Question 1

What assumptions are necessary for a market to be perfectly competitive? Explain why each of these assumptions is important.

Accepted Answer

The assumptions necessary for a market t

Question 2

A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000.The price of each bushel is $50.Calculate the firm's short-run profit or loss.

Accepted Answer

A)  loss of $14,000 
B)  profit of $14,000 
C)  profit of $50,000 
D)  There is insufficient information to answer the question. 
A)  loss of $14,000 
B)  profit of $14,000 
C)  profit of $50,000 
D)  There is insufficient information to answer the question.

Question 3

In the short run,a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following describes a situation in which a good or service is produced at the lowest possible cost?

Accepted Answer

A)  productive efficiency 
B)  allocative efficiency 
C)  marginal efficiency 
D)  profit maximization 
A)  productive efficiency 
B)  allocative efficiency 
C)  marginal efficiency 
D)  profit maximization

Question 5

Which of the following describes a difference between allocative efficiency and productive efficiency in a perfectly competitive market?

Accepted Answer

A)  Allocative efficiency is achieved only in the long run. Productive efficiency is achieved only in the short run. 
B)  Allocative efficiency is achieved only in the long run. Productive efficiency is achieved in the short run and the long run. 
C)  Allocative efficiency is achieved only in the short run. Productive efficiency is achieved only in the long run. 
D)  Allocative efficiency is achieved in the short run and the long run. Productive efficiency is achieved only in the long run. 
A)  Allocative efficiency is achieved only in the long run. Productive efficiency is achieved only in the short run. 
B)  Allocative efficiency is achieved only in the long run. Productive efficiency is achieved in the short run and the long run. 
C)  Allocative efficiency is achieved only in the short run. Productive efficiency is achieved only in the long run. 
D)  Allocative efficiency is achieved in the short run and the long run. Productive efficiency is achieved only in the long run.

Question 6

Figure 12-2  
-Refer to Figure 12-2.What happens if the firm produces more than Q4 units?

Accepted Answer

A)  Its profit increases. 
B)  It makes a loss. 
C)  Its total revenue is increasing faster than its total cost. 
D)  It could make a profit or a loss depending on what happens to demand. 
A)  Its profit increases. 
B)  It makes a loss. 
C)  Its total revenue is increasing faster than its total cost. 
D)  It could make a profit or a loss depending on what happens to demand.

Question 7

In long-run competitive equilibrium,the perfectly competitive firm produces where price equals minimum average total cost.
a.What is this efficiency criterion called?
b.How does it benefit consumers?

Accepted Answer

a.Productive efficiency
b.Productive eff

Question 8

Why are individual buyers and sellers in perfect competition called price takers?

Accepted Answer

They are called price takers b

Question 9

Perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit.This condition is referred to as

Accepted Answer

A)  productive efficiency. 
B)  constant returns to scale. 
C)  allocative efficiency. 
D)  perfectly competitive efficiency. 
A)  productive efficiency. 
B)  constant returns to scale. 
C)  allocative efficiency. 
D)  perfectly competitive efficiency.

Question 10

Figure 12-6   Figure 12-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples.
-Refer to Figure 12-6.To maximize his profit,Jason should produce the rate of output indicated by point

Accepted Answer

A)  a. 
B)  b. 
C)  e. 
D)  d. 
A)  a. 
B)  b. 
C)  e. 
D)  d.

Question 11

Explain two different ways to determine the profit-maximizing level of output for a firm in a perfectly competitive market.

Accepted Answer

One way is using total revenue and total

Question 12

Figure 12-3  
-Refer to Figure 12-3.Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity.Identify the area that represents the loss.

Accepted Answer

A)  P2 deP1 
B)  P3cbP1 
C)  P3caP0 
D)  0P1 bQ1 
A)  P2 deP1 
B)  P3cbP1 
C)  P3caP0 
D)  0P1 bQ1

Question 13

Figure 12-2  
-Refer to Figure 12-2.The firm breaks even at an output level of

Accepted Answer

A)  Q1 units. 
B)  Q2 units. 
C)  Q3 units. 
D)  Q4 units. 
A)  Q1 units. 
B)  Q2 units. 
C)  Q3 units. 
D)  Q4 units.

Question 14

Molly Sharp is producing a documentary about the plight of the six-toed ferrets of Sri Lanka.Molly has spent $125,000 of her own money on this project and the documentary is now complete.Molly just found out that no studio is willing to release her documentary and she must now shop it to cable television networks,where she knows she will not be able to recoup her investment.Which of the following statements regarding Molly Sharp's documentary is true?

Accepted Answer

A)  She should not try to have her documentary aired on television because she cannot recoup her $125,000 investment. 
B)  Since the $125,000 is a sunk cost, she should still try to have her documentary aired on television even though she will not see a profit. 
C)  The $125,000 is a variable cost, so will not be incurred if she chooses not to have her documentary aired. 
D)  The $125,000 investment is an economic cost, and she will still make an accounting profit even if the television network willing to air her documentary pays her less than $125,000. 
A)  She should not try to have her documentary aired on television because she cannot recoup her $125,000 investment. 
B)  Since the $125,000 is a sunk cost, she should still try to have her documentary aired on television even though she will not see a profit. 
C)  The $125,000 is a variable cost, so will not be incurred if she chooses not to have her documentary aired. 
D)  The $125,000 investment is an economic cost, and she will still make an accounting profit even if the television network willing to air her documentary pays her less than $125,000.

Question 15

A perfectly competitive firm faces a demand curve that is

Accepted Answer

A)  horizontal. 
B)  vertical. 
C)  perpendicular to the quantity axis. 
D)  perfectly inelastic. 
A)  horizontal. 
B)  vertical. 
C)  perpendicular to the quantity axis. 
D)  perfectly inelastic.

Question 16

Figure 12-9   Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9.At price P2,the firm would

Accepted Answer

A)  lose an amount equal to its fixed cost. 
B)  lose an amount more than fixed cost. 
C)  lose an amount less than fixed cost. 
D)  break even. 
A)  lose an amount equal to its fixed cost. 
B)  lose an amount more than fixed cost. 
C)  lose an amount less than fixed cost. 
D)  break even.

Question 17

Apple introduced its iPhone 3G in July 2008 and within a month sales had topped 3 million units.By April 2009,more than 25,000 apps for the iPhone 3G were available in the iTunes store,an indication that in a competitive market

Accepted Answer

A)  the ease at which a new firm can enter a competitive market is low. 
B)  the ease at which a new firm can enter a competitive market is high. 
C)  entry into the market is blocked. 
D)  entry into the market is restricted in the short run, but becomes easier in the long run. 
A)  the ease at which a new firm can enter a competitive market is low. 
B)  the ease at which a new firm can enter a competitive market is high. 
C)  entry into the market is blocked. 
D)  entry into the market is restricted in the short run, but becomes easier in the long run.

Question 18

A perfectly competitive firm's marginal revenue curve is downward sloping.

Accepted Answer

A) True 
 B)False

What assumptions are necessary for a market to be perfectly competitive? Explain why each of these assumptions is important.

A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000.The price of each bushel is $50.Calculate the firm's short-run profit or loss.

In the short run,a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

Which of the following describes a situation in which a good or service is produced at the lowest possible cost?

Which of the following describes a difference between allocative efficiency and productive efficiency in a perfectly competitive market?

Figure 12-2 -Refer to Figure 12-2.What happens if the firm produces more than Q₄units?

In long-run competitive equilibrium,the perfectly competitive firm produces where price equals minimum average total cost. a.What is this efficiency criterion called? b.How does it benefit consumers?

Why are individual buyers and sellers in perfect competition called price takers?

Perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit.This condition is referred to as

Figure 12-6 Figure 12-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples. -Refer to Figure 12-6.To maximize his profit,Jason should produce the rate of output indicated by point

Explain two different ways to determine the profit-maximizing level of output for a firm in a perfectly competitive market.

Figure 12-3 -Refer to Figure 12-3.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.Identify the area that represents the loss.

Figure 12-2 -Refer to Figure 12-2.The firm breaks even at an output level of

A perfectly competitive firm faces a demand curve that is

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₂,the firm would

Apple introduced its iPhone 3G in July 2008 and within a month sales had topped 3 million units.By April 2009,more than 25,000 apps for the iPhone 3G were available in the iTunes store,an indication that in a competitive market

A perfectly competitive firm's marginal revenue curve 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

What assumptions are necessary for a market to be perfectly competitive? Explain why each of these assumptions is important.

A perfectly competitive apple farm produces 1,000 bushels of apples at a total cost of $36,000.The price of each bushel is $50.Calculate the firm's short-run profit or loss.

In the short run,a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

Which of the following describes a situation in which a good or service is produced at the lowest possible cost?

Which of the following describes a difference between allocative efficiency and productive efficiency in a perfectly competitive market?

Figure 12-2 -Refer to Figure 12-2.What happens if the firm produces more than Q4 units?

In long-run competitive equilibrium,the perfectly competitive firm produces where price equals minimum average total cost. a.What is this efficiency criterion called? b.How does it benefit consumers?

Why are individual buyers and sellers in perfect competition called price takers?

Perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit.This condition is referred to as

Figure 12-6 Figure 12-6 shows the demand, marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples. -Refer to Figure 12-6.To maximize his profit,Jason should produce the rate of output indicated by point

Explain two different ways to determine the profit-maximizing level of output for a firm in a perfectly competitive market.

Figure 12-3 -Refer to Figure 12-3.Suppose the prevailing price is P1 and the firm is currently producing its loss-minimizing quantity.Identify the area that represents the loss.

Figure 12-2 -Refer to Figure 12-2.The firm breaks even at an output level of

A perfectly competitive firm faces a demand curve that is

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P2,the firm would

Apple introduced its iPhone 3G in July 2008 and within a month sales had topped 3 million units.By April 2009,more than 25,000 apps for the iPhone 3G were available in the iTunes store,an indication that in a competitive market

A perfectly competitive firm's marginal revenue curve 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

Figure 12-2 -Refer to Figure 12-2.What happens if the firm produces more than Q₄units?

Figure 12-3 -Refer to Figure 12-3.Suppose the prevailing price is P₁ and the firm is currently producing its loss-minimizing quantity.Identify the area that represents the loss.

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9.At price P₂,the firm would