Question 1

Which of the following is the best example of a perfectly competitive market?

Accepted Answer

A)  The breakfast cereal industry 
B)  The textbook industry 
C)  The plasma TV market 
D)  The apple market 
A)  The breakfast cereal industry 
B)  The textbook industry 
C)  The plasma TV market 
D)  The apple market

Question 2

Short-run profits are maximized if the firm produces where marginal cost equals price.

Accepted Answer

A) True 
 B)False

Question 3

A catfish farmer in a perfectly competitive market:

Accepted Answer

A)  Is able to keep other potential catfish producers out of the market. 
B)  Might like to keep other potential catfish producers out of the market but cannot do so. 
C)  Will not care if more catfish producers enter the market. 
D)  Is powerless to alter his or her own rate of production. 
A)  Is able to keep other potential catfish producers out of the market. 
B)  Might like to keep other potential catfish producers out of the market but cannot do so. 
C)  Will not care if more catfish producers enter the market. 
D)  Is powerless to alter his or her own rate of production.

Question 4

When economic profits exist in a perfectly competitive market,the number of suppliers will increase and the market price will fall in the long run.

Accepted Answer

A) True 
 B)False

Question 5

If the market price was below the ATC and at the current firm's rate of production the MC was less than the market price an increase in output would:

Accepted Answer

A)  cause economic profits to be positive. 
B)  cause economic profits to be zero. 
C)  increase profit but economic profits would still be negative. 
D)  increase profit and economic profits would be positive. 
A)  cause economic profits to be positive. 
B)  cause economic profits to be zero. 
C)  increase profit but economic profits would still be negative. 
D)  increase profit and economic profits would be positive.

Question 6

An industry in which a few large firms supply most or all of a product is known as:

Accepted Answer

A)  Perfect competition. 
B)  A monopoly. 
C)  Monopolistic competition. 
D)  An oligopoly. 
A)  Perfect competition. 
B)  A monopoly. 
C)  Monopolistic competition. 
D)  An oligopoly.

Question 7

If a perfectly competitive firm wanted to maximize its total revenues,it would produce:

Accepted Answer

A)  The output where MC equals price. 
B)  As much output as it is capable of producing. 
C)  The output where the ATC curve is at a minimum. 
D)  The output where the marginal cost curve is at a minimum. 
A)  The output where MC equals price. 
B)  As much output as it is capable of producing. 
C)  The output where the ATC curve is at a minimum. 
D)  The output where the marginal cost curve is at a minimum.

Question 8

Total profit is equal to:

Accepted Answer

A)  The difference between total revenue and total cost. 
B)  Average cost times quantity sold. 
C)  The difference between price and average total cost. 
D)  The difference between marginal revenue and marginal cost. 
A)  The difference between total revenue and total cost. 
B)  Average cost times quantity sold. 
C)  The difference between price and average total cost. 
D)  The difference between marginal revenue and marginal cost.

Question 9

The marginal cost curve is the short-run supply curve for a competitive firm.

Accepted Answer

A) True 
 B)False

Question 10

When firms exit an industry,price _______ and industry output _______.

Accepted Answer

A)  Decreases;increases 
B)  Increases;decreases 
C)  Increases;increases 
D)  Decreases;decreases 
A)  Decreases;increases 
B)  Increases;decreases 
C)  Increases;increases 
D)  Decreases;decreases

Question 11

An industry in which many firms produce similar products but each firm has significant brand loyalty is known as:

Accepted Answer

A)  Perfect competition. 
B)  A monopoly. 
C)  Monopolistic competition. 
D)  An oligopoly. 
A)  Perfect competition. 
B)  A monopoly. 
C)  Monopolistic competition. 
D)  An oligopoly.

Question 12

Which of the following is characteristic of perfectly competitive markets?

Accepted Answer

A)  Differentiated products 
B)  A large number of firms 
C)  Price below marginal cost 
D)  Significant barriers to entry 
A)  Differentiated products 
B)  A large number of firms 
C)  Price below marginal cost 
D)  Significant barriers to entry

Question 13

The goal of most business firms is to:

Accepted Answer

A)  Maximize total revenue. 
B)  Maximize total profit. 
C)  Maximize both total revenue and total profit at the same time. 
D)  Produce as much output as possible. 
A)  Maximize total revenue. 
B)  Maximize total profit. 
C)  Maximize both total revenue and total profit at the same time. 
D)  Produce as much output as possible.

Question 14

When some firms are forced out of a market due to economic losses the result is a better use of our scarce resources.

Accepted Answer

A) True 
 B)False

Question 15

Figure 6.2:  
-Refer to Figure 6.2 for a perfectly competitive firm.If price is $4,the profit-maximizing rate of output is:

Accepted Answer

A)  43 units. 
B)  38 units. 
C)  32 units. 
D)  25 units. 
A)  43 units. 
B)  38 units. 
C)  32 units. 
D)  25 units.

