Question 1

In perfect competition, the elasticity of demand for the product of a single firm is

Accepted Answer

A)  zero because the firm produces a unique product. 
B)  zero because many other firms produce identical products. 
C)  infinite because the firm produces a unique product. 
D)  infinite because many other firms produce identical products. 
A)  zero because the firm produces a unique product. 
B)  zero because many other firms produce identical products. 
C)  infinite because the firm produces a unique product. 
D)  infinite because many other firms produce identical products.

Question 2

-The figure above shows a perfectly competitive firm. The firm will shut down in the short run if total fixed costs

Accepted Answer

A)  are between $201 and $400. 
B)  exceed $401. 
C)  are less than $200. 
D)  exceed total costs. 
A)  are between $201 and $400. 
B)  exceed $401. 
C)  are less than $200. 
D)  exceed total costs.

Question 3

Why is the demand for a perfectly competitive firm's good perfectly elastic even though the market demand is not?

Accepted Answer

Each firm takes the market price as give

Question 4

The market for maple syrup is perfectly competitive. Suppose that the market is in long-run equilibrium when the market demand for maple syrup increases. In the long run, firms will ________ the market and the market ________ will ________.

Accepted Answer

A)  leave; supply; decrease 
B)  enter; supply; increase 
C)  leave; demand; decrease 
D)  enter; supply; decrease 
A)  leave; supply; decrease 
B)  enter; supply; increase 
C)  leave; demand; decrease 
D)  enter; supply; decrease

Question 5

-In the short run, perfectly competitive firms ________ but in the long run, perfectly competitive firms ________.

Accepted Answer

A)  can incur an economic loss; incur an economic loss 
B)  can incur economic losses; make an economic profit 
C)  must make an economic profit; make an economic profit 
D)  can incur an economic loss; make zero economic profit 
A)  can incur an economic loss; incur an economic loss 
B)  can incur economic losses; make an economic profit 
C)  must make an economic profit; make an economic profit 
D)  can incur an economic loss; make zero economic profit

Question 6

-The figure above shows a typical perfectly competitive corn farm, whose marginal cost curve is MC and average total cost curve is ATC. The market is initially in a long-run equilibrium, where the price is $3.00 per bushel. Then, the market demand for corn decreases and, in the short run, the price falls to $2.50 per bushel. In the new short-run equilibrium, the farm produces ________ bushels of corn and sells corn at ________ per bushel.

Accepted Answer

A)  250,000; $3.00 
B)  250,000; $2.50 
C)  300,000; $2.50 
D)  200,000; $2.50 
A)  250,000; $3.00 
B)  250,000; $2.50 
C)  300,000; $2.50 
D)  200,000; $2.50

Question 7

-American restaurants receive their supply of baby back-ribs from American farms and from farms in Denmark. In the figures above, the first diagram shows the perfectly competitive market for baby back ribs in the United States. The second figure shows the situation at Premium Standard Farm in Kansas, one of the many U.S. farms supplying these ribs.
Now assume that the United States imposes a ban on European meat in response to the foot-and-mouth disease that has infected livestock in Europe. (Which the United States did several years ago.) In particular, suppose that the U.S. ban decreases the supply by 40 tons a year. Using the first figure, show the impact of this ban on the baby back rib market. Using the second figure, show the impact on Premium Standard Farm in Kansas.

Accepted Answer

@#IMG-DLM& @#IMG-DLM& The ban on European meat decreases the

Question 8

-In the above figure, if the price is P1 and the firm produced Q1, the firm's economic profit is ________ than if it produced Q2 and ________ than if it produced Q3.

Accepted Answer

A)  less; less 
B)  less; more 
C)  more; less 
D)  more; more 
A)  less; less 
B)  less; more 
C)  more; less 
D)  more; more

Question 9

A perfectly competitive firm maximizes its profits by producing the amount of output such that

Accepted Answer

A)  MR = P. 
B)  MR = MC. 
C)  P = AVC. 
D)  P = ATC. 
A)  MR = P. 
B)  MR = MC. 
C)  P = AVC. 
D)  P = ATC.

Question 10

Suppose firms in a perfectly competitive market are earning an economic profit. As new firms enter, the price ________ and the economic profit of each existing firm ________.

