Question 1

Which of the following is NOT an assumption of perfect competition?

Accepted Answer

A)  There are many firms, each selling an identical product. 
B)  There are many buyers. 
C)  The price each firm sets differs from the prices set by the other firms. 
D)  There are no restrictions on entry into the market. 
A)  There are many firms, each selling an identical product. 
B)  There are many buyers. 
C)  The price each firm sets differs from the prices set by the other firms. 
D)  There are no restrictions on entry into the market.

Question 2

In the short run, a perfectly competitive firm will shut down if

Accepted Answer

A)  it incurs any economic loss. 
B)  price equals average cost. 
C)  total revenue is less than total variable cost. 
D)  total revenue is less than total fixed cost. 
A)  it incurs any economic loss. 
B)  price equals average cost. 
C)  total revenue is less than total variable cost. 
D)  total revenue is less than total fixed cost.

Question 3

-In the short run, a perfectly competitive firm will make an economic profit as long as

Accepted Answer

A)  it maximizes its profit. 
B)  P > AVC. 
C)  P > AFC. 
D)  P > ATC. 
A)  it maximizes its profit. 
B)  P > AVC. 
C)  P > AFC. 
D)  P > ATC.

Question 4

-Consider the perfectly competitive firm in the above figure. At what price will long-run equilibrium occur?

Accepted Answer

A)  $11 
B)  $12 
C)  $22 
D)  $23 
A)  $11 
B)  $12 
C)  $22 
D)  $23

Question 5

In a perfectly competitive market, an increase in market demand

Accepted Answer

A)  raises the price in the short run and attracts new firms in the long run. 
B)  raises the price in the short run and the long run. 
C)  lowers the price in the short run and in the long run. 
D)  has no effect on the price in either the short run or the long run because the firms are price takers. 
A)  raises the price in the short run and attracts new firms in the long run. 
B)  raises the price in the short run and the long run. 
C)  lowers the price in the short run and in the long run. 
D)  has no effect on the price in either the short run or the long run because the firms are price takers.

Question 6

In perfect competition, an individual firm

Accepted Answer

A)  faces unitary elasticity of demand. 
B)  has a price elasticity of supply equal to one. 
C)  faces a perfectly elastic demand. 
D)  has perfectly elastic supply. 
A)  faces unitary elasticity of demand. 
B)  has a price elasticity of supply equal to one. 
C)  faces a perfectly elastic demand. 
D)  has perfectly elastic supply.

Question 7

-The table above shows output and costs of Evan's Subs, a typical perfectly competitive firm in a local market for sandwiches. Evan's fixed cost is $9 per hour. The current market price of a sandwich is $6. If Evan's sells the 5th sandwich, the marginal cost is ________ the marginal revenue, so the firm's profit ________.

Accepted Answer

A)  greater than; decreases 
B)  greater than; increases 
C)  less than; increases 
D)  less than; decreases 
A)  greater than; decreases 
B)  greater than; increases 
C)  less than; increases 
D)  less than; decreases

Question 8

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $22, the firm will

Accepted Answer

A)  shut down. 
B)  leave the market in the long run. 
C)  stay in the market in the long run. 
D)  incur an economic loss. 
A)  shut down. 
B)  leave the market in the long run. 
C)  stay in the market in the long run. 
D)  incur an economic loss.

Question 9

Do firms in perfect competition advertise their products? Why or why not?

Accepted Answer

Firms in perfect competition do not adve

Question 10

The costs incurred even when no output is produced are called

Accepted Answer

A)  fixed costs. 
B)  variable costs. 
C)  external costs. 
D)  marginal costs. 
A)  fixed costs. 
B)  variable costs. 
C)  external costs. 
D)  marginal costs.

Question 11

-In the long run, which of the following is present in a perfectly competitive market?

