Question 1

If a firm operates in a perfectly competitive market,then it will most likely

Accepted Answer

A)  advertise its product on television. 
B)  settle for whatever price is offered. 
C)  have a difficult time obtaining information about the market price. 
D)  have an easy time keeping other firms out of the market. 
A)  advertise its product on television. 
B)  settle for whatever price is offered. 
C)  have a difficult time obtaining information about the market price. 
D)  have an easy time keeping other firms out of the market.

Question 2

If a firm makes zero economic profit,then the firm

Accepted Answer

A)  has total revenues greater than its economic costs. 
B)  must shut down. 
C)  can be earning positive business profit. 
D)  must have no fixed costs. 
A)  has total revenues greater than its economic costs. 
B)  must shut down. 
C)  can be earning positive business profit. 
D)  must have no fixed costs.

Question 3

Suppose there are 20 competitive firms in a market.The supply curve of each firm is q = 2p.The market demand is Q = 200 - 2p.What is the residual demand curve facing a typical firm?

Accepted Answer

The residual demand curve is e

Question 4

Explain why individual firms in competitive markets face more elastic demand curves than the market as a whole.

Accepted Answer

In a competitive market,if an individual

Question 5

In the long run,profits will equal zero in a competitive market because of

Accepted Answer

A)  constant returns to scale. 
B)  identical products being produced by all firms. 
C)  the availability of information. 
D)  free entry and exit. 
A)  constant returns to scale. 
B)  identical products being produced by all firms. 
C)  the availability of information. 
D)  free entry and exit.

Question 6

If a firm is operating at an output level where losses are minimized,the firm

Accepted Answer

A)  has no incentive to stay in the industry. 
B)  is better of exiting the industry. 
C)  is maximizing profits. 
D)  will shut down. 
A)  has no incentive to stay in the industry. 
B)  is better of exiting the industry. 
C)  is maximizing profits. 
D)  will shut down.

Question 7

The competitive firm's supply curve is equal to

Accepted Answer

A)  its marginal cost curve. 
B)  the portion of its marginal cost curve that lies above AC. 
C)  the portion of its marginal cost curve that lies above AVC. 
D)  the portion of its marginal cost curve that lies above AFC. 
A)  its marginal cost curve. 
B)  the portion of its marginal cost curve that lies above AC. 
C)  the portion of its marginal cost curve that lies above AVC. 
D)  the portion of its marginal cost curve that lies above AFC.

Question 8

Assuming a horizontal long-run market supply curve,which of the following statements is (are)TRUE about competitive firms in the long run?

Accepted Answer

A)  p = MC 
B)  p = AC 
C)  profit = 0 
D)  All of the above. 
A)  p = MC 
B)  p = AC 
C)  profit = 0 
D)  All of the above.

Question 9

The residual demand curve is

Accepted Answer

A)  the market demand minus the supply of other firms. 
B)  the remaining demand after the market clears. 
C)  the market demand minus the supply of one firm. 
D)  the long-run demand for a market. 
A)  the market demand minus the supply of other firms. 
B)  the remaining demand after the market clears. 
C)  the market demand minus the supply of one firm. 
D)  the long-run demand for a market.

Question 10

For the following, please answer "True" or "False" and explain why.
-If a competitive firm has to pay a lump sum tax,it will produce less.

Accepted Answer

A) True 
 B)False

Question 11

If consumers view the output of any firm in a market to be identical to the output of any other firm in the market,the demand curve for the output of any given firm

Accepted Answer

A)  will be identical to the market demand curve. 
B)  will be horizontal. 
C)  will be vertical. 
D)  cannot be determined from the information given. 
A)  will be identical to the market demand curve. 
B)  will be horizontal. 
C)  will be vertical. 
D)  cannot be determined from the information given.

Question 12

For the following, please answer "True" or "False" and explain why.
-A market is perfectly competitive even if firms have the ability to set their own price as long as the price difference reflects differences in the product.

Accepted Answer

A) True 
 B)False

Question 13

Suppose that once a well is dug,water flows out of it continuously without any additional effort.Customers collect their water and pay a per gallon fee when they leave the site of the well.In the short run,the competitive firm in this market

Accepted Answer

A)  has no variable costs. 
B)  has no fixed costs. 
C)  will shut down. 
D)  can produce water at no cost. 
A)  has no variable costs. 
B)  has no fixed costs. 
C)  will shut down. 
D)  can produce water at no cost.

Question 14

-The above figure shows the cost curves for a typical firm in a competitive market.From the graph,estimate the firm's profits when price equals $10 per unit.

Accepted Answer

When price = 10,p = MC when q

Question 15

Long-run market supply curves are upward sloping if

Accepted Answer

A)  firms are identical. 
B)  the number of firms is restricted in the long run. 
C)  input prices fall as the industry expands. 
D)  All of the above. 
A)  firms are identical. 
B)  the number of firms is restricted in the long run. 
C)  input prices fall as the industry expands. 
D)  All of the above.

Question 16

A firm should always shut down if its revenue is

Accepted Answer

A)  declining. 
B)  less than its average fixed costs. 
C)  less than its total costs. 
D)  less than its avoidable costs. 
A)  declining. 
B)  less than its average fixed costs. 
C)  less than its total costs. 
D)  less than its avoidable costs.

