Question 1

Perfect competition is characterized by all of the following EXCEPT

Accepted Answer

A) a large number of buyers and sellers. 
B) no restrictions on entry into or exit from the industry. 
C) considerable advertising by individual firms. 
D) buyers and sellers are well informed about prices. 
E) firms produce an identical product. 
A) a large number of buyers and sellers. 
B) no restrictions on entry into or exit from the industry. 
C) considerable advertising by individual firms. 
D) buyers and sellers are well informed about prices. 
E) firms produce an identical product.

Question 2

If a perfectly competitive firm's marginal revenue is greater than its marginal cost, as it increases its output, its profit ________ and the price it can charge for its product ________.

Accepted Answer

A) increases; does not change 
B) decreases; falls 
C) increases; falls 
D) decreases; rises 
E) decreases; does not change 
A) increases; does not change 
B) decreases; falls 
C) increases; falls 
D) decreases; rises 
E) decreases; does not change

Question 3

One part of a perfectly competitive trout farm's supply curve is its

Accepted Answer

A) marginal cost curve below the shutdown point. 
B) entire marginal cost curve. 
C) marginal cost curve above the shutdown point. 
D) average variable cost curve above the shutdown point. 
E) marginal revenue curve above the demand curve. 
A) marginal cost curve below the shutdown point. 
B) entire marginal cost curve. 
C) marginal cost curve above the shutdown point. 
D) average variable cost curve above the shutdown point. 
E) marginal revenue curve above the demand curve.

Question 4

A perfectly competitive firm is earning an economic profit when total fixed costs increase. Assuming the firm does not shut down, in the short run the firm will

Accepted Answer

A) charge a higher price. 
B) produce more output so the extra revenue will cover the increased costs. 
C) produce less output to decrease total costs. 
D) continue producing the same quantity as before but will make less economic profit. 
E) continue producing the same quantity as before and continue making the same economic profit as before. 
A) charge a higher price. 
B) produce more output so the extra revenue will cover the increased costs. 
C) produce less output to decrease total costs. 
D) continue producing the same quantity as before but will make less economic profit. 
E) continue producing the same quantity as before and continue making the same economic profit as before.

Question 5

In the long run, a perfectly competitive firm will

Accepted Answer

A) be able to make an economic profit. 
B) produce but incur an economic loss. 
C) make zero economic profit. 
D) not produce and will incur an economic loss equal to its total fixed cost. 
E) not produce but not incur an economic loss. 
A) be able to make an economic profit. 
B) produce but incur an economic loss. 
C) make zero economic profit. 
D) not produce and will incur an economic loss equal to its total fixed cost. 
E) not produce but not incur an economic loss.

Question 6

Mark owns a cattle ranch near Hugo, Oklahoma. Mark is currently producing beef at an output level where marginal revenue exceeds marginal cost. In order to maximize his profit, Mark should

Accepted Answer

A) not change his output. 
B) decrease his output. 
C) increase his output. 
D) shut down his ranch. 
E) probably change his output, but more information is needed to determine if he should increase, decrease, or not change it. 
A) not change his output. 
B) decrease his output. 
C) increase his output. 
D) shut down his ranch. 
E) probably change his output, but more information is needed to determine if he should increase, decrease, or not change it.

Question 7

Suppose the bobby pin industry is perfectly competitive. The price of a packet of bobby pins is $2.00. Pins and Needles, Inc. is a firm in this industry and is producing 1,000 packets of bobby pins per day at the point where the MC = MR. The average cost of production at this output level is $1.50 per packet.
a. What is the marginal cost of the 1,000th packet?
b. Is this firm making an economic profit, zero economic profit, or an economic loss?
 How much?
c. Is the firm in long-run equilibrium?
 Why or why not?

Accepted Answer

a. The price per packet is $2, which is

Question 8

Suppose a perfectly competitive market is in a short-run equilibrium. If some firms exit the market, the profit of the remaining firms ________; if some firms enter the market, the profit of each existing firm ________.

Accepted Answer

A) decreases; is unchanged 
B) increases; decreases 
C) increases; is unchanged 
D) is unchanged; is unchanged 
E) decreases; increases 
A) decreases; is unchanged 
B) increases; decreases 
C) increases; is unchanged 
D) is unchanged; is unchanged 
E) decreases; increases

Question 9

A permanent decrease in demand definitely

Accepted Answer

A) shifts a firm's average total cost curve downward. 
B) creates diseconomies for individual firms. 
C) lowers the market price. 
D) decreases the number of firms in the industry. 
E) shifts a firm's average total cost curve upward. 
A) shifts a firm's average total cost curve downward. 
B) creates diseconomies for individual firms. 
C) lowers the market price. 
D) decreases the number of firms in the industry. 
E) shifts a firm's average total cost curve upward.