Question 16

If a firm can change market prices by altering its output then it:

Accepted Answer

A)  Has market power. 
B)  Is a price taker. 
C)  Faces a horizontal demand curve. 
D)  Is a competitive firm. 
A)  Has market power. 
B)  Is a price taker. 
C)  Faces a horizontal demand curve. 
D)  Is a competitive firm.

Question 17

Which of the following market structures has the highest barriers to entry?

Accepted Answer

A)  Perfect competition 
B)  Monopoly 
C)  Monopolistic competition 
D)  Oligopoly 
A)  Perfect competition 
B)  Monopoly 
C)  Monopolistic competition 
D)  Oligopoly

Question 18

Figure 6.1:  
-Refer to Figure 6.1 for a perfectly competitive firm.If the market price is $20:

Accepted Answer

A)  The firm should produce 19 units. 
B)  There will be economic losses. 
C)  There will be economic profits. 
D)  The firm will expand production. 
A)  The firm should produce 19 units. 
B)  There will be economic losses. 
C)  There will be economic profits. 
D)  The firm will expand production.

Question 19

In a perfectly competitive industry,if the buyers expect the price to rise in the future economic profits will increase.

Accepted Answer

A) True 
 B)False

Question 20

If a perfectly competitive firm raises its price above the market price,it will lose all its customers.

Accepted Answer

A) True 
 B)False

Which of the following is the best example of a perfectly competitive market?

Short-run profits are maximized if the firm produces where marginal cost equals price.

A catfish farmer in a perfectly competitive market:

When economic profits exist in a perfectly competitive market,the number of suppliers will increase and the market price will fall in the long run.

If the market price was below the ATC and at the current firm's rate of production the MC was less than the market price an increase in output would:

An industry in which a few large firms supply most or all of a product is known as:

If a perfectly competitive firm wanted to maximize its total revenues,it would produce:

Total profit is equal to:

The marginal cost curve is the short-run supply curve for a competitive firm.

When firms exit an industry,price _ and industry output _.

An industry in which many firms produce similar products but each firm has significant brand loyalty is known as:

Which of the following is characteristic of perfectly competitive markets?

The goal of most business firms is to:

When some firms are forced out of a market due to economic losses the result is a better use of our scarce resources.

Figure 6.2: -Refer to Figure 6.2 for a perfectly competitive firm.If price is $4,the profit-maximizing rate of output is:

If a firm can change market prices by altering its output then it:

Which of the following market structures has the highest barriers to entry?

Figure 6.1: -Refer to Figure 6.1 for a perfectly competitive firm.If the market price is $20:

In a perfectly competitive industry,if the buyers expect the price to rise in the future economic profits will increase.

If a perfectly competitive firm raises its price above the market price,it will lose all its customers.

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Aggregate Supply and Demand

Fiscal Policy

Money and Banks

Monetary Policy

Economic Growth

Theory and Reality

International Trade

Filters

Exam 6: Competition

Which of the following is the best example of a perfectly competitive market?

Short-run profits are maximized if the firm produces where marginal cost equals price.

A catfish farmer in a perfectly competitive market:

When economic profits exist in a perfectly competitive market,the number of suppliers will increase and the market price will fall in the long run.

If the market price was below the ATC and at the current firm's rate of production the MC was less than the market price an increase in output would:

An industry in which a few large firms supply most or all of a product is known as:

If a perfectly competitive firm wanted to maximize its total revenues,it would produce:

Total profit is equal to:

The marginal cost curve is the short-run supply curve for a competitive firm.

When firms exit an industry,price _______ and industry output _______.

An industry in which many firms produce similar products but each firm has significant brand loyalty is known as:

Which of the following is characteristic of perfectly competitive markets?

The goal of most business firms is to:

When some firms are forced out of a market due to economic losses the result is a better use of our scarce resources.

Figure 6.2: -Refer to Figure 6.2 for a perfectly competitive firm.If price is $4,the profit-maximizing rate of output is:

If a firm can change market prices by altering its output then it:

Which of the following market structures has the highest barriers to entry?

Figure 6.1: -Refer to Figure 6.1 for a perfectly competitive firm.If the market price is $20:

In a perfectly competitive industry,if the buyers expect the price to rise in the future economic profits will increase.

If a perfectly competitive firm raises its price above the market price,it will lose all its customers.

The Challenge of Economics

The US Economy

Supply and Demand

Consumer Demand

Supply Decisions

Monopoly

The Labor Market

Government Intervention

The Business Cycle

Aggregate Supply and Demand

Fiscal Policy

Money and Banks

Monetary Policy

Economic Growth

Theory and Reality

International Trade

Filters

When firms exit an industry,price _ and industry output _.