Question 17

All the supply of peppermint oil is produced from mint plants grown in one county by several competitive growers (the number of growers is not limited).The quality of land in the county varies greatly.Would you expect the long-run market supply curve to slope upward,downward,or remain constant? Why?

Accepted Answer

The long-run market supply curve will sl

Question 18

If a firm operates at a loss,the loss is equal to TC - TR.If the firm shuts down instead,its loss is equal to FC.Given this,show that price must exceed AVC for the firm to operate at a loss and not shut down.

Accepted Answer

The firm operates at a loss if

Question 19

The perfectly competitive model makes a lot of fairly unrealistic assumptions.Why do economics text books still talk a lot about this model?

Accepted Answer

A)  Many markets are close to being perfectly competitive. 
B)  It is an important model to use as a benchmark to compare other markets structures to. 
C)  Perfectly competitive markets maximize societal welfare. 
D)  All of the above. 
A)  Many markets are close to being perfectly competitive. 
B)  It is an important model to use as a benchmark to compare other markets structures to. 
C)  Perfectly competitive markets maximize societal welfare. 
D)  All of the above.

Question 20

A market's structure is described by

Accepted Answer

A)  the number of firms in the market. 
B)  the ease with which firms can enter and exit the market. 
C)  the ability of firms to differentiate their product. 
D)  All of the above. 
A)  the number of firms in the market. 
B)  the ease with which firms can enter and exit the market. 
C)  the ability of firms to differentiate their product. 
D)  All of the above.

If a firm operates in a perfectly competitive market,then it will most likely

If a firm makes zero economic profit,then the firm

Suppose there are 20 competitive firms in a market.The supply curve of each firm is q = 2p.The market demand is Q = 200 - 2p.What is the residual demand curve facing a typical firm?

Explain why individual firms in competitive markets face more elastic demand curves than the market as a whole.

In the long run,profits will equal zero in a competitive market because of

If a firm is operating at an output level where losses are minimized,the firm

The competitive firm's supply curve is equal to

Assuming a horizontal long-run market supply curve,which of the following statements is (are)TRUE about competitive firms in the long run?

The residual demand curve is

For the following, please answer "True" or "False" and explain why. -If a competitive firm has to pay a lump sum tax,it will produce less.

If consumers view the output of any firm in a market to be identical to the output of any other firm in the market,the demand curve for the output of any given firm

For the following, please answer "True" or "False" and explain why. -A market is perfectly competitive even if firms have the ability to set their own price as long as the price difference reflects differences in the product.

Suppose that once a well is dug,water flows out of it continuously without any additional effort.Customers collect their water and pay a per gallon fee when they leave the site of the well.In the short run,the competitive firm in this market

-The above figure shows the cost curves for a typical firm in a competitive market.From the graph,estimate the firm's profits when price equals $10 per unit.

Long-run market supply curves are upward sloping if

A firm should always shut down if its revenue is

All the supply of peppermint oil is produced from mint plants grown in one county by several competitive growers (the number of growers is not limited).The quality of land in the county varies greatly.Would you expect the long-run market supply curve to slope upward,downward,or remain constant? Why?

If a firm operates at a loss,the loss is equal to TC - TR.If the firm shuts down instead,its loss is equal to FC.Given this,show that price must exceed AVC for the firm to operate at a loss and not shut down.

The perfectly competitive model makes a lot of fairly unrealistic assumptions.Why do economics text books still talk a lot about this model?

A market's structure is described by

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, externalities, rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 8: Competitive Firms and Markets

If a firm operates in a perfectly competitive market,then it will most likely

If a firm makes zero economic profit,then the firm

Suppose there are 20 competitive firms in a market.The supply curve of each firm is q = 2p.The market demand is Q = 200 - 2p.What is the residual demand curve facing a typical firm?

Explain why individual firms in competitive markets face more elastic demand curves than the market as a whole.

In the long run,profits will equal zero in a competitive market because of

If a firm is operating at an output level where losses are minimized,the firm

The competitive firm's supply curve is equal to

Assuming a horizontal long-run market supply curve,which of the following statements is (are)TRUE about competitive firms in the long run?

The residual demand curve is

For the following, please answer "True" or "False" and explain why. -If a competitive firm has to pay a lump sum tax,it will produce less.

If consumers view the output of any firm in a market to be identical to the output of any other firm in the market,the demand curve for the output of any given firm

For the following, please answer "True" or "False" and explain why. -A market is perfectly competitive even if firms have the ability to set their own price as long as the price difference reflects differences in the product.

Suppose that once a well is dug,water flows out of it continuously without any additional effort.Customers collect their water and pay a per gallon fee when they leave the site of the well.In the short run,the competitive firm in this market

-The above figure shows the cost curves for a typical firm in a competitive market.From the graph,estimate the firm's profits when price equals $10 per unit.

Long-run market supply curves are upward sloping if

A firm should always shut down if its revenue is

If a firm operates at a loss,the loss is equal to TC - TR.If the firm shuts down instead,its loss is equal to FC.Given this,show that price must exceed AVC for the firm to operate at a loss and not shut down.

The perfectly competitive model makes a lot of fairly unrealistic assumptions.Why do economics text books still talk a lot about this model?

A market's structure is described by

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Monopoly and Monopsony

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, externalities, rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters