Question 1

In perfect competition, each firm ________.

Accepted Answer

A)  can influence the price that it charges 
B)  produces as much as it can 
C)  is a price taker 
D)  faces a perfectly inelastic demand for its product 
A)  can influence the price that it charges 
B)  produces as much as it can 
C)  is a price taker 
D)  faces a perfectly inelastic demand for its product

Question 2

Because the demand for a perfectly competitive firm's product is perfectly elastic, marginal revenue is equal to

Accepted Answer

A)  one. 
B)  zero. 
C)  the price of the product. 
D)  negative one. 
A)  one. 
B)  zero. 
C)  the price of the product. 
D)  negative one.

Question 3

In a perfectly competitive market that is in long-run equilibrium, a permanent leftward shift in the market demand curve

Accepted Answer

A)  raises the price in the short run. 
B)  raises profits in the short run. 
C)  leads to new firms entering the market in the long run. 
D)  lowers the price at first but then raises it as firms leave the market. 
A)  raises the price in the short run. 
B)  raises profits in the short run. 
C)  leads to new firms entering the market in the long run. 
D)  lowers the price at first but then raises it as firms leave the market.

Question 4

-The figure above shows the marginal revenue and costs of a perfectly competitive firm. The firm's profit is maximized when the firm produces

Accepted Answer

A)  90 units of output. 
B)  130 units of output. 
C)  170 units of output. 
D)  210 units of output. 
A)  90 units of output. 
B)  130 units of output. 
C)  170 units of output. 
D)  210 units of output.

Question 5

-The figure above shows a perfectly competitive firm. In the short run, the firm will shut down

Accepted Answer

A)  only if the AVC of producing 10 units is less than $20. 
B)  only if the AVC of producing 10 units is more than $20. 
C)  only if the AVC curve reaches its minimum before 10 units are produced. 
D)  always. 
A)  only if the AVC of producing 10 units is less than $20. 
B)  only if the AVC of producing 10 units is more than $20. 
C)  only if the AVC curve reaches its minimum before 10 units are produced. 
D)  always.

Question 6

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

Accepted Answer

A)  Firms compete by making their product different from products produced by other firms. 
B)  There are no restrictions on entry into the market. 
C)  Established firms have no advantage over new firms. 
D)  Sellers and buyers are well informed about prices. 
A)  Firms compete by making their product different from products produced by other firms. 
B)  There are no restrictions on entry into the market. 
C)  Established firms have no advantage over new firms. 
D)  Sellers and buyers are well informed about prices.

Question 7

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. After the demand increases, a typical firm will

Accepted Answer

A)  make zero economic profit. 
B)  make an economic profit. 
C)  incur an economic loss. 
D)  exit the market. 
A)  make zero economic profit. 
B)  make an economic profit. 
C)  incur an economic loss. 
D)  exit the market.

Question 8

In the short run, a perfectly competitive firm NEVER

Accepted Answer

A)  earns an economic profit. 
B)  incurs a loss greater than its total fixed costs. 
C)  produces where MR = MC. 
D)  earns a normal profit. 
A)  earns an economic profit. 
B)  incurs a loss greater than its total fixed costs. 
C)  produces where MR = MC. 
D)  earns a normal profit.

Question 9

-Acme is a perfectly competitive firm. It has the total cost schedule given in the above table. Acme's product sells for $8.00 per unit. What amount of output is the most profitable and what is Acme's economic profit or economic loss?

Accepted Answer

Acme's profit-maximizing level of output

Question 10

-The figure above shows the costs for the typical grower in the perfectly competitive turnip market. Currently, the price of a ton of turnips is $1,200. The demand for turnips increases permanently. The turnip industry experiences neither external economies nor external diseconomies. In the long run, the price of a ton of turnips ________.

Accepted Answer

A)  increases so it is above $1,200 
B)  is $1,200 and turnip growers will make normal profit 
C)  decreases so it is below $1,200, and turnip growers will make normal profit 
D)  decreases so it is below $1,200 and the turnip growers make an economic profit 
A)  increases so it is above $1,200 
B)  is $1,200 and turnip growers will make normal profit 
C)  decreases so it is below $1,200, and turnip growers will make normal profit 
D)  decreases so it is below $1,200 and the turnip growers make an economic profit

Question 11

If a perfectly competitive firm finds that it is producing an amount of output such that MR > MC and P > AVC, it will

Accepted Answer

A)  leave the industry. 
B)  decrease its output. 
C)  increase its output. 
D)  not change its behavior. 
A)  leave the industry. 
B)  decrease its output. 
C)  increase its output. 
D)  not change its behavior.

Question 12

At a firm's break-even point, its

Accepted Answer

A)  total revenue equals its total opportunity cost. 
B)  marginal revenue exceeds its marginal cost. 
C)  marginal revenue equals its average variable cost. 
D)  marginal revenue equals its average fixed cost. 
A)  total revenue equals its total opportunity cost. 
B)  marginal revenue exceeds its marginal cost. 
C)  marginal revenue equals its average variable cost. 
D)  marginal revenue equals its average fixed cost.

Question 13

-If the price is $12 per pizza, the perfectly competitive firm in the above figure is

Accepted Answer

A)  making an economic profit. 
B)  making zero economic profit. 
C)  incurring an economic loss. 
D)  More information about the firm's total cost is needed to determine if the firm has a positive economic profit, zero economic profit, or an economic loss. 
A)  making an economic profit. 
B)  making zero economic profit. 
C)  incurring an economic loss. 
D)  More information about the firm's total cost is needed to determine if the firm has a positive economic profit, zero economic profit, or an economic loss.

Question 14

All along the beach in San Diego, California are shops which rent boogie boards by the hour. Tourists perceive that all rental boogie boards are identical, all prices are clearly listed on signs in front of the shops, and there are no restrictions on entry and exit in the boogie board market. What type of market is the boogie board market?

Accepted Answer

A)  monopoly 
B)  oligopoly 
C)  monopolistic competition 
D)  perfect competition 
A)  monopoly 
B)  oligopoly 
C)  monopolistic competition 
D)  perfect competition

Question 15

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. What happens in the short run?

Accepted Answer

A)  Firms will enter the market. 
B)  Some of the existing firms shut down. 
C)  The firms decrease production. 
D)  The firms increase production. 
A)  Firms will enter the market. 
B)  Some of the existing firms shut down. 
C)  The firms decrease production. 
D)  The firms increase production.

Question 16

In a perfectly competitive market, if a firm finds it is producing an amount of output such that its marginal cost exceeds its price, it will

Accepted Answer

A)  immediately shut down for the short run. 
B)  be maximizing profits. 
C)  increase its output to increase its profit. 
D)  decrease its output to increase its profit. 
A)  immediately shut down for the short run. 
B)  be maximizing profits. 
C)  increase its output to increase its profit. 
D)  decrease its output to increase its profit.

Question 17

-In the above figure, the line represented by the "4" is the

Accepted Answer

A)  average fixed cost. 
B)  marginal revenue. 
C)  average total cost. 
D)  marginal cost. 
A)  average fixed cost. 
B)  marginal revenue. 
C)  average total cost. 
D)  marginal cost.

Question 18

All along the beach in San Diego, California are shops which rent boogie boards by the hour. Tourists perceive that all rental boogie boards are identical, all prices are clearly listed on signs in front of the shops, and there are no restrictions on entry and exit in the boogie board market. Suppose Surf's Up is a boogie board rental shop. What is the shape of Surf's Up's demand curve as compared to the market demand curve?

Accepted Answer

A)  Surf's Up's demand curve is vertical and the market demand curve is downward sloping. 
B)  Surf's Up's demand curve is horizontal and the market demand curve is upward sloping. 
C)  Surf's Up's demand curve is horizontal and the market demand curve is downward sloping. 
D)  Surf's Up's demand curve is vertical and the market demand curve is upward sloping. 
A)  Surf's Up's demand curve is vertical and the market demand curve is downward sloping. 
B)  Surf's Up's demand curve is horizontal and the market demand curve is upward sloping. 
C)  Surf's Up's demand curve is horizontal and the market demand curve is downward sloping. 
D)  Surf's Up's demand curve is vertical and the market demand curve is upward sloping.

Question 19

When do new firms enter a perfectly competitive market? When does entry stop?

Accepted Answer

New firms enter a perfectly competitive

Question 20

In the long-run equilibrium for a perfectly competitive market

Accepted Answer

A)  the firms' economic profits are zero. 
B)  there is no incentive for entry or exit. 
C)  average total costs of production are minimized. 
D)  All of the above are correct. 
A)  the firms' economic profits are zero. 
B)  there is no incentive for entry or exit. 
C)  average total costs of production are minimized. 
D)  All of the above are correct.

In perfect competition, each firm ________.

Because the demand for a perfectly competitive firm's product is perfectly elastic, marginal revenue is equal to

In a perfectly competitive market that is in long-run equilibrium, a permanent leftward shift in the market demand curve

-The figure above shows the marginal revenue and costs of a perfectly competitive firm. The firm's profit is maximized when the firm produces

-The figure above shows a perfectly competitive firm. In the short run, the firm will shut down

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

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. After the demand increases, a typical firm will

In the short run, a perfectly competitive firm NEVER

-Acme is a perfectly competitive firm. It has the total cost schedule given in the above table. Acme's product sells for $8.00 per unit. What amount of output is the most profitable and what is Acme's economic profit or economic loss?

If a perfectly competitive firm finds that it is producing an amount of output such that MR > MC and P > AVC, it will

At a firm's break-even point, its

-If the price is $12 per pizza, the perfectly competitive firm in the above figure is

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. What happens in the short run?

In a perfectly competitive market, if a firm finds it is producing an amount of output such that its marginal cost exceeds its price, it will

-In the above figure, the line represented by the "4" is the

When do new firms enter a perfectly competitive market? When does entry stop?

In the long-run equilibrium for a perfectly competitive market

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, each firm ________.

Because the demand for a perfectly competitive firm's product is perfectly elastic, marginal revenue is equal to

In a perfectly competitive market that is in long-run equilibrium, a permanent leftward shift in the market demand curve

-The figure above shows the marginal revenue and costs of a perfectly competitive firm. The firm's profit is maximized when the firm produces

-The figure above shows a perfectly competitive firm. In the short run, the firm will shut down

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

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. After the demand increases, a typical firm will

In the short run, a perfectly competitive firm NEVER

-Acme is a perfectly competitive firm. It has the total cost schedule given in the above table. Acme's product sells for $8.00 per unit. What amount of output is the most profitable and what is Acme's economic profit or economic loss?

If a perfectly competitive firm finds that it is producing an amount of output such that MR > MC and P > AVC, it will

At a firm's break-even point, its

-If the price is $12 per pizza, the perfectly competitive firm in the above figure is

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. What happens in the short run?

In a perfectly competitive market, if a firm finds it is producing an amount of output such that its marginal cost exceeds its price, it will

-In the above figure, the line represented by the "4" is the

When do new firms enter a perfectly competitive market? When does entry stop?

In the long-run equilibrium for a perfectly competitive market

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