Question 1

When the market demand increases in a perfect competition, the long-run result is a larger number of firms, a higher price, and a permanent economic profit for the firms.

Accepted Answer

A) True 
 B)False

Question 2

-In the short run, a perfectly competitive firm

Accepted Answer

A)  cannot shut down. 
B)  must make zero economic profit. 
C)  can make an economic profit, incur an economic loss, or make zero economic profit. 
D)  will not incur an economic loss if it shuts down. 
A)  cannot shut down. 
B)  must make zero economic profit. 
C)  can make an economic profit, incur an economic loss, or make zero economic profit. 
D)  will not incur an economic loss if it shuts down.

Question 3

Total economic profit is

Accepted Answer

A)  total revenue minus total opportunity cost. 
B)  total revenue divided by total cost. 
C)  marginal revenue minus marginal cost. 
D)  marginal revenue divided by marginal cost. 
A)  total revenue minus total opportunity cost. 
B)  total revenue divided by total cost. 
C)  marginal revenue minus marginal cost. 
D)  marginal revenue divided by marginal cost.

Question 4

Can a perfectly competitive firm make an economic profit in the short run? Can it incur an economic loss?

Accepted Answer

In the short run, a perfectly competitiv

Question 5

If there is a permanent decrease in demand in a perfectly competitive market, then there is an initial ________ in price and existing firms ________.

Accepted Answer

A)  rise; make an economic profit 
B)  rise; incur an economic loss 
C)  fall; make an economic profit 
D)  fall; incur an economic loss 
A)  rise; make an economic profit 
B)  rise; incur an economic loss 
C)  fall; make an economic profit 
D)  fall; incur an economic loss

Question 6

Jane's Garage Cleaning is a perfectly competitive firm that currently cleans 40 garages a week. Jane's marginal cost is less than the price she charges. Jane can increase her profit if she

Accepted Answer

A)  charges a higher price. 
B)  charges a lower price. 
C)  cleans fewer than 40 garages a week. 
D)  cleans more than 40 garages a week. 
A)  charges a higher price. 
B)  charges a lower price. 
C)  cleans fewer than 40 garages a week. 
D)  cleans more than 40 garages a week.

Question 7

-Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price of a tattoo is $12, the firm

Accepted Answer

A)  incurs an economic loss, but will not shut down. 
B)  will not shut down in the short run, but will leave the industry in the long run. 
C)  will shut down. 
D)  is breaking even. 
A)  incurs an economic loss, but will not shut down. 
B)  will not shut down in the short run, but will leave the industry in the long run. 
C)  will shut down. 
D)  is breaking even.

Question 8

-In the above table, if the firm produces 2 units of output, it will

Accepted Answer

A)  make an economic profit of $9. 
B)  make an economic profit of $60. 
C)  incur an economic loss of $9. 
D)  incur an economic loss of $60. 
A)  make an economic profit of $9. 
B)  make an economic profit of $60. 
C)  incur an economic loss of $9. 
D)  incur an economic loss of $60.

Question 9

A perfectly competitive firm maximizes its profit by

Accepted Answer

A)  setting its price so that it exceeds the marginal revenue. 
B)  choosing to produce the quantity that sets MC equal to MR. 
C)  cutting wages. 
D)  manipulating demand. 
A)  setting its price so that it exceeds the marginal revenue. 
B)  choosing to produce the quantity that sets MC equal to MR. 
C)  cutting wages. 
D)  manipulating demand.

Question 10

Initially, a perfectly competitive industry that has 1,000 firms is in long-run equilibrium. Then 100 firms in the industry adopt a new technology that reduces the average cost of producing the good. In the short run, the price ________, firms with the new technology make ________ economic profit, and firms with the old technology ________.

Accepted Answer

A)  remains the same; zero; incur economic losses 
B)  falls; positive; incur economic losses 
C)  remains the same; positive; make normal profit 
D)  remains the same; positive; incur economic losses 
A)  remains the same; zero; incur economic losses 
B)  falls; positive; incur economic losses 
C)  remains the same; positive; make normal profit 
D)  remains the same; positive; incur economic losses

Question 11

An example of a perfectly competitive firm is

Accepted Answer

A)  an oat farmer in the United States. 
B)  the local cable TV company. 
C)  a U.S. automobile producer. 
D)  a big city newspaper. 
A)  an oat farmer in the United States. 
B)  the local cable TV company. 
C)  a U.S. automobile producer. 
D)  a big city newspaper.

Question 12

In a perfectly competitive market, there are

Accepted Answer

A)  many buyers and many sellers. 
B)  many buyers, but there might be only one or two sellers. 
C)  many sellers, but there might be only one or two buyers. 
D)  one firm that sets the price for the others to follow. 
A)  many buyers and many sellers. 
B)  many buyers, but there might be only one or two sellers. 
C)  many sellers, but there might be only one or two buyers. 
D)  one firm that sets the price for the others to follow.

Question 13

-The table above shows some of the costs for a perfectly competitive firm. The firm will produce 9 units of output if the price per unit is

Accepted Answer

A)  $1750. 
B)  $200. 
C)  $300. 
D)  $500. 
A)  $1750. 
B)  $200. 
C)  $300. 
D)  $500.

