Question 1

In short run equilibrium in a perfectly competitive industry whose firms are earning economic profits, a firm:

Accepted Answer

A) has no incentive to change its output. 
B) has no incentive to change its plant size. 
C) has no incentive to expand its factory. 
D) has no incentive to leave the industry. 
E) has no incentive to do any of the above. 
A) has no incentive to change its output. 
B) has no incentive to change its plant size. 
C) has no incentive to expand its factory. 
D) has no incentive to leave the industry. 
E) has no incentive to do any of the above.

Question 2

Which of the following is true about the long run operations of perfectly competitive firms?

Accepted Answer

A) They produce with productive efficiency. 
B) They produce with allocative efficiency. 
C) They earn zero economic profits. 
D) They earn a fair rate of return. 
E) all of the above 
A) They produce with productive efficiency. 
B) They produce with allocative efficiency. 
C) They earn zero economic profits. 
D) They earn a fair rate of return. 
E) all of the above

Question 3

Perfectly competitive markets are characterized by:

Accepted Answer

A) rivalry in product design. 
B) competition in terms of product quality. 
C) attempts by sellers to outdo one another with good service. 
D) all of the above. 
E) none of the above. 
A) rivalry in product design. 
B) competition in terms of product quality. 
C) attempts by sellers to outdo one another with good service. 
D) all of the above. 
E) none of the above.

Question 4

Figure 7-H  
-What are the characteristics of a perfectly competitive industry?

Accepted Answer

In a perfectly competitive industry ther

Question 5

The most socially efficient market structure in the long run is:

Accepted Answer

A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly. 
A) perfect competition. 
B) monopolistic competition. 
C) oligopoly. 
D) monopoly.

Question 6

Extractive industries such as farming, mining, or lumbering typically:

Accepted Answer

A) are considered to be decreasing cost industries. 
B) are considered to be constant cost industries. 
C) use only small portions of the total supply of specialized resources. 
D) are considered to be increasing cost industries. 
A) are considered to be decreasing cost industries. 
B) are considered to be constant cost industries. 
C) use only small portions of the total supply of specialized resources. 
D) are considered to be increasing cost industries.

Question 7

Which of the following is not true in the long run under perfect competition?

Accepted Answer

A) There is no incentive for firms to enter or exit the industry. 
B) Economic profit is zero. 
C) Long-run marginal cost is minimized. 
D) Long-run average total cost is minimized. 
A) There is no incentive for firms to enter or exit the industry. 
B) Economic profit is zero. 
C) Long-run marginal cost is minimized. 
D) Long-run average total cost is minimized.

Question 8

Assume a perfectly competitive firm sells its output for $250 per unit.At its current 2,000 units of output, marginal cost is $180 and increasing, and average variable cost is $160.Assuming it wants to maximize its profits, it should:

Accepted Answer

A) increase output. 
B) decrease output, but not shut down. 
C) maintain its current output rate. 
D) shut down. 
E) There is not enough information to determine what the firm should do. 
A) increase output. 
B) decrease output, but not shut down. 
C) maintain its current output rate. 
D) shut down. 
E) There is not enough information to determine what the firm should do.

Question 9

Figure 7-A  
-Refer to Figure 7-A.In Graph B, the market demand has decreased from d0 to d1, and as a result:

Accepted Answer

A) both the market price and the price of the price-taking firm have increased to $5. 
B) both the market price