Accepted Answer

A)  rises; increases 
B)  rises; decreases 
C)  falls; increases 
D)  falls; decreases 
A)  rises; increases 
B)  rises; decreases 
C)  falls; increases 
D)  falls; decreases

Question 11

-The first table shows the market demand schedule for CDs, and the second table shows the cost structure of each firm. The CD market is perfectly competitive and there are 100 identical firms. The market price of a CD is ________, and ________ CDs are produced and sold.

Accepted Answer

A)  $9.00; 20,000 
B)  $9.50; 15,000 
C)  $10.00; 10,000 
D)  $8.50; 24,000 
A)  $9.00; 20,000 
B)  $9.50; 15,000 
C)  $10.00; 10,000 
D)  $8.50; 24,000

Question 12

A perfectly competitive firm maximizes its profit by producing the level of output so that its average total cost equals the market price.

Accepted Answer

A) True 
 B)False

Question 13

-Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy's cost curves. The current market price is 2 cents per page. With no change in demand and technology, in the long run, the price will

Accepted Answer

A)  remain unchanged. 
B)  rise to 5 cents per page. 
C)  rise to 4 cents per page. 
D)  fall to 1 cent per page. 
A)  remain unchanged. 
B)  rise to 5 cents per page. 
C)  rise to 4 cents per page. 
D)  fall to 1 cent per page.

Question 14

Suppose firms in a perfectly competitive market are incurring an economic loss. Over time

Accepted Answer

A)  other firms enter the market, so the price rises and the economic loss decreases. 
B)  some firms leave the market, so the price rises and the economic loss decreases. 
C)  other firms enter the market, so the price falls and the economic loss decreases. 
D)  some firms leave the market, so the price falls and the economic loss decreases. 
A)  other firms enter the market, so the price rises and the economic loss decreases. 
B)  some firms leave the market, so the price rises and the economic loss decreases. 
C)  other firms enter the market, so the price falls and the economic loss decreases. 
D)  some firms leave the market, so the price falls and the economic loss decreases.

Question 15

Jane's Copy Services is in perfect competition. Jane currently charges 10 cents per page, which is the going market price. Jane thinks that she can increase her profit if she lowers her price to 8 cents per page to increase the demand for her service. Is Jane right? Why or why not?

Accepted Answer

If Jane lowers her price, her profit wil

Question 16

If the price of its product just equals the average variable cost of production for a competitive firm,

Accepted Answer

A)  total revenue equals total fixed cost and the firm's loss equals total variable cost. 
B)  total revenue equals total variable cost and the firm's loss equals total fixed cost. 
C)  total fixed cost is zero. 
D)  total variable cost equals total fixed cost. 
A)  total revenue equals total fixed cost and the firm's loss equals total variable cost. 
B)  total revenue equals total variable cost and the firm's loss equals total fixed cost. 
C)  total fixed cost is zero. 
D)  total variable cost equals total fixed cost.

Question 17

In perfect competition, each individual firm faces ________ demand curve.

Accepted Answer

A)  an inelastic 
B)  an upward sloping 
C)  a perfectly elastic 
D)  a downward sloping 
A)  an inelastic 
B)  an upward sloping 
C)  a perfectly elastic 
D)  a downward sloping

Question 18

-The figure above shows a typical perfectly competitive corn farm, whose marginal cost curve is MC and average total cost curve is ATC. The market is initially in a long-run equilibrium, where the price is $3.00 per bushel. Then, the market demand for corn decreases and, in the short run, the price falls to $2.50 per bushel. In the new short-run equilibrium, the farm

Accepted Answer

A)  incurs an economic loss of between $1 and $40,000. 
B)  makes zero economic profit. 
C)  incurs an economic loss of between $40,001 and $130,000. 
D)  incurs an economic loss of more than $130,001. 
A)  incurs an economic loss of between $1 and $40,000. 
B)  makes zero economic profit. 
C)  incurs an economic loss of between $40,001 and $130,000. 
D)  incurs an economic loss of more than $130,001.

Question 19

-In the above figure, the firm's total economic profit is equal to

Accepted Answer

A)  $60. 
B)  $200. 
C)  $150. 
D)  MR - MC. 
A)  $60. 
B)  $200. 
C)  $150. 
D)  MR - MC.

Question 20

-In the above figure, below what minimum price will a perfectly competitive firm shut down rather than produce?

Accepted Answer

A)  for any price less than $16 per unit 
B)  for any price less than $12 per unit 
C)  for any price less than $8 per unit 
D)  for any price less than $4 per unit 
A)  for any price less than $16 per unit 
B)  for any price less than $12 per unit 
C)  for any price less than $8 per unit 
D)  for any price less than $4 per unit

In perfect competition, the elasticity of demand for the product of a single firm is

-The figure above shows a perfectly competitive firm. The firm will shut down in the short run if total fixed costs

Why is the demand for a perfectly competitive firm's good perfectly elastic even though the market demand is not?

