Question 1

In the short run, a perfectly competitive firm produces output and earns an economic profit if:

Accepted Answer

A)  P > ATC. 
B)  P = ATC. 
C)  P  P > ATC. 
A)  P > ATC. 
B)  P = ATC. 
C)  P  P > ATC.

Question 2

Use the following to answer question(s): 
Exhibit: The Market for Carrots
  
-(Exhibit: The Market for Carrots) Assume that this is a perfectly competitive market and the original price is determined by D1 and S. If the demand shifts to D2, any firm could enter this market and:

Accepted Answer

A)  sell all it wants to sell at 40 cents a pound. 
B)  sell all it wants to sell at 30 cents a pound. 
C)  be a price setter. 
D)  would probably set its price just above 30 cents a pound. 
A)  sell all it wants to sell at 40 cents a pound. 
B)  sell all it wants to sell at 30 cents a pound. 
C)  be a price setter. 
D)  would probably set its price just above 30 cents a pound.

Question 3

Accountants use only _______ costs in their computations of short-run total cost.

Accepted Answer

A)  opportunity 
B)  implicit 
C)  explicit costs 
D)  variable 
A)  opportunity 
B)  implicit 
C)  explicit costs 
D)  variable

Question 4

An assumption of the model of perfect competition is:

Accepted Answer

A)  discrimination. 
B)  difficult entry and exit. 
C)  many buyers and sellers. 
D)  limited information. 
A)  discrimination. 
B)  difficult entry and exit. 
C)  many buyers and sellers. 
D)  limited information.

Question 5

If all firms in a perfectly competitive industry earn zero economic profits, in the long run, the:

Accepted Answer

A)  industry supply curve will not shift. 
B)  industry supply curve will shift to the right. 
C)  number of firms in the industry will decrease. 
D)  number of firms in the industry will increase. 
A)  industry supply curve will not shift. 
B)  industry supply curve will shift to the right. 
C)  number of firms in the industry will decrease. 
D)  number of firms in the industry will increase.

Question 6

If all firms in a perfectly competitive industry earn zero economic profits, in the long run, the:

Accepted Answer

A)  industry supply curve will shift to the right. 
B)  number of firms in the industry will decrease. 
C)  number of firms in the industry will increase. 
D)  industry is in long-run equilibrium. 
A)  industry supply curve will shift to the right. 
B)  number of firms in the industry will decrease. 
C)  number of firms in the industry will increase. 
D)  industry is in long-run equilibrium.

Question 7

Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Now suppose that the price of sugar rises, increasing the marginal and average total costs of producing candy canes by $0.05. Based on the information given, we can conclude that in the short run a typical producer of candy canes will be making:

Accepted Answer

A)  an economic profit. 
B)  zero economic profit. 
C)  negative economic profits. 
D)  It is impossible to determine based on the information given. 
A)  an economic profit. 
B)  zero economic profit. 
C)  negative economic profits. 
D)  It is impossible to determine based on the information given.

Question 8

People in the eastern part of Beirut are prevented by border guards from traveling to the western part of Beirut to shop for food. This situation violates the perfect competition assumption of:

Accepted Answer

A)  price-setting behavior. 
B)  a small number of buyers and sellers. 
C)  differentiated goods. 
D)  ease of entry and exit. 
A)  price-setting behavior. 
B)  a small number of buyers and sellers. 
C)  differentiated goods. 
D)  ease of entry and exit.

Question 9

Discuss and explain what happens when a firm in perfect competition is making positive economic profit. Use graphs to support your answer. Do the same for a firm that is producing where P  minimum AVC. Explain what a firm will do if P < minimum AVC.

Accepted Answer

When a firm in perfect competition is ma

Question 10

Perfect competition is characterized by:

Accepted Answer

A)  rivalry in advertising. 
B)  fierce quality competition. 
C)  the inability of any one firm to influence price. 
D)  widely recognized brands. 
A)  rivalry in advertising. 
B)  fierce quality competition. 
C)  the inability of any one firm to influence price. 
D)  widely recognized brands.

Question 11

Use the following to answer question(s): 
Exhibit: Total Revenue, Total Cost, and Economic Profit
  
-(Exhibit: Total Revenue, Total Costs, and Economic Profit) Total revenue and total cost are equal at approximately _______ pounds and $_______ .

Accepted Answer

A)  2,000; 1,400 
B)  5,000; 1,600 
C)  10,000; 2,800 
D)  15,000,2,800 
A)  2,000; 1,400 
B)  5,000; 1,600 
C)  10,000; 2,800 
D)  15,000,2,800

Question 12

Perfect competition is important to study because it:

Accepted Answer

A)  is a theoretical extreme used for analysis. 
B)  is a realistic model of a few key markets. 
C)  is a realistic model of many different markets. 
D)  avoids all real-world problems and complexities. 
A)  is a theoretical extreme used for analysis. 
B)  is a realistic model of a few key markets. 
C)  is a realistic model of many different markets. 
D)  avoids all real-world problems and complexities.

