Question 1

One requirement for an industry to be perfectly competitive is that

Accepted Answer

A) sellers and buyers have imperfect information about prices. 
B) established firms have no advantage over new firms. 
C) established firms have a significant advantage over new firms. 
D) different firms produce widely different products. 
E) many firms produce slightly different products. 
A) sellers and buyers have imperfect information about prices. 
B) established firms have no advantage over new firms. 
C) established firms have a significant advantage over new firms. 
D) different firms produce widely different products. 
E) many firms produce slightly different products.

Question 2

Entry by competitive firms decreases the market price, while exit by competitive firms increases the market price. Explain why firms enter or exit an industry and why these price changes occur.

Accepted Answer

Competitive firms will enter an industry

Question 3

When a firm adopts new technology, generally its

Accepted Answer

A) cost curves shift upward. 
B) cost curves shift downward. 
C) cost curves are unaffected. 
D) supply curve shifts leftward. 
E) production permanently decreases. 
A) cost curves shift upward. 
B) cost curves shift downward. 
C) cost curves are unaffected. 
D) supply curve shifts leftward. 
E) production permanently decreases.

Question 4

If a perfectly competitive firm is maximizing its profit and is making an economic profit, which of the following is correct?
I. Price equals marginal revenue.
Ii. Marginal revenue equals marginal cost.
Iii. Price is greater than average total cost.

Accepted Answer

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

Question 5

In a perfectly competitive industry, i. entry by new firms shifts the market supply curve rightward.
Ii. exit by existing firms shifts the market supply curve leftward.
Iii. at all times existing firms make only zero economic profit.

Accepted Answer

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

Question 6

-In the above, a marginal revenue curve for a perfectly competitive firm is shown in Figure ________.

Accepted Answer

A) W 
B) X 
C) Y 
D) Z 
E) X and Figure Z 
A) W 
B) X 
C) Y 
D) Z 
E) X and Figure Z

Question 7

A perfectly competitive firm is producing 50 units of output, which it sells at the market price of $23 per unit. The firm's average total cost is $20. What is the firm's total revenue?

Accepted Answer

A) $23 
B) $150 
C) $1,000 
D) $1,150 
E) $20 
A) $23 
B) $150 
C) $1,000 
D) $1,150 
E) $20

Question 8

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

Accepted Answer

A) $5.10 × 10 
B) $8.00 × 10 
C) ($5.10 - $8.00)× 10 
D) ($8.00 - $5.10)× 10 
E) None of the above answers are correct because more information is needed. 
A) $5.10 × 10 
B) $8.00 × 10 
C) ($5.10 - $8.00)× 10 
D) ($8.00 - $5.10)× 10 
E) None of the above answers are correct because more information is needed.

Question 9

Suppose a perfectly competitive market is in short-run equilibrium. Firms that are incurring a ________ economic loss ________.

Accepted Answer

A) persistent; increase their output to increase their profit 
B) temporary; exit the industry 
C) temporary; decrease their production but definitely stay open 
D) persistent; exit the industry and shift the market supply curve leftward 
E) persistent; exit the industry and shift the market supply curve rightward 
A) persistent; increase their output to increase their profit 
B) temporary; exit the industry 
C) temporary; decrease their production but definitely stay open 
D) persistent; exit the industry and shift the market supply curve leftward 
E) persistent; exit the industry and shift the market supply curve rightward

Question 10

John keeps beehives and sells 100 quarts of honey per month. The honey market is perfectly competitive, and the price of a quart of honey is $10. John has an average variable cost of $5 and an average fixed cost of $3. At 100 quarts per month, John's marginal cost is $10.
a. Is John maximizing his profit?
 If not, what should John do?
b. Calculate John's total revenue, total cost, and total economic profit or economic loss when he produces 100 quarts of honey.

Accepted Answer

a. Yes, John is maximizing his profit be

Question 11

-The above figure shows three possible average total cost curves. If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC₂, each produces 40 units, and the market price of the good is $20 per unit, then

Accepted Answer

A) the firms incur an economic loss of $12 per unit. 
B) firms will enter the industry and the number of firms increases. 
C) the firms' ATC curves will eventually shift to become the same as ATC₁. 
D) firms will exit the industry and the number of firms decreases. 
E) Both answer A and answer D are correct. 
A) the firms incur an economic loss of $12 per unit. 
B) firms will enter the industry and the number of firms increases. 
C) the firms' ATC curves will eventually shift to become the same as ATC₁. 
D) firms will exit the industry and the number of firms decreases. 
E) Both answer A and answer D are correct.

Question 12

For a perfectly competitive palm tree nursery in South Carolina, the total revenue curve is

Accepted Answer

A) downward sloping. 
B) a horizontal line. 
C) upward sloping. 
D) U-shaped. 
E) undefined because the firm is perfectly competitive. 
A) downward sloping. 
B) a horizontal line. 
C) upward sloping. 
D) U-shaped. 
E) undefined because the firm is perfectly competitive.

Question 13

If the price is less than a perfectly competitive firm's minimum average variable cost, the firm

Accepted Answer

A) makes an economic profit. 
B) operates and incurs an economic loss equal to total fixed cost. 
C) operates and incurs an economic loss equal to average variable cost. 
D) shuts down and incurs an economic loss equal to total fixed cost. 
E) shuts down and incurs an economic loss equal to average variable cost. 
A) makes an economic profit. 
B) operates and incurs an economic loss equal to total fixed cost. 
C) operates and incurs an economic loss equal to average variable cost. 
D) shuts down and incurs an economic loss equal to total fixed cost. 
E) shuts down and incurs an economic loss equal to average variable cost.

Question 14

We know that a perfectly competitive firm is a price taker because

Accepted Answer

A) its MC curve slopes upward. 
B) its ATC curve is U-shaped. 
C) its demand curve is horizontal. 
D) MC and ATC are equal at the profit-maximizing amount of output. 
E) it has no supply curve. 
A) its MC curve slopes upward. 
B) its ATC curve is U-shaped. 
C) its demand curve is horizontal. 
D) MC and ATC are equal at the profit-maximizing amount of output. 
E) it has no supply curve.

Question 15

In which market structure does one firm sell a good or service with no close substitutes and there is a barrier blocking the entry of new firms?

Accepted Answer

A) only monopoly 
B) only oligopoly 
C) perfect competition 
D) monopolistic competition 
E) either monopoly or oligopoly 
A) only monopoly 
B) only oligopoly 
C) perfect competition 
D) monopolistic competition 
E) either monopoly or oligopoly

One requirement for an industry to be perfectly competitive is that

Entry by competitive firms decreases the market price, while exit by competitive firms increases the market price. Explain why firms enter or exit an industry and why these price changes occur.

When a firm adopts new technology, generally its

If a perfectly competitive firm is maximizing its profit and is making an economic profit, which of the following is correct? I. Price equals marginal revenue. Ii. Marginal revenue equals marginal cost. Iii. Price is greater than average total cost.

In a perfectly competitive industry, i. entry by new firms shifts the market supply curve rightward. Ii. exit by existing firms shifts the market supply curve leftward. Iii. at all times existing firms make only zero economic profit.

-In the above, a marginal revenue curve for a perfectly competitive firm is shown in Figure ________.

A perfectly competitive firm is producing 50 units of output, which it sells at the market price of $23 per unit. The firm's average total cost is $20. What is the firm's total revenue?

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

Suppose a perfectly competitive market is in short-run equilibrium. Firms that are incurring a economic loss .

-The above figure shows three possible average total cost curves. If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC₂, each produces 40 units, and the market price of the good is $20 per unit, then

For a perfectly competitive palm tree nursery in South Carolina, the total revenue curve is

If the price is less than a perfectly competitive firm's minimum average variable cost, the firm

We know that a perfectly competitive firm is a price taker because

In which market structure does one firm sell a good or service with no close substitutes and there is a barrier blocking the entry of new firms?

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

One requirement for an industry to be perfectly competitive is that

Entry by competitive firms decreases the market price, while exit by competitive firms increases the market price. Explain why firms enter or exit an industry and why these price changes occur.

When a firm adopts new technology, generally its

If a perfectly competitive firm is maximizing its profit and is making an economic profit, which of the following is correct? I. Price equals marginal revenue. Ii. Marginal revenue equals marginal cost. Iii. Price is greater than average total cost.

In a perfectly competitive industry, i. entry by new firms shifts the market supply curve rightward. Ii. exit by existing firms shifts the market supply curve leftward. Iii. at all times existing firms make only zero economic profit.

-In the above, a marginal revenue curve for a perfectly competitive firm is shown in Figure ________.

A perfectly competitive firm is producing 50 units of output, which it sells at the market price of $23 per unit. The firm's average total cost is $20. What is the firm's total revenue?

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

Suppose a perfectly competitive market is in short-run equilibrium. Firms that are incurring a ________ economic loss ________.

-The above figure shows three possible average total cost curves. If all firms in a perfectly competitive industry each have an average total cost curve identical to ATC₂, each produces 40 units, and the market price of the good is $20 per unit, then

For a perfectly competitive palm tree nursery in South Carolina, the total revenue curve is

If the price is less than a perfectly competitive firm's minimum average variable cost, the firm

We know that a perfectly competitive firm is a price taker because

In which market structure does one firm sell a good or service with no close substitutes and there is a barrier blocking the entry of new firms?

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

Suppose a perfectly competitive market is in short-run equilibrium. Firms that are incurring a economic loss .