Question 1

Firms in a perfectly competitive market:

Accepted Answer

A)  compete with each other by undercutting the prices. 
B)  compete with each other by offering customers a slightly different product. 
C)  reduce the output so they can increase the price. 
D)  do not advertise. 
A)  compete with each other by undercutting the prices. 
B)  compete with each other by offering customers a slightly different product. 
C)  reduce the output so they can increase the price. 
D)  do not advertise.

Question 2

Which of the following is not a characteristic of perfect competition?

Accepted Answer

A)  Ease of entry and exit. 
B)  A few large firms dominate the market. 
C)  The product is homogeneous. 
D)  There are many buyers. 
A)  Ease of entry and exit. 
B)  A few large firms dominate the market. 
C)  The product is homogeneous. 
D)  There are many buyers.

Question 3

Perfect competition requires that resources be:

Accepted Answer

A)  the highest quality for consumers. 
B)  fixed over the short run but free over the long run. 
C)  completely mobile to freely enter or exit the market. 
D)  completely unmovable and enjoy the economies of scale. 
A)  the highest quality for consumers. 
B)  fixed over the short run but free over the long run. 
C)  completely mobile to freely enter or exit the market. 
D)  completely unmovable and enjoy the economies of scale.

Question 4

In a perfectly competitive market, firms:

Accepted Answer

A)  produce a differentiated product. 
B)  can enter free but exit is costly. 
C)  extensively advertise to attract more buyers. 
D)  produce a homogeneous product. 
A)  produce a differentiated product. 
B)  can enter free but exit is costly. 
C)  extensively advertise to attract more buyers. 
D)  produce a homogeneous product.

Question 5

The firm maximises profit by producing the output where the marginal revenue is higher than marginal cost.

Accepted Answer

A) True 
 B)False

Question 6

Narrbegin Exhibit 7.8   
-According to Exhibit 7.8, given the short-run equilibrium of this firm, we would expect:

Accepted Answer

A)  the firm's output to increase. 
B)  the firm to cover its fixed cost. 
C)  the firm's output to decline. 
D)  the market supply curve to shift to the right. 
A)  the firm's output to increase. 
B)  the firm to cover its fixed cost. 
C)  the firm's output to decline. 
D)  the market supply curve to shift to the right.

Question 7

At an output level of 100 units, TC = $1000, TVC = $500, MC = $3 and MR = $3, the short-run result/s for the perfectly competitive firm will be:

Accepted Answer

A)  making a short-run loss of $500. 
B)  breaking even, as MC = MR. 
C)  shutting down and incurring a loss of $1000. 
D)  making a loss of $1000 but continuing to operate. 
A)  making a short-run loss of $500. 
B)  breaking even, as MC = MR. 
C)  shutting down and incurring a loss of $1000. 
D)  making a loss of $1000 but continuing to operate.

Question 8

A perfectly competitive firm has control over:

Accepted Answer

A)  the number of firms in the market. 
B)  market conditions. 
C)  the price at which to sell. 
D)  the quantity of output to produce. 
A)  the number of firms in the market. 
B)  market conditions. 
C)  the price at which to sell. 
D)  the quantity of output to produce.

Question 9

Narrbegin Exhibit 7.7   
-According to Exhibit 7.7, the short-run equilibrium output level for this perfectly competitive firm is:

Accepted Answer

A) 1000. 
B) 100. 
C) 120. 
D)  130. 
A) 1000. 
B) 100. 
C) 120. 
D)  130.

Question 10

Under perfect competition, no matter how much output is produced, the total revenue curve is a:

Accepted Answer

A)  positively sloped line. 
B)  negatively sloped line. 
C)  horizontal straight line. 
D)  U-shaped curve. 
A)  positively sloped line. 
B)  negatively sloped line. 
C)  horizontal straight line. 
D)  U-shaped curve.

Question 11

Total revenue is computed as:

Accepted Answer

A)  the product price times the quantity. 
B)  the product cost times the quantity. 
C)  the product price minus the product cost. 
D)  the product marginal cost times the price. 
A)  the product price times the quantity. 
B)  the product cost times the quantity. 
C)  the product price minus the product cost. 
D)  the product marginal cost times the price.

Question 12

What are the possible long-run equilibrium situations for a firm in a perfectly competitive market?

Accepted Answer

A)  Normal profit. 
B)  Economic profit. 
C)  Loss. 
D)  Product diversification. 
A)  Normal profit. 
B)  Economic profit. 
C)  Loss. 
D)  Product diversification.

Question 13

Assume the short-run average total cost for a perfectly competitive industry decreases as the output of the industry expands. In the long run, the industry supply curve will:

Accepted Answer

A)  have a positive slope. 
B)  have a negative slope. 
C)  be perfectly horizontal. 
D)  be perfectly vertical. 
A)  have a positive slope. 
B)  have a negative slope. 
C)  be perfectly horizontal. 
D)  be perfectly vertical.

Question 14

A perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the:

Accepted Answer

A)  average total cost curve. 
B)  average variable cost curve. 
C)  average fixed curve. 
D)  average price curve. 
A)  average total cost curve. 
B)  average variable cost curve. 
C)  average fixed curve. 
D)  average price curve.

Question 15

If ATC = $25, AVC = $20, TFC = $600, MR = $15 and MC = $15, then the result for the perfectly competitive firm will be:

Accepted Answer

A)  a loss of $10 per unit. 
B)  a loss of $600. 
C)  continuing to operate because it covers its variable costs. 
D)  breaking even because MR = MC. 
A)  a loss of $10 per unit. 
B)  a loss of $600. 
C)  continuing to operate because it covers its variable costs. 
D)  breaking even because MR = MC.

