Question 1

A perfectly competitive firm has to charge the same price as every other firm in the market.Therefore,the firm

Accepted Answer

A)  faces a perfectly inelastic demand curve. 
B)  is not able to make a profit in the short run. 
C)  is a price taker. 
D)  faces a perfectly elastic supply curve. 
A)  faces a perfectly inelastic demand curve. 
B)  is not able to make a profit in the short run. 
C)  is a price taker. 
D)  faces a perfectly elastic supply curve.

Question 2

If firms do not earn economic profits in a competitive equilibrium,why would the firms choose to stay in business?

Accepted Answer

When firms earn no economic profit but e

Question 3

An individual seller in perfect competition will not sell at a price lower than the market price because

Accepted Answer

A)  demand for the product will exceed supply. 
B)  the seller would start a price war. 
C)  the seller can sell any quantity she wants at the prevailing market price. 
D)  demand is perfectly inelastic. 
A)  demand for the product will exceed supply. 
B)  the seller would start a price war. 
C)  the seller can sell any quantity she wants at the prevailing market price. 
D)  demand is perfectly inelastic.

Question 4

In a graph that illustrates a perfectly competitive firm,marginal revenue is

Accepted Answer

A)  a diagonal line that lies below the firm's demand curve. 
B)  a line that intersects the firm's demand curve from below at its lowest point. 
C)  a line that intersects the firm's average total cost curve from below at its lowest point. 
D)  the same as the firm's demand curve. 
A)  a diagonal line that lies below the firm's demand curve. 
B)  a line that intersects the firm's demand curve from below at its lowest point. 
C)  a line that intersects the firm's average total cost curve from below at its lowest point. 
D)  the same as the firm's demand curve.

Question 5

The minimum point on the average variable cost curve is called

Accepted Answer

A)  the shutdown point. 
B)  the break-even point. 
C)  the loss minimizing point. 
D)  the point of diminishing returns. 
A)  the shutdown point. 
B)  the break-even point. 
C)  the loss minimizing point. 
D)  the point of diminishing returns.

Question 6

If,as a perfectly competitive industry expands,it can supply larger quantities only at a higher long-run equilibrium price,it is

Accepted Answer

A)  a constant-cost industry. 
B)  an increasing-cost industry. 
C)  a decreasing-cost industry. 
D)  a fixed-cost industry. 
A)  a constant-cost industry. 
B)  an increasing-cost industry. 
C)  a decreasing-cost industry. 
D)  a fixed-cost industry.

Question 7

Assume that price is greater than average variable cost.If a perfectly competitive seller is producing at an output where price is $11 and the marginal cost is $14.54,then to maximize profits the firm should

Accepted Answer

A)  continue producing at the current output. 
B)  produce a larger level of output. 
C)  produce a smaller level of output. 
D)  There is not enough information given to answer the question. 
A)  continue producing at the current output. 
B)  produce a larger level of output. 
C)  produce a smaller level of output. 
D)  There is not enough information given to answer the question.

Question 8

Table 12-3
   Arnie sells basketballs in a perfectly competitive market. Table 12-3 summarizes Arnie's output per day (Q), total cost (TC), average total cost (ATC) and marginal cost (MC).
-Refer to Table 12-3.What price (P)will Arnie charge and how much profit will he earn if the market price of basketballs is $12.50?

Accepted Answer

A)  Price and profit cannot be determined from the information given. 
B)  P = $12.50; profit = $52.50 
C)  P = $12.50; profit = $22.50 
D)  P = $20; profit = $75.00. 
A)  Price and profit cannot be determined from the information given. 
B)  P = $12.50; profit = $52.50 
C)  P = $12.50; profit = $22.50 
D)  P = $20; profit = $75.00.

