Question 1

An assumption of the model of perfect competition is:

Accepted Answer

A)  discrimination. 
B)  ease of entry and exit. 
C)  few buyers and sellers. 
D)  limited information. 
A)  discrimination. 
B)  ease of entry and exit. 
C)  few buyers and sellers. 
D)  limited information.

Question 2

The Case in Point on Competition in the Market for Generic Prescription Drugs suggests that:

Accepted Answer

A)  there is little if any price difference between branded prescription drugs and generic prescription drugs because of imperfect information. 
B)  there is little if any price difference between branded prescription drugs and generic prescription drugs because the goods are essentially identical and the firms are price takers. 
C)  branded prescription drugs are less expensive than their generic counterparts because of economies of scale. 
D)  generic prescription drugs are less expensive than their branded counterparts because of the ease of entry into the market. 
A)  there is little if any price difference between branded prescription drugs and generic prescription drugs because of imperfect information. 
B)  there is little if any price difference between branded prescription drugs and generic prescription drugs because the goods are essentially identical and the firms are price takers. 
C)  branded prescription drugs are less expensive than their generic counterparts because of economies of scale. 
D)  generic prescription drugs are less expensive than their branded counterparts because of the ease of entry into the market.

Question 3

Profit computed using only explicit costs is called accounting profit.

Accepted Answer

A) True 
 B)False

Question 4

Use the following to answer question(s): 
Exhibit: Total Revenue, Total Cost, and Economic Profit
  
-(Exhibit: Total Revenue, Total Costs, and Economic Profit) Which of the following is true?

Accepted Answer

A)  As output increases the slope of the total revenue curve does not change. 
B)  The total cost curve becomes steeper and steeper as output increases from 0 to 10,000 pounds of output. 
C)  Total revenue and total cost curves never have the same slope. 
D)  None of the above is true. 
A)  As output increases the slope of the total revenue curve does not change. 
B)  The total cost curve becomes steeper and steeper as output increases from 0 to 10,000 pounds of output. 
C)  Total revenue and total cost curves never have the same slope. 
D)  None of the above is true.

Question 5

In perfect competition P > MR.

Accepted Answer

A) True 
 B)False

Question 6

A curve that shows the quantity of a good or service supplied at various prices after all long-run adjustments to a price change have been completed is a long-run:

Accepted Answer

A)  marginal revenue curve. 
B)  marginal cost curve. 
C)  industry supply curve. 
D)  production curve. 
A)  marginal revenue curve. 
B)  marginal cost curve. 
C)  industry supply curve. 
D)  production curve.

Question 7

Which of the following is true?

Accepted Answer

A)  Profit per unit is price minus AVC. 
B)  Total economic profit is per unit profit times quantity. 
C)  If price is less than ATC, the firm will shut down in the short run. 
D)  If price is less than marginal cost, the perfectly competitive firm should raise the price and increase output. 
A)  Profit per unit is price minus AVC. 
B)  Total economic profit is per unit profit times quantity. 
C)  If price is less than ATC, the firm will shut down in the short run. 
D)  If price is less than marginal cost, the perfectly competitive firm should raise the price and increase output.

Question 8

A perfectly competitive firm is a:

Accepted Answer

A)  price taker. 
B)  price searcher. 
C)  cost maximizer. 
D)  quantity taker. 
A)  price taker. 
B)  price searcher. 
C)  cost maximizer. 
D)  quantity taker.

Question 9

Which of the following is false?

Accepted Answer

A)  Economists believe that they can understand most markets by applying the model of demand and supply. 
B)  When economists apply the model of demand and supply, they are using the model of perfect competition. 
C)  Many changes in the past 20 years have made markets more competitive by increasing ease of entry. 
D)  Price-taking firms produce differentiated goods. 
A)  Economists believe that they can understand most markets by applying the model of demand and supply. 
B)  When economists apply the model of demand and supply, they are using the model of perfect competition. 
C)  Many changes in the past 20 years have made markets more competitive by increasing ease of entry. 
D)  Price-taking firms produce differentiated goods.

Question 10

Price takers are individuals in a market who:

Accepted Answer

A)  select a price from a wide range of alternatives. 
B)  select the lowest price available in a competitive market. 
C)  select the average of prices available in a competitive market. 
D)  have no ability to affect the price of a good in a market. 
A)  select a price from a wide range of alternatives. 
B)  select the lowest price available in a competitive market. 
C)  select the average of prices available in a competitive market. 
D)  have no ability to affect the price of a good in a market.

Question 11

If a perfectly competitive firm sells 30 units of output at a price of $10 per unit, its marginal revenue is:

Accepted Answer

A)  $10. 
B)  more than $10. 
C)  less than $10. 
D)  $300. 
A)  $10. 
B)  more than $10. 
C)  less than $10. 
D)  $300.

Question 12

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) A perfectly competitive firm's supply curve is the:

Accepted Answer

A)  entire MC curve. 
B)  rising part of MC beginning at the shutdown point. 
C)  rising part of MC beginning at the point at which the firm starts earning economic profit. 
D)  MC curve below the shutdown point. 
A)  entire MC curve. 
B)  rising part of MC beginning at the shutdown point. 
C)  rising part of MC beginning at the point at which the firm starts earning economic profit. 
D)  MC curve below the shutdown point.

Question 13

Use the following to answer question(s): 
Exhibit: Marginal Decision Rule
  
-(Exhibit: Marginal Decision Rule) Economic profit:

Accepted Answer

A)  exists between q1 and q2. 
B)  exists between the origin and q1. 
C)  exists as a maximum at q1. 
D)  cannot be determined based on information provided. 
A)  exists between q1 and q2. 
B)  exists between the origin and q1. 
C)  exists as a maximum at q1. 
D)  cannot be determined based on information provided.