Question 14

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

Accepted Answer

A)  many firms 
B)  many buyers 
C)  restrictions on entry into the market 
D)  each firm sells an identical product 
A)  many firms 
B)  many buyers 
C)  restrictions on entry into the market 
D)  each firm sells an identical product

Question 15

In perfect competition, the firm's marginal revenue curve

Accepted Answer

A)  cuts its demand curve from below, going from left to right. 
B)  cuts its demand curve from above, going from left to right. 
C)  always lies below its demand curve. 
D)  is the same as its demand curve. 
A)  cuts its demand curve from below, going from left to right. 
B)  cuts its demand curve from above, going from left to right. 
C)  always lies below its demand curve. 
D)  is the same as its demand curve.

Question 16

In perfect competition, the price of the product is determined where the market

Accepted Answer

A)  elasticity of supply equals the market elasticity of demand. 
B)  supply curve and market demand curve intersect. 
C)  average variable cost equals the market average total cost. 
D)  fixed cost is zero. 
A)  elasticity of supply equals the market elasticity of demand. 
B)  supply curve and market demand curve intersect. 
C)  average variable cost equals the market average total cost. 
D)  fixed cost is zero.

Question 17

In perfect competition, the product of a single firm

Accepted Answer

A)  has many perfect substitutes produced by other firms. 
B)  has many perfect complements produced by other firms. 
C)  is sold under many differing brand names. 
D)  is sold to different customers at different prices. 
A)  has many perfect substitutes produced by other firms. 
B)  has many perfect complements produced by other firms. 
C)  is sold under many differing brand names. 
D)  is sold to different customers at different prices.

Question 18

Which of the following is TRUE regarding perfect competition? I. The firms are price takers.
II) Marginal revenue equals the price of the product.
III) Established firms have no advantage over new firms.

Accepted Answer

A)  I and II 
B)  II and III 
C)  I, II and III 
D)  I only 
A)  I and II 
B)  II and III 
C)  I, II and III 
D)  I only

Question 19

Consumer surplus ________.

Accepted Answer

A)  equals total revenue minus marginal cost 
B)  is maximized when the market outcome is efficient 
C)  equals total revenue minus opportunity cost 
D)  plus producer surplus is maximized when resources are used efficiently 
A)  equals total revenue minus marginal cost 
B)  is maximized when the market outcome is efficient 
C)  equals total revenue minus opportunity cost 
D)  plus producer surplus is maximized when resources are used efficiently

Question 20

Hubert's Copy Services is in perfect competition. Hubert currently charges 10 cents per page, which is the going market price. He thinks that he can increase his profit by raising the price. Is it possible? Why or why not?

Accepted Answer

If Hubert raises his price, his profit w

When the market demand increases in a perfect competition, the long-run result is a larger number of firms, a higher price, and a permanent economic profit for the firms.

-In the short run, a perfectly competitive firm

Total economic profit is

Can a perfectly competitive firm make an economic profit in the short run? Can it incur an economic loss?

If there is a permanent decrease in demand in a perfectly competitive market, then there is an initial in price and existing firms .

Jane's Garage Cleaning is a perfectly competitive firm that currently cleans 40 garages a week. Jane's marginal cost is less than the price she charges. Jane can increase her profit if she

-Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price of a tattoo is $12, the firm

-In the above table, if the firm produces 2 units of output, it will

A perfectly competitive firm maximizes its profit by

An example of a perfectly competitive firm is

In a perfectly competitive market, there are

-The table above shows some of the costs for a perfectly competitive firm. The firm will produce 9 units of output if the price per unit is

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

In perfect competition, the firm's marginal revenue curve

In perfect competition, the price of the product is determined where the market

In perfect competition, the product of a single firm

Which of the following is TRUE regarding perfect competition? I. The firms are price takers. II) Marginal revenue equals the price of the product. III) Established firms have no advantage over new firms.

Consumer surplus ________.

Hubert's Copy Services is in perfect competition. Hubert currently charges 10 cents per page, which is the going market price. He thinks that he can increase his profit by raising the price. Is it possible? Why or why not?

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

When the market demand increases in a perfect competition, the long-run result is a larger number of firms, a higher price, and a permanent economic profit for the firms.

-In the short run, a perfectly competitive firm

Total economic profit is

Can a perfectly competitive firm make an economic profit in the short run? Can it incur an economic loss?

If there is a permanent decrease in demand in a perfectly competitive market, then there is an initial ________ in price and existing firms ________.

Jane's Garage Cleaning is a perfectly competitive firm that currently cleans 40 garages a week. Jane's marginal cost is less than the price she charges. Jane can increase her profit if she

-Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price of a tattoo is $12, the firm

-In the above table, if the firm produces 2 units of output, it will

A perfectly competitive firm maximizes its profit by

An example of a perfectly competitive firm is

In a perfectly competitive market, there are

-The table above shows some of the costs for a perfectly competitive firm. The firm will produce 9 units of output if the price per unit is

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

In perfect competition, the firm's marginal revenue curve

In perfect competition, the price of the product is determined where the market

In perfect competition, the product of a single firm

Which of the following is TRUE regarding perfect competition? I. The firms are price takers. II) Marginal revenue equals the price of the product. III) Established firms have no advantage over new firms.

Consumer surplus ________.

Hubert's Copy Services is in perfect competition. Hubert currently charges 10 cents per page, which is the going market price. He thinks that he can increase his profit by raising the price. Is it possible? Why or why not?

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

If there is a permanent decrease in demand in a perfectly competitive market, then there is an initial in price and existing firms .