Question 9

Market supply is found by

Accepted Answer

A)  vertically summing the relevant part of each individual producer's marginal cost curve. 
B)  horizontally summing the relevant part of each individual producer's marginal cost curve. 
C)  vertically summing each individual producer's average total cost curve. 
D)  horizontally summing each individual producer's average total cost curve. 
A)  vertically summing the relevant part of each individual producer's marginal cost curve. 
B)  horizontally summing the relevant part of each individual producer's marginal cost curve. 
C)  vertically summing each individual producer's average total cost curve. 
D)  horizontally summing each individual producer's average total cost curve.

Question 10

If in the long run a firm makes zero profit,it should exit the industry.

Accepted Answer

A) True 
 B)False

Question 11

In the long run,perfectly competitive firms earn zero economic profit.Why do firms enter an industry when they know that in the long-run they will not earn any profit?

Accepted Answer

Even though in the long run firms earn z

Question 12

If,for the last bushel of apples produced and sold by an apple farm marginal revenue exceeds marginal cost,then in producing that bushel the farm

Accepted Answer

A)  added more to total cost than it added to total revenue. 
B)  added an equal amount to both total revenue and total cost. 
C)  added more to total revenue than it added to total cost. 
D)  maximized its profits or minimized its losses. 
A)  added more to total cost than it added to total revenue. 
B)  added an equal amount to both total revenue and total cost. 
C)  added more to total revenue than it added to total cost. 
D)  maximized its profits or minimized its losses.

Question 13

If a firm shuts down in the short run

Accepted Answer

A)  its loss equals zero. 
B)  its loss equals its fixed cost. 
C)  is makes zero economic profit. 
D)  its total revenue is not large enough to cover its fixed cost. 
A)  its loss equals zero. 
B)  its loss equals its fixed cost. 
C)  is makes zero economic profit. 
D)  its total revenue is not large enough to cover its fixed cost.

Question 14

Perfectly competitive industries tend to produce low-priced,low-technology products.

Accepted Answer

A) True 
 B)False

Question 15

Table 12-2
   Table 12-2 lists the various pounds (lbs.) of apples that Margie Stattler can sell. Assume that Margie operates in a perfectly competitive market.
-Refer to Table 12-2.How many pounds of apples should Margie sell to maximize her profit?

Accepted Answer

A)  300 pounds 
B)  400 pounds 
C)  This cannot be determined without knowing Margie's total or marginal production costs. 
D)  This can be determined only when all of the values for market price, total revenue, average revenue and marginal revenue are given. 
A)  300 pounds 
B)  400 pounds 
C)  This cannot be determined without knowing Margie's total or marginal production costs. 
D)  This can be determined only when all of the values for market price, total revenue, average revenue and marginal revenue are given.

Question 16

Figure 12-12  
-Refer to Figure 12-12.Consider a typical firm in a perfectly competitive industry that makes short-run profits.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D

Question 17

If a perfectly competitive firm raises the price it charges to consumers,which of the following is the most likely outcome?

Accepted Answer

A)  The firm's revenue will not change because some consumers will refuse to pay the higher price. 
B)  The firm will not sell any output. 
C)  The firm's total revenue will increase only if the demand for its product is inelastic. 
D)  The firm's total revenue will increase only if the demand for its product is elastic. 
A)  The firm's revenue will not change because some consumers will refuse to pay the higher price. 
B)  The firm will not sell any output. 
C)  The firm's total revenue will increase only if the demand for its product is inelastic. 
D)  The firm's total revenue will increase only if the demand for its product is elastic.

Question 18

Firms in perfect competition produce the allocatively efficient output in the short run and in the long run.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not an option for a perfectly competitive firm that suffers short-run losses?

Accepted Answer

A)  shutting down 
B)  reducing production 
C)  reducing the use of variable factors 
D)  raising price 
A)  shutting down 
B)  reducing production 
C)  reducing the use of variable factors 
D)  raising price

Question 20

The market demand curve in a perfectly competitive market is downward-sloping.