Question 14

The supply curve of the firm in perfect competition is the rising portion of the MC curve above the minimum point on the AVC curve.

Accepted Answer

A) True 
 B)False

Question 15

In perfectly competitive markets, if the price is _______ , the firm will _______ .

Accepted Answer

A)  greater than ATC; make an economic profit 
B)  less than the minimum AVC; shut down 
C)  greater than the minimum AVC but less than ATC; continue to produce and incur a loss. 
D)  all of the above are true. 
A)  greater than ATC; make an economic profit 
B)  less than the minimum AVC; shut down 
C)  greater than the minimum AVC but less than ATC; continue to produce and incur a loss. 
D)  all of the above are true.

Question 16

In perfect competition, _______ profits in long-run equilibrium will be _______.

Accepted Answer

A)  implicit and explicit; equal to zero 
B)  accounting; negative 
C)  economic; zero 
D)  economic; positive 
A)  implicit and explicit; equal to zero 
B)  accounting; negative 
C)  economic; zero 
D)  economic; positive

Question 17

In a perfectly competitive industry, economic profit:

Accepted Answer

A)  is total revenue minus marginal cost. 
B)  is found by using cost in the economic sense of opportunity cost. 
C)  will be negative if TC > TR in long-run equilibrium. 
D)  will generally be positive in long-run equilibrium. 
A)  is total revenue minus marginal cost. 
B)  is found by using cost in the economic sense of opportunity cost. 
C)  will be negative if TC > TR in long-run equilibrium. 
D)  will generally be positive in long-run equilibrium.

Question 18

A perfectly competitive firm's total revenue:

Accepted Answer

A)  curve is a straight, downward sloping line 
B)  curve has a slope equal to marginal cost. 
C)  is found by multiplying price by quantity sold by the firm. 
D)  is always above its total cost. 
A)  curve is a straight, downward sloping line 
B)  curve has a slope equal to marginal cost. 
C)  is found by multiplying price by quantity sold by the firm. 
D)  is always above its total cost.

Question 19

Suppose that the market for haircuts in a community is perfectly competitive and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the short run, we expect that the market price will _______ and the output of a typical firm will _______ .

Accepted Answer

A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall 
A)  rise; rise 
B)  rise; fall 
C)  fall; rise 
D)  fall; fall

Question 20

If price is greater than average variable cost and less than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

Accepted Answer

A)  produce at an economic loss. 
B)  produce at an economic profit. 
C)  shut down production. 
D)  produce more than the profit-maximizing quantity. 
A)  produce at an economic loss. 
B)  produce at an economic profit. 
C)  shut down production. 
D)  produce more than the profit-maximizing quantity.

An assumption of the model of perfect competition is:

The Case in Point on Competition in the Market for Generic Prescription Drugs suggests that:

Profit computed using only explicit costs is called accounting profit.

Use the following to answer question(s): Exhibit: Total Revenue, Total Cost, and Economic Profit -(Exhibit: Total Revenue, Total Costs, and Economic Profit) Which of the following is true?

In perfect competition P > MR.

A curve that shows the quantity of a good or service supplied at various prices after all long-run adjustments to a price change have been completed is a long-run:

Which of the following is true?

A perfectly competitive firm is a:

Which of the following is false?

Price takers are individuals in a market who:

If a perfectly competitive firm sells 30 units of output at a price of $10 per unit, its marginal revenue is:

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) A perfectly competitive firm's supply curve is the:

Use the following to answer question(s): Exhibit: Marginal Decision Rule -(Exhibit: Marginal Decision Rule) Economic profit:

The supply curve of the firm in perfect competition is the rising portion of the MC curve above the minimum point on the AVC curve.

In perfectly competitive markets, if the price is _ , the firm will _ .

In perfect competition, _ profits in long-run equilibrium will be _.

In a perfectly competitive industry, economic profit:

A perfectly competitive firm's total revenue:

If price is greater than average variable cost and less than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

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

An assumption of the model of perfect competition is:

The Case in Point on Competition in the Market for Generic Prescription Drugs suggests that:

Profit computed using only explicit costs is called accounting profit.

Use the following to answer question(s): Exhibit: Total Revenue, Total Cost, and Economic Profit -(Exhibit: Total Revenue, Total Costs, and Economic Profit) Which of the following is true?

In perfect competition P > MR.

A curve that shows the quantity of a good or service supplied at various prices after all long-run adjustments to a price change have been completed is a long-run:

Which of the following is true?

A perfectly competitive firm is a:

Which of the following is false?

Price takers are individuals in a market who:

If a perfectly competitive firm sells 30 units of output at a price of $10 per unit, its marginal revenue is:

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) A perfectly competitive firm's supply curve is the:

Use the following to answer question(s): Exhibit: Marginal Decision Rule -(Exhibit: Marginal Decision Rule) Economic profit:

The supply curve of the firm in perfect competition is the rising portion of the MC curve above the minimum point on the AVC curve.

In perfectly competitive markets, if the price is _______ , the firm will _______ .

In perfect competition, _______ profits in long-run equilibrium will be _______.

In a perfectly competitive industry, economic profit:

A perfectly competitive firm's total revenue:

If price is greater than average variable cost and less than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:

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

In perfectly competitive markets, if the price is _ , the firm will _ .

In perfect competition, _ profits in long-run equilibrium will be _.