to the market price. 
D) is zero. 
E) is always greater than marginal cost. 
A) increases as more is sold. 
B) decreases as more is sold. 
C) is equal to the market price. 
D) is zero. 
E) is always greater than marginal cost.

Question 2

One requirement for an industry to be perfectly competitive is that

Accepted Answer

A) there are no restrictions on entry into or exit from the market. 
B) there are multiple restrictions on entry into or exit from the market. 
C) there are many firms selling different products. 
D) sellers and buyers have imperfect information about prices. 
E) the many firms sell slightly different products. 
A) there are no restrictions on entry into or exit from the market. 
B) there are multiple restrictions on entry into or exit from the market. 
C) there are many firms selling different products. 
D) sellers and buyers have imperfect information about prices. 
E) the many firms sell slightly different products.

Question 3

-The above figure illustrates a perfectly competitive firm. Curve C represents the

Accepted Answer

A) MR curve. 
B) ATC curve. 
C) MC curve. 
D) market demand curve. 
E) AFC curve. 
A) MR curve. 
B) ATC curve. 
C) MC curve. 
D) market demand curve. 
E) AFC curve.

Question 4

For a perfectly competitive firm, profit is maximized at the output level where i. total revenue exceeds total cost by the largest amount.
Ii. marginal revenue equals marginal cost.
Iii. price equals marginal cost.

Accepted Answer

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

Question 5

In a perfectly competitive market, the market price is $23. At the current level of output, a firm has a marginal cost of $28. What should the firm do?

Accepted Answer

A) produce a larger output to make more profit 
B) nothing, it is currently maximizing profit 
C) produce less output to make more profit 
D) shut down 
E) raise the price of its product 
A) produce a larger output to make more profit 
B) nothing, it is currently maximizing profit 
C) produce less output to make more profit 
D) shut down 
E) raise the price of its product

Question 6

Which of the following market types has only a few competing firms?

Accepted Answer

A) perfect competition 
B) monopolistic competition 
C) oligopoly 
D) monopoly 
E) perfect competition and monopolistic competition 
A) perfect competition 
B) monopolistic competition 
C) oligopoly 
D) monopoly 
E) perfect competition and monopolistic competition

Question 7

Suppose that each of 8,000 firms in a perfectly competitive industry produces 1,000 units of a good and maximizes profits when the price of the good is $10. If there is a permanent increase in demand, in the short run each firm produces ________ 1,000 units and in the long run the number of firms is ________ 8,000.

Accepted Answer

A) more than; more than 
B) less than; more than 
C) less than; less than 
D) more than; less than 
E) exactly; more than 
A) more than; more than 
B) less than; more than 
C) less than; less than 
D) more than; less than 
E) exactly; more than

Question 8

-The above figure illustrates a perfectly competitive firm. Curve B represents the

Accepted Answer

A) MR curve. 
B) ATC curve. 
C) MC curve. 
D) AVC curve. 
E) AFC curve. 
A) MR curve. 
B) ATC curve. 
C) MC curve. 
D) AVC curve. 
E) AFC curve.

Question 9

In the long run, new firms enter a perfectly competitive market when

Accepted Answer

A) normal profit is greater than zero. 
B) economic profit is equal to zero. 
C) normal profit is equal to zero. 
D) economic profit is greater than zero. 
E) the existing firms are weak because they are incurring economic losses. 
A) normal profit is greater than zero. 
B) economic profit is equal to zero. 
C) normal profit is equal to zero. 
D) economic profit is greater than zero. 
E) the existing firms are weak because they are incurring economic losses.

Question 10

The figure above shows the cost curves and marginal revenue curve for a perfectly competitive firm.
-Based on the figure above, if the firm produces 7 cans per day, the firm ________ maximizing its profit and is ________.