The market for maple syrup is perfectly competitive. Suppose that the market is in long-run equilibrium when the market demand for maple syrup increases. In the long run, firms will the market and the market will .

-In the short run, perfectly competitive firms but in the long run, perfectly competitive firms .

-In the above figure, if the price is P₁ and the firm produced Q₁, the firm's economic profit is than if it produced Q₂ and than if it produced Q₃.

A perfectly competitive firm maximizes its profits by producing the amount of output such that

Suppose firms in a perfectly competitive market are earning an economic profit. As new firms enter, the price and the economic profit of each existing firm .

-The first table shows the market demand schedule for CDs, and the second table shows the cost structure of each firm. The CD market is perfectly competitive and there are 100 identical firms. The market price of a CD is , and CDs are produced and sold.

A perfectly competitive firm maximizes its profit by producing the level of output so that its average total cost equals the market price.

-Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy's cost curves. The current market price is 2 cents per page. With no change in demand and technology, in the long run, the price will

Suppose firms in a perfectly competitive market are incurring an economic loss. Over time

Jane's Copy Services is in perfect competition. Jane currently charges 10 cents per page, which is the going market price. Jane thinks that she can increase her profit if she lowers her price to 8 cents per page to increase the demand for her service. Is Jane right? Why or why not?

If the price of its product just equals the average variable cost of production for a competitive firm,

In perfect competition, each individual firm faces ________ demand curve.

-In the above figure, the firm's total economic profit is equal to

-In the above figure, below what minimum price will a perfectly competitive firm shut down rather than produce?

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

In perfect competition, the elasticity of demand for the product of a single firm is

-The figure above shows a perfectly competitive firm. The firm will shut down in the short run if total fixed costs

Why is the demand for a perfectly competitive firm's good perfectly elastic even though the market demand is not?

The market for maple syrup is perfectly competitive. Suppose that the market is in long-run equilibrium when the market demand for maple syrup increases. In the long run, firms will ________ the market and the market ________ will ________.

-In the short run, perfectly competitive firms ________ but in the long run, perfectly competitive firms ________.

-In the above figure, if the price is P1 and the firm produced Q1, the firm's economic profit is ________ than if it produced Q2 and ________ than if it produced Q3.

A perfectly competitive firm maximizes its profits by producing the amount of output such that

Suppose firms in a perfectly competitive market are earning an economic profit. As new firms enter, the price ________ and the economic profit of each existing firm ________.

-The first table shows the market demand schedule for CDs, and the second table shows the cost structure of each firm. The CD market is perfectly competitive and there are 100 identical firms. The market price of a CD is ________, and ________ CDs are produced and sold.

A perfectly competitive firm maximizes its profit by producing the level of output so that its average total cost equals the market price.

-Fast Copy is a perfectly competitive firm. The figure above shows Fast Copy's cost curves. The current market price is 2 cents per page. With no change in demand and technology, in the long run, the price will

Suppose firms in a perfectly competitive market are incurring an economic loss. Over time

Jane's Copy Services is in perfect competition. Jane currently charges 10 cents per page, which is the going market price. Jane thinks that she can increase her profit if she lowers her price to 8 cents per page to increase the demand for her service. Is Jane right? Why or why not?

If the price of its product just equals the average variable cost of production for a competitive firm,

In perfect competition, each individual firm faces ________ demand curve.

-In the above figure, the firm's total economic profit is equal to

-In the above figure, below what minimum price will a perfectly competitive firm shut down rather than produce?

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

The market for maple syrup is perfectly competitive. Suppose that the market is in long-run equilibrium when the market demand for maple syrup increases. In the long run, firms will the market and the market will .

-In the short run, perfectly competitive firms but in the long run, perfectly competitive firms .

-In the above figure, if the price is P₁ and the firm produced Q₁, the firm's economic profit is than if it produced Q₂ and than if it produced Q₃.

Suppose firms in a perfectly competitive market are earning an economic profit. As new firms enter, the price and the economic profit of each existing firm .

-The first table shows the market demand schedule for CDs, and the second table shows the cost structure of each firm. The CD market is perfectly competitive and there are 100 identical firms. The market price of a CD is , and CDs are produced and sold.