Accepted Answer

A)  barriers to entry 
B)  many firms in the market 
C)  firms incurring an economic loss in the long run 
D)  firms making an economic profit in the long run 
A)  barriers to entry 
B)  many firms in the market 
C)  firms incurring an economic loss in the long run 
D)  firms making an economic profit in the long run

Question 12

-The figure above shows a perfectly competitive firm. The firm is operating; that is, it has not shut down. The firm produces

Accepted Answer

A)  20 units of output and makes zero economic profit. 
B)  20 units of output and incurs an economic loss. 
C)  10 units of output and makes zero economic profit. 
D)  10 units of output and incurs an economic loss. 
A)  20 units of output and makes zero economic profit. 
B)  20 units of output and incurs an economic loss. 
C)  10 units of output and makes zero economic profit. 
D)  10 units of output and incurs an economic loss.

Question 13

"Higher ethanol production definitely and directly raises the price of corn," said USDA economist Ephraim Leibtag. In the long run in the corn market, what is TRUE if the production of ethanol increases?

Accepted Answer

A)  Individual corn farmers will make zero economic profit in the long run. 
B)  Individual corn farmers will make an economic profit in the long run. 
C)  Individual corn farmers will incur an economic loss in the long run, but they will still produce. 
D)  Individual corn farmers will incur an economic loss in the long run and will shut down. 
A)  Individual corn farmers will make zero economic profit in the long run. 
B)  Individual corn farmers will make an economic profit in the long run. 
C)  Individual corn farmers will incur an economic loss in the long run, but they will still produce. 
D)  Individual corn farmers will incur an economic loss in the long run and will shut down.

Question 14

A worldwide hops (a flowers used in brewing) shortage made stouts, ales and other specialty microbrews more pricy in 2008. A triple whammy of bad weather in Europe, an increase in the price of barley and a decrease in hops production in the U.S. led to a price increase of 20 percent for the most widely grown varieties, to 80 percent for specialty hops. What is the effect of this hops shortage on a microbrewery's cost curves?

Accepted Answer

A)  Short run fixed costs would increase. 
B)  Short run total costs would decrease. 
C)  Short run average variable costs would decrease. 
D)  Short run variable costs would increase. 
A)  Short run fixed costs would increase. 
B)  Short run total costs would decrease. 
C)  Short run average variable costs would decrease. 
D)  Short run variable costs would increase.

Question 15

-The table above provides cost data for a perfectly competitive firm producing toy cars. The firm is producing non-divisible goods. If the market price is $70 and the firm is a profit maximizer, the firm can earn a maximum economic profit of ________.

Accepted Answer

A)  a loss of $500 
B)  a loss of $10 
C)  a loss of $510 
D)  $210 
A)  a loss of $500 
B)  a loss of $10 
C)  a loss of $510 
D)  $210

Question 16

Explain the process that drives the economic profit to zero in the long run for a perfectly competitive firm.

Accepted Answer

In the long run, new firms enter a perfe

Question 17

-Consider the perfectly competitive firm in the figure above. At the profit maximizing level of output, the firm will

Accepted Answer

A)  make an economic profit equal to the area ABCD. 
B)  incur an economic loss equal to the area ABCD. 
C)  make zero economic profit. 
D)  make an economic profit equal to the area AECD. 
A)  make an economic profit equal to the area ABCD. 
B)  incur an economic loss equal to the area ABCD. 
C)  make zero economic profit. 
D)  make an economic profit equal to the area AECD.

Question 18

-The table above shows output and costs of Evan's Subs, a typical perfectly competitive firm in a local market for sandwiches. Evan's fixed cost is $9 per hour. The current market price of a sandwich is $6. What is Evan's marginal revenue from the 2nd sandwich sold?

Accepted Answer

A)  $10.00 
B)  $13.50 
C)  $3.00 
D)  $6.00 
A)  $10.00 
B)  $13.50 
C)  $3.00 
D)  $6.00

Question 19

-The above figure shows the total revenue curve for Dizzy Discs. The demand curve for CDs sold by Dizzy Discs

Accepted Answer

A)  has negative slope. 
B)  has positive slope. 
C)  is horizontal. 
D)  is vertical. 
A)  has negative slope. 
B)  has positive slope. 
C)  is horizontal. 
D)  is vertical.