Question 13

Use the following to answer question(s): 
Exhibit: Total Revenue, Total Cost, and Economic Profit
  
-(Exhibit: Total Revenue, Total Costs, and Economic Profit) As output exceeds approximately ________ pounds, economic profits _______ as long as _______ rise faster than _______ .

Accepted Answer

A)  8,300; fall; revenues; costs 
B)  4,300; increase; revenues; costs 
C)  8,300; rise; costs; revenues 
D)  4,300; decrease; revenues; costs 
A)  8,300; fall; revenues; costs 
B)  4,300; increase; revenues; costs 
C)  8,300; rise; costs; revenues 
D)  4,300; decrease; revenues; costs

Question 14

Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Based on the information given, we can conclude that the average revenue for candy canes:

Accepted Answer

A)  is less than $0.10. 
B)  equals $0.10. 
C)  is greater than $0.10. 
D)  It is not possible to answer based on the information given. 
A)  is less than $0.10. 
B)  equals $0.10. 
C)  is greater than $0.10. 
D)  It is not possible to answer based on the information given.

Question 15

Use the following to answer question(s): 
Exhibit: Supply: Short and Long Run
  
-(Exhibit: Supply: Short and Long Run) S3 would be the _______-run supply curve if _______.

Accepted Answer

A)  long; expanded production leaves production costs unchanged 
B)  short; expanded production changes production costs 
C)  long; there is no entry into or exit from the industry 
D)  medium; costs are changed if there is easy entry 
A)  long; expanded production leaves production costs unchanged 
B)  short; expanded production changes production costs 
C)  long; there is no entry into or exit from the industry 
D)  medium; costs are changed if there is easy entry

Question 16

A perfectly competitive industry's market supply curve is the sum of the supply curves of all firms in the industry.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is not an assumption economists make when using the model of perfect competition?

Accepted Answer

A)  Firms seek to maximize profits. 
B)  The products of each firm in a particular market are identical. 
C)  Each firm sets it price equal to its average total cost. 
D)  There is easy entry and exit. 
A)  Firms seek to maximize profits. 
B)  The products of each firm in a particular market are identical. 
C)  Each firm sets it price equal to its average total cost. 
D)  There is easy entry and exit.

Question 18

Use the following to answer question(s): 
Exhibit: A Perfectly Competitive Firm in the Short Run
  
-(Exhibit: A Perfectly Competitive Firm in the Short Run) The lowest price that will yield zero economic profits is indicated by the distance:

Accepted Answer

A)  0G. 
B)  0F. 
C)  0E. 
D)  0N. 
A)  0G. 
B)  0F. 
C)  0E. 
D)  0N.

Question 19

When a firm's total cost exceeds its total revenue:

Accepted Answer

A)  average total cost is less than average revenue. 
B)  net revenue is positive. 
C)  marginal cost is negative. 
D)  total cost rises with increases in output. 
A)  average total cost is less than average revenue. 
B)  net revenue is positive. 
C)  marginal cost is negative. 
D)  total cost rises with increases in output.

Question 20

Use the following to answer question(s): 
Exhibit: Short-Run Costs
  
-(Exhibit: Short-Run Costs) This firm's supply curve begins at quantity:

Accepted Answer

A)  Q. 
B)  R. 
C)  S. 
D)  T. 
A)  Q. 
B)  R. 
C)  S. 
D)  T.

In the short run, a perfectly competitive firm produces output and earns an economic profit if:

Use the following to answer question(s): Exhibit: The Market for Carrots -(Exhibit: The Market for Carrots) Assume that this is a perfectly competitive market and the original price is determined by D₁ and S. If the demand shifts to D₂, any firm could enter this market and:

Accountants use only _______ costs in their computations of short-run total cost.

An assumption of the model of perfect competition is:

If all firms in a perfectly competitive industry earn zero economic profits, in the long run, the:

If all firms in a perfectly competitive industry earn zero economic profits, in the long run, the:

People in the eastern part of Beirut are prevented by border guards from traveling to the western part of Beirut to shop for food. This situation violates the perfect competition assumption of:

Discuss and explain what happens when a firm in perfect competition is making positive economic profit. Use graphs to support your answer. Do the same for a firm that is producing where P < ATC yet P > minimum AVC. Explain what a firm will do if P < minimum AVC.

Perfect competition is characterized by:

Use the following to answer question(s): Exhibit: Total Revenue, Total Cost, and Economic Profit -(Exhibit: Total Revenue, Total Costs, and Economic Profit) Total revenue and total cost are equal at approximately _ pounds and $_ .

Perfect competition is important to study because it:

Use the following to answer question(s): Exhibit: Total Revenue, Total Cost, and Economic Profit -(Exhibit: Total Revenue, Total Costs, and Economic Profit) As output exceeds approximately ____ pounds, economic profits _ as long as _ rise faster than ___ .

Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Based on the information given, we can conclude that the average revenue for candy canes:

Use the following to answer question(s): Exhibit: Supply: Short and Long Run -(Exhibit: Supply: Short and Long Run) S₃ would be the _-run supply curve if _.

A perfectly competitive industry's market supply curve is the sum of the supply curves of all firms in the industry.

Which of the following is not an assumption economists make when using the model of perfect competition?

Use the following to answer question(s): Exhibit: A Perfectly Competitive Firm in the Short Run -(Exhibit: A Perfectly Competitive Firm in the Short Run) The lowest price that will yield zero economic profits is indicated by the distance:

When a firm's total cost exceeds its total revenue:

Use the following to answer question(s): Exhibit: Short-Run Costs -(Exhibit: Short-Run Costs) This firm's supply curve begins at quantity:

Economics: The Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Elasticity: a Measure of Response

Markets, Maximizers, and Efficiency

The Analysis of Consumer Choice

Production and Cost

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Antitrust Policy and Business Regulation

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Filters

Exam 9: Competitive Markets for Goods and Services

In the short run, a perfectly competitive firm produces output and earns an economic profit if:

Use the following to answer question(s): Exhibit: The Market for Carrots -(Exhibit: The Market for Carrots) Assume that this is a perfectly competitive market and the original price is determined by D1 and S. If the demand shifts to D2, any firm could enter this market and:

Accountants use only _______ costs in their computations of short-run total cost.

An assumption of the model of perfect competition is:

If all firms in a perfectly competitive industry earn zero economic profits, in the long run, the:

If all firms in a perfectly competitive industry earn zero economic profits, in the long run, the:

People in the eastern part of Beirut are prevented by border guards from traveling to the western part of Beirut to shop for food. This situation violates the perfect competition assumption of:

Discuss and explain what happens when a firm in perfect competition is making positive economic profit. Use graphs to support your answer. Do the same for a firm that is producing where P < ATC yet P > minimum AVC. Explain what a firm will do if P < minimum AVC.

Perfect competition is characterized by:

Use the following to answer question(s): Exhibit: Total Revenue, Total Cost, and Economic Profit -(Exhibit: Total Revenue, Total Costs, and Economic Profit) Total revenue and total cost are equal at approximately _______ pounds and $_______ .

Perfect competition is important to study because it:

Use the following to answer question(s): Exhibit: Total Revenue, Total Cost, and Economic Profit -(Exhibit: Total Revenue, Total Costs, and Economic Profit) As output exceeds approximately ________ pounds, economic profits _______ as long as _______ rise faster than _______ .

Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Based on the information given, we can conclude that the average revenue for candy canes:

Use the following to answer question(s): Exhibit: Supply: Short and Long Run -(Exhibit: Supply: Short and Long Run) S3 would be the _______-run supply curve if _______.

A perfectly competitive industry's market supply curve is the sum of the supply curves of all firms in the industry.

Which of the following is not an assumption economists make when using the model of perfect competition?

Use the following to answer question(s): Exhibit: A Perfectly Competitive Firm in the Short Run -(Exhibit: A Perfectly Competitive Firm in the Short Run) The lowest price that will yield zero economic profits is indicated by the distance:

When a firm's total cost exceeds its total revenue:

Use the following to answer question(s): Exhibit: Short-Run Costs -(Exhibit: Short-Run Costs) This firm's supply curve begins at quantity:

Economics: The Study of Choice

Confronting Scarcity: Choices in Production

Demand and Supply

Applications of Supply and Demand

Elasticity: a Measure of Response

Markets, Maximizers, and Efficiency

The Analysis of Consumer Choice

Production and Cost

Monopoly

The World of Imperfect Competition

Wages and Employment in Perfect Competition

Interest Rates and the Markets for Capital and Natural Resources

Imperfectly Competitive Markets for Factors of Production

Public Finance and Public Choice

Antitrust Policy and Business Regulation

International Trade

The Economics of the Environment

Inequality, Poverty, and Discrimination

Filters

Use the following to answer question(s): Exhibit: The Market for Carrots -(Exhibit: The Market for Carrots) Assume that this is a perfectly competitive market and the original price is determined by D₁ and S. If the demand shifts to D₂, any firm could enter this market and:

Use the following to answer question(s): Exhibit: Total Revenue, Total Cost, and Economic Profit -(Exhibit: Total Revenue, Total Costs, and Economic Profit) Total revenue and total cost are equal at approximately _ pounds and $_ .

Use the following to answer question(s): Exhibit: Total Revenue, Total Cost, and Economic Profit -(Exhibit: Total Revenue, Total Costs, and Economic Profit) As output exceeds approximately ____ pounds, economic profits _ as long as _ rise faster than ___ .

Use the following to answer question(s): Exhibit: Supply: Short and Long Run -(Exhibit: Supply: Short and Long Run) S₃ would be the _-run supply curve if _.