Question 10

A perfectly competitive firm is producing 50 units of output and selling at the market price of $23. The firm's average total cost is $20. What is the firm's total cost?

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 11

"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect.

Accepted Answer

The statement is incorrect. Perfectly co

Question 12

The figure above shows the cost curves and marginal revenue curve for a perfectly competitive firm.
-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 13

Each firm in a perfectly competitive industry

Accepted Answer

A) produces a good that is slightly different from that of the other firms. 
B) produces a good that is identical to that of the other firms. 
C) attains economies of scale so that its efficient size is large compared to the market as a whole. 
D) has control over at least one unique resource to separate themselves from their competitors. 
E) has an important influence on the market price of the good or service being produced. 
A) produces a good that is slightly different from that of the other firms. 
B) produces a good that is identical to that of the other firms. 
C) attains economies of scale so that its efficient size is large compared to the market as a whole. 
D) has control over at least one unique resource to separate themselves from their competitors. 
E) has an important influence on the market price of the good or service being produced.

Question 14

If the market price faced by a perfectly competitive firm increases, in the short run how does the firm respond?

Accepted Answer

If the market price rises, a p

Question 15

The firm in the figure above is ________ that is equal to ________.

Accepted Answer

A) making an economic profit; $8.00 × 10 
B) making an economic profit; $5.10 × 10 
C) incurring an economic loss; $5.10 × 10 
D) incurring an economic loss; ($8.00 - $5.10)× 10 
E) making an economic profit; ($8.00 - $5.10)× 10 
A) making an economic profit; $8.00 × 10 
B) making an economic profit; $5.10 × 10 
C) incurring an economic loss; $5.10 × 10 
D) incurring an economic loss; ($8.00 - $5.10)× 10 
E) making an economic profit; ($8.00 - $5.10)× 10

Question 16

In a perfectly competitive market, one farmer's barley is

Accepted Answer

A) completely different from another farmer's barley. 
B) a perfect substitute for another farmer's barley. 
C) a monopolized product in that farmer's local market. 
D) a monopolized product in the national market. 
E) slightly different from another farmer's barley. 
A) completely different from another farmer's barley. 
B) a perfect substitute for another farmer's barley. 
C) a monopolized product in that farmer's local market. 
D) a monopolized product in the national market. 
E) slightly different from another farmer's barley.

Question 17

The marginal revenue curve for a perfectly competitive firm is

Accepted Answer

A) horizontal. 
B) vertical. 
C) upward sloping. 
D) downward sloping. 
E) a straight line coming out of the origin with a 45 degree slope. 
A) horizontal. 
B) vertical. 
C) upward sloping. 
D) downward sloping. 
E) a straight line coming out of the origin with a 45 degree slope.

Question 18

The cranberry market is perfectly competitive. Reports that consuming cranberries can lead to improved health result in a permanent increase in the demand for cranberries and an immediate upward jump in the price of cranberries. As time passes, the price of cranberries ________ and the initial firms' economic ________.

Accepted Answer

A) falls; profit will be eliminated 
B) rises still higher; loss will be eliminated 
C) rises still higher; profit will not change 
D) falls; loss will be increased 
E) falls; profit will not change 
A) falls; profit will be eliminated 
B) rises still higher; loss will be eliminated 
C) rises still higher; profit will not change 
D) falls; loss will be increased 
E) falls; profit will not change

Question 19

If firms in a perfectly competitive market are incurring economic losses, then as time passes firms ________ and the market ________.

Accepted Answer

A) enter; demand curve shifts leftward 
B) enter; supply curve shifts rightward 
C) exit; demand curve shifts leftward 
D) exit; supply curve shifts rightward 
E) exit; supply curve shifts leftward 
A) enter; demand curve shifts leftward 
B) enter; supply curve shifts rightward 
C) exit; demand curve shifts leftward 
D) exit; supply curve shifts rightward 
E) exit; supply curve shifts leftward

Question 20

-Bill owns a lawn-care company in Windermere, Florida, Florida, whose cost curves are illustrated in the above figure. The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed. If Bill's average total cost curve is ATC, his total economic ________ equals ________.

Accepted Answer

A) loss; $800 per week 
B) profit; $1,280 per week 
C) profit; $480 per week 
D) loss; $1,280 per week 
E) profit; $32 per week 
A) loss; $800 per week 
B) profit; $1,280 per week 
C) profit; $480 per week 
D) loss; $1,280 per week 
E) profit; $32 per week

Perfect competition is characterized by all of the following EXCEPT

If a perfectly competitive firm's marginal revenue is greater than its marginal cost, as it increases its output, its profit and the price it can charge for its product .

One part of a perfectly competitive trout farm's supply curve is its

A perfectly competitive firm is earning an economic profit when total fixed costs increase. Assuming the firm does not shut down, in the short run the firm will

In the long run, a perfectly competitive firm will

Mark owns a cattle ranch near Hugo, Oklahoma. Mark is currently producing beef at an output level where marginal revenue exceeds marginal cost. In order to maximize his profit, Mark should

Suppose a perfectly competitive market is in a short-run equilibrium. If some firms exit the market, the profit of the remaining firms ; if some firms enter the market, the profit of each existing firm .

A permanent decrease in demand definitely

A perfectly competitive firm is producing 50 units of output and selling at the market price of $23. The firm's average total cost is $20. What is the firm's total cost?

"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect.

The figure above shows the cost curves and marginal revenue curve for a perfectly competitive firm. -Suppose the price of a can was $5.14. In this case, to maximize its profit the firm illustrated in the figure above would

Each firm in a perfectly competitive industry

If the market price faced by a perfectly competitive firm increases, in the short run how does the firm respond?

The firm in the figure above is that is equal to .

In a perfectly competitive market, one farmer's barley is

The marginal revenue curve for a perfectly competitive firm is

If firms in a perfectly competitive market are incurring economic losses, then as time passes firms and the market .

-Bill owns a lawn-care company in Windermere, Florida, Florida, whose cost curves are illustrated in the above figure. The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed. If Bill's average total cost curve is ATC, his total economic equals .

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

Perfect competition is characterized by all of the following EXCEPT

If a perfectly competitive firm's marginal revenue is greater than its marginal cost, as it increases its output, its profit ________ and the price it can charge for its product ________.

One part of a perfectly competitive trout farm's supply curve is its

A perfectly competitive firm is earning an economic profit when total fixed costs increase. Assuming the firm does not shut down, in the short run the firm will

In the long run, a perfectly competitive firm will

Mark owns a cattle ranch near Hugo, Oklahoma. Mark is currently producing beef at an output level where marginal revenue exceeds marginal cost. In order to maximize his profit, Mark should

Suppose a perfectly competitive market is in a short-run equilibrium. If some firms exit the market, the profit of the remaining firms ________; if some firms enter the market, the profit of each existing firm ________.

A permanent decrease in demand definitely

A perfectly competitive firm is producing 50 units of output and selling at the market price of $23. The firm's average total cost is $20. What is the firm's total cost?

"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect.

The figure above shows the cost curves and marginal revenue curve for a perfectly competitive firm. -Suppose the price of a can was $5.14. In this case, to maximize its profit the firm illustrated in the figure above would

Each firm in a perfectly competitive industry

If the market price faced by a perfectly competitive firm increases, in the short run how does the firm respond?

The firm in the figure above is ________ that is equal to ________.

In a perfectly competitive market, one farmer's barley is

The marginal revenue curve for a perfectly competitive firm is

If firms in a perfectly competitive market are incurring economic losses, then as time passes firms ________ and the market ________.

-Bill owns a lawn-care company in Windermere, Florida, Florida, whose cost curves are illustrated in the above figure. The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed. If Bill's average total cost curve is ATC, his total economic ________ equals ________.

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

If a perfectly competitive firm's marginal revenue is greater than its marginal cost, as it increases its output, its profit and the price it can charge for its product .

Suppose a perfectly competitive market is in a short-run equilibrium. If some firms exit the market, the profit of the remaining firms ; if some firms enter the market, the profit of each existing firm .

The firm in the figure above is that is equal to .

If firms in a perfectly competitive market are incurring economic losses, then as time passes firms and the market .

-Bill owns a lawn-care company in Windermere, Florida, Florida, whose cost curves are illustrated in the above figure. The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed. If Bill's average total cost curve is ATC, his total economic equals .