Accepted Answer

A) is; incurring an economic loss 
B) is; making a normal profit 
C) is; making an economic profit 
D) is not; incurring an economic loss 
E) is not; making a normal profit 
A) is; incurring an economic loss 
B) is; making a normal profit 
C) is; making an economic profit 
D) is not; incurring an economic loss 
E) is not; making a normal profit

Question 11

-The above figure shows a perfectly competitive firm. If the market price is $10, the firm

Accepted Answer

A) is incurring an economic loss. 
B) is making an economic profit. 
C) is making zero economic profit. 
D) will immediately shut down. 
E) might shut down but more information is needed about the AVC. 
A) is incurring an economic loss. 
B) is making an economic profit. 
C) is making zero economic profit. 
D) will immediately shut down. 
E) might shut down but more information is needed about the AVC.

Question 12

If firms in a perfectly competitive industry are earning an economic profit, then in the ________ firms will ________ the industry.

Accepted Answer

A) short run; enter 
B) long run; enter 
C) short run; exit 
D) long run; exit 
E) More information about the firms' costs and the price of the product is needed to determine if firms enter or exit the industry. 
A) short run; enter 
B) long run; enter 
C) short run; exit 
D) long run; exit 
E) More information about the firms' costs and the price of the product is needed to determine if firms enter or exit the industry.

Question 13

For a perfectly competitive firm, profit maximization occurs when output is such that

Accepted Answer

A) total revenue (TR)is maximized. 
B) total cost (T
C) is minimized. 
C) marginal revenue (MR)= marginal cost (M
C) . 
D) average total cost (AT
C) is minimized. 
E) total revenue (TR)equals total cost (T
C) . 
A) total revenue (TR)is maximized. 
B) total cost (T
C) is minimized. 
C) marginal revenue (MR)= marginal cost (M
C) . 
D) average total cost (AT
C) is minimized. 
E) total revenue (TR)equals total cost (T
C) .

Question 14

A market is classified as monopolistically competitive when

Accepted Answer

A) there is a barrier that blocks entry by other firms. 
B) a small number of firms compete. 
C) many firms produce the same product. 
D) many firms produce a slightly differentiated product. 
E) there is one firm that sells a good or service with no close substitutes. 
A) there is a barrier that blocks entry by other firms. 
B) a small number of firms compete. 
C) many firms produce the same product. 
D) many firms produce a slightly differentiated product. 
E) there is one firm that sells a good or service with no close substitutes.

Question 15

Which of the following market types has the fewest number of firms?

Accepted Answer

A) perfect competition 
B) monopolistic competition 
C) oligopoly 
D) monopoly 
E) perfect competition and monopolistic competition 
A) perfect competition 
B) monopolistic competition 
C) oligopoly 
D) monopoly 
E) perfect competition and monopolistic competition

Question 16

A perfectly competitive firm will continue to operate in the short run when the market price is below its average total cost if the

Accepted Answer

A) marginal revenue is greater than marginal cost. 
B) price is at least equal to the minimum average variable cost. 
C) total fixed costs are less than total revenue. 
D) marginal cost is minimized. 
E) price is also less than the minimum average variable cost. 
A) marginal revenue is greater than marginal cost. 
B) price is at least equal to the minimum average variable cost. 
C) total fixed costs are less than total revenue. 
D) marginal cost is minimized. 
E) price is also less than the minimum average variable cost.

Question 17

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 18

What are the four types of markets?
 Give a brief description of each type.

Accepted Answer

The four types of markets are perfect co

Question 19

Keith is a perfectly competitive carnation grower. The market price is $2 per dozen carnations. Keith's average total cost to grow carnations is $2.50 per dozen. In the long run, Keith will

Accepted Answer

A) raise his price to more than $2.50 per dozen carnations. 
B) raise his price to $2.50 per dozen carnations. 
C) exit the industry if the price and his costs do not change. 
D) incur an economic loss. 
E) continue to make an economic profit. 
A) raise his price to more than $2.50 per dozen carnations. 
B) raise his price to $2.50 per dozen carnations. 
C) exit the industry if the price and his costs do not change. 
D) incur an economic loss. 
E) continue to make an economic profit.

Question 20

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Quantity } \
\text { (wafers per hour) }
\end{array} & \begin{array} { c } 
\text { Average variable cost } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Average total cost } \
\text { (dollars) }
\end{array} \
\hline 0 & 0 & \
1 & 1900 & 7900 \
2 & 1400 & 4400 \
3 & 1300 & 3300 \
4 & 1400 & 2900 \
5 & 1600 & 2800 \
6 & 2000 & 3000 \
\hline
\end{array}$$
-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.

In perfect competition, marginal revenue

One requirement for an industry to be perfectly competitive is that

-The above figure illustrates a perfectly competitive firm. Curve C represents the

For a perfectly competitive firm, profit is maximized at the output level where i. total revenue exceeds total cost by the largest amount. Ii. marginal revenue equals marginal cost. Iii. price equals marginal cost.

In a perfectly competitive market, the market price is $23. At the current level of output, a firm has a marginal cost of $28. What should the firm do?

Which of the following market types has only a few competing firms?

Suppose that each of 8,000 firms in a perfectly competitive industry produces 1,000 units of a good and maximizes profits when the price of the good is $10. If there is a permanent increase in demand, in the short run each firm produces 1,000 units and in the long run the number of firms is 8,000.

-The above figure illustrates a perfectly competitive firm. Curve B represents the

In the long run, new firms enter a perfectly competitive market when

The figure above shows the cost curves and marginal revenue curve for a perfectly competitive firm. -Based on the figure above, if the firm produces 7 cans per day, the firm maximizing its profit and is .

-The above figure shows a perfectly competitive firm. If the market price is $10, the firm

If firms in a perfectly competitive industry are earning an economic profit, then in the firms will the industry.

For a perfectly competitive firm, profit maximization occurs when output is such that

A market is classified as monopolistically competitive when

Which of the following market types has the fewest number of firms?

A perfectly competitive firm will continue to operate in the short run when the market price is below its average total cost if the

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.

What are the four types of markets? Give a brief description of each type.

Keith is a perfectly competitive carnation grower. The market price is $2 per dozen carnations. Keith's average total cost to grow carnations is $2.50 per dozen. In the long run, Keith will

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

Exam 11: Perfect Competition

In perfect competition, marginal revenue

One requirement for an industry to be perfectly competitive is that

-The above figure illustrates a perfectly competitive firm. Curve C represents the

For a perfectly competitive firm, profit is maximized at the output level where i. total revenue exceeds total cost by the largest amount. Ii. marginal revenue equals marginal cost. Iii. price equals marginal cost.

In a perfectly competitive market, the market price is $23. At the current level of output, a firm has a marginal cost of $28. What should the firm do?

Which of the following market types has only a few competing firms?

-The above figure illustrates a perfectly competitive firm. Curve B represents the

In the long run, new firms enter a perfectly competitive market when

The figure above shows the cost curves and marginal revenue curve for a perfectly competitive firm. -Based on the figure above, if the firm produces 7 cans per day, the firm ________ maximizing its profit and is ________.

-The above figure shows a perfectly competitive firm. If the market price is $10, the firm

If firms in a perfectly competitive industry are earning an economic profit, then in the ________ firms will ________ the industry.

For a perfectly competitive firm, profit maximization occurs when output is such that

A market is classified as monopolistically competitive when

Which of the following market types has the fewest number of firms?

A perfectly competitive firm will continue to operate in the short run when the market price is below its average total cost if the

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.

What are the four types of markets? Give a brief description of each type.

Keith is a perfectly competitive carnation grower. The market price is $2 per dozen carnations. Keith's average total cost to grow carnations is $2.50 per dozen. In the long run, Keith will

Getting Started

The Us and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Global Markets in Action

Externalities: Pollution, Education, and Health Care

Production and Cost

Monopoly

Monopolistic Competition and Oligopoly

Gdp: a Measure of Total Production and Income

Jobs and Unemployment

The Cpi and the Cost of Living

Potential Gdp and Economic Growth

Money and the Monetary System

Aggregate Supply and Aggregate Demand

Fiscal Policy and Monetary Policy

Filters

The figure above shows the cost curves and marginal revenue curve for a perfectly competitive firm. -Based on the figure above, if the firm produces 7 cans per day, the firm maximizing its profit and is .

If firms in a perfectly competitive industry are earning an economic profit, then in the firms will the industry.