Question 16

Narrbegin Exhibit 7.1 Total revenue and total cost graph   
-In Exhibit 7.1, if output is 200 units per week, economic profit for the firm is:

Accepted Answer

A)  zero. 
B)  at its minimum. 
C)  at its maximum. 
D)  average. 
A)  zero. 
B)  at its minimum. 
C)  at its maximum. 
D)  average.

Question 17

Which of the following is not a characteristic of a perfectly competitive market?

Accepted Answer

A)  There is a large number of small firms. 
B)  Firms sell a homogeneous product. 
C)  Firms can easily enter or exit the market. 
D)  Firms are price makers, not price takers. 
A)  There is a large number of small firms. 
B)  Firms sell a homogeneous product. 
C)  Firms can easily enter or exit the market. 
D)  Firms are price makers, not price takers.

Question 18

In the short run, a firm should continue operating if its economic loss from operating exceeds its total fixed cost.

Accepted Answer

A) True 
 B)False

Question 19

In long-run equilibrium, the typical perfectly competitive firm will:

Accepted Answer

A)  earn maximum economic profit. 
B)  never change plant size in the long run. 
C)  change output in the short run. 
D)  enter or exit the industry. 
A)  earn maximum economic profit. 
B)  never change plant size in the long run. 
C)  change output in the short run. 
D)  enter or exit the industry.

Question 20

If there is no level of output at which the firm earns a profit, the firm should:

Accepted Answer

A)  shut down. 
B)  perform an analysis regarding whether to operate or not. 
C)  diversify. 
D)  try to push the price up. 
A)  shut down. 
B)  perform an analysis regarding whether to operate or not. 
C)  diversify. 
D)  try to push the price up.

Firms in a perfectly competitive market:

Which of the following is not a characteristic of perfect competition?

Perfect competition requires that resources be:

In a perfectly competitive market, firms:

The firm maximises profit by producing the output where the marginal revenue is higher than marginal cost.

Narrbegin Exhibit 7.8 -According to Exhibit 7.8, given the short-run equilibrium of this firm, we would expect:

At an output level of 100 units, TC = $1000, TVC = $500, MC = $3 and MR = $3, the short-run result/s for the perfectly competitive firm will be:

A perfectly competitive firm has control over:

Narrbegin Exhibit 7.7 -According to Exhibit 7.7, the short-run equilibrium output level for this perfectly competitive firm is:

Under perfect competition, no matter how much output is produced, the total revenue curve is a:

Total revenue is computed as:

What are the possible long-run equilibrium situations for a firm in a perfectly competitive market?

Assume the short-run average total cost for a perfectly competitive industry decreases as the output of the industry expands. In the long run, the industry supply curve will:

A perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the:

If ATC = $25, AVC = $20, TFC = $600, MR = $15 and MC = $15, then the result for the perfectly competitive firm will be:

Narrbegin Exhibit 7.1 Total revenue and total cost graph -In Exhibit 7.1, if output is 200 units per week, economic profit for the firm is:

Which of the following is not a characteristic of a perfectly competitive market?

In the short run, a firm should continue operating if its economic loss from operating exceeds its total fixed cost.

In long-run equilibrium, the typical perfectly competitive firm will:

If there is no level of output at which the firm earns a profit, the firm should:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters

Exam 8: Perfect Competition

Firms in a perfectly competitive market:

Which of the following is not a characteristic of perfect competition?

Perfect competition requires that resources be:

In a perfectly competitive market, firms:

The firm maximises profit by producing the output where the marginal revenue is higher than marginal cost.

Narrbegin Exhibit 7.8 -According to Exhibit 7.8, given the short-run equilibrium of this firm, we would expect:

At an output level of 100 units, TC = $1000, TVC = $500, MC = $3 and MR = $3, the short-run result/s for the perfectly competitive firm will be:

A perfectly competitive firm has control over:

Narrbegin Exhibit 7.7 -According to Exhibit 7.7, the short-run equilibrium output level for this perfectly competitive firm is:

Under perfect competition, no matter how much output is produced, the total revenue curve is a:

Total revenue is computed as:

What are the possible long-run equilibrium situations for a firm in a perfectly competitive market?

Assume the short-run average total cost for a perfectly competitive industry decreases as the output of the industry expands. In the long run, the industry supply curve will:

A perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the:

If ATC = $25, AVC = $20, TFC = $600, MR = $15 and MC = $15, then the result for the perfectly competitive firm will be:

Narrbegin Exhibit 7.1 Total revenue and total cost graph -In Exhibit 7.1, if output is 200 units per week, economic profit for the firm is:

Which of the following is not a characteristic of a perfectly competitive market?

In the short run, a firm should continue operating if its economic loss from operating exceeds its total fixed cost.

In long-run equilibrium, the typical perfectly competitive firm will:

If there is no level of output at which the firm earns a profit, the firm should:

Thinking Like an Economist

Applying Graphs to Economics

Production Possibilities and Opportunity Cost

Market Demand and Supply

Markets in Action

Elasticity of Demand and Supply

Production Costs

Monopoly

Monopolistic Competition and Oligopoly

Policy Issues: Housing Affordability and Climate Change

Measuring the Size of the Economy

Business Cycles and Economic Growth

Inflation and Unemployment

A Simple Model of the Macro Economy

The Monetary and Financial System

Macroeconomic Policy I: Monetary Policy

Macroeconomic Policy II: Fiscal Policy

International Trade and Finance

Filters