Accepted Answer

A) True 
 B)False

A perfectly competitive firm has to charge the same price as every other firm in the market.Therefore,the firm

If firms do not earn economic profits in a competitive equilibrium,why would the firms choose to stay in business?

An individual seller in perfect competition will not sell at a price lower than the market price because

In a graph that illustrates a perfectly competitive firm,marginal revenue is

The minimum point on the average variable cost curve is called

If,as a perfectly competitive industry expands,it can supply larger quantities only at a higher long-run equilibrium price,it is

Assume that price is greater than average variable cost.If a perfectly competitive seller is producing at an output where price is $11 and the marginal cost is $14.54,then to maximize profits the firm should

Market supply is found by

If in the long run a firm makes zero profit,it should exit the industry.

In the long run,perfectly competitive firms earn zero economic profit.Why do firms enter an industry when they know that in the long-run they will not earn any profit?

If,for the last bushel of apples produced and sold by an apple farm marginal revenue exceeds marginal cost,then in producing that bushel the farm

If a firm shuts down in the short run

Perfectly competitive industries tend to produce low-priced,low-technology products.

Table 12-2 Table 12-2 lists the various pounds (lbs.) of apples that Margie Stattler can sell. Assume that Margie operates in a perfectly competitive market. -Refer to Table 12-2.How many pounds of apples should Margie sell to maximize her profit?

Figure 12-12 -Refer to Figure 12-12.Consider a typical firm in a perfectly competitive industry that makes short-run profits.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

If a perfectly competitive firm raises the price it charges to consumers,which of the following is the most likely outcome?

Firms in perfect competition produce the allocatively efficient output in the short run and in the long run.

Which of the following is not an option for a perfectly competitive firm that suffers short-run losses?

The market demand curve in a perfectly competitive market is downward-sloping.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice,taxes,and the Distribution of Income

Filters

Exam 12: Firms in Perfectly Competitive Markets

A perfectly competitive firm has to charge the same price as every other firm in the market.Therefore,the firm

If firms do not earn economic profits in a competitive equilibrium,why would the firms choose to stay in business?

An individual seller in perfect competition will not sell at a price lower than the market price because

In a graph that illustrates a perfectly competitive firm,marginal revenue is

The minimum point on the average variable cost curve is called

If,as a perfectly competitive industry expands,it can supply larger quantities only at a higher long-run equilibrium price,it is

Assume that price is greater than average variable cost.If a perfectly competitive seller is producing at an output where price is $11 and the marginal cost is $14.54,then to maximize profits the firm should

Market supply is found by

If in the long run a firm makes zero profit,it should exit the industry.

In the long run,perfectly competitive firms earn zero economic profit.Why do firms enter an industry when they know that in the long-run they will not earn any profit?

If,for the last bushel of apples produced and sold by an apple farm marginal revenue exceeds marginal cost,then in producing that bushel the farm

If a firm shuts down in the short run

Perfectly competitive industries tend to produce low-priced,low-technology products.

Table 12-2 Table 12-2 lists the various pounds (lbs.) of apples that Margie Stattler can sell. Assume that Margie operates in a perfectly competitive market. -Refer to Table 12-2.How many pounds of apples should Margie sell to maximize her profit?

Figure 12-12 -Refer to Figure 12-12.Consider a typical firm in a perfectly competitive industry that makes short-run profits.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

If a perfectly competitive firm raises the price it charges to consumers,which of the following is the most likely outcome?

Firms in perfect competition produce the allocatively efficient output in the short run and in the long run.

Which of the following is not an option for a perfectly competitive firm that suffers short-run losses?

The market demand curve in a perfectly competitive market is downward-sloping.

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, government Price Setting, and Taxes

Externalities, environmental Policy, and Public Goods

Elasticity: The Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Comparative Advantage and the Gains From International Trade

Consumer Choice and Behavioral Economics

Technology, production, and Costs

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice,taxes,and the Distribution of Income

Filters