Question 20

Suppose a farmer raising beef is making a normal profit. Then, because of a scare about mad cow disease, the demand for beef decreases drastically. What happens to the profits of the beef farmer in the short run and in the long run?

Accepted Answer

In the short run, the fall in beef price

Which of the following is NOT an assumption of perfect competition?

In the short run, a perfectly competitive firm will shut down if

-In the short run, a perfectly competitive firm will make an economic profit as long as

-Consider the perfectly competitive firm in the above figure. At what price will long-run equilibrium occur?

In a perfectly competitive market, an increase in market demand

In perfect competition, an individual firm

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $22, the firm will

Do firms in perfect competition advertise their products? Why or why not?

The costs incurred even when no output is produced are called

-In the long run, which of the following is present in a perfectly competitive market?

-The figure above shows a perfectly competitive firm. The firm is operating; that is, it has not shut down. The firm produces

"Higher ethanol production definitely and directly raises the price of corn," said USDA economist Ephraim Leibtag. In the long run in the corn market, what is TRUE if the production of ethanol increases?

-The table above provides cost data for a perfectly competitive firm producing toy cars. The firm is producing non-divisible goods. If the market price is $70 and the firm is a profit maximizer, the firm can earn a maximum economic profit of ________.

Explain the process that drives the economic profit to zero in the long run for a perfectly competitive firm.

-Consider the perfectly competitive firm in the figure above. At the profit maximizing level of output, the firm will

-The table above shows output and costs of Evan's Subs, a typical perfectly competitive firm in a local market for sandwiches. Evan's fixed cost is $9 per hour. The current market price of a sandwich is $6. What is Evan's marginal revenue from the 2nd sandwich sold?

-The above figure shows the total revenue curve for Dizzy Discs. The demand curve for CDs sold by Dizzy Discs

Suppose a farmer raising beef is making a normal profit. Then, because of a scare about mad cow disease, the demand for beef decreases drastically. What happens to the profits of the beef farmer in the short run and in the long run?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 12: Perfect Competition

Which of the following is NOT an assumption of perfect competition?

In the short run, a perfectly competitive firm will shut down if

-In the short run, a perfectly competitive firm will make an economic profit as long as

-Consider the perfectly competitive firm in the above figure. At what price will long-run equilibrium occur?

In a perfectly competitive market, an increase in market demand

In perfect competition, an individual firm

-Giuseppe's Pizza is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price is $22, the firm will

Do firms in perfect competition advertise their products? Why or why not?

The costs incurred even when no output is produced are called

-In the long run, which of the following is present in a perfectly competitive market?

-The figure above shows a perfectly competitive firm. The firm is operating; that is, it has not shut down. The firm produces

"Higher ethanol production definitely and directly raises the price of corn," said USDA economist Ephraim Leibtag. In the long run in the corn market, what is TRUE if the production of ethanol increases?

-The table above provides cost data for a perfectly competitive firm producing toy cars. The firm is producing non-divisible goods. If the market price is $70 and the firm is a profit maximizer, the firm can earn a maximum economic profit of ________.

Explain the process that drives the economic profit to zero in the long run for a perfectly competitive firm.

-Consider the perfectly competitive firm in the figure above. At the profit maximizing level of output, the firm will

-The table above shows output and costs of Evan's Subs, a typical perfectly competitive firm in a local market for sandwiches. Evan's fixed cost is $9 per hour. The current market price of a sandwich is $6. What is Evan's marginal revenue from the 2nd sandwich sold?

-The above figure shows the total revenue curve for Dizzy Discs. The demand curve for CDs sold by Dizzy Discs

Suppose a farmer raising beef is making a normal profit. Then, because of a scare about mad cow disease, the demand for beef decreases drastically. What happens to the profits of the beef farmer in the short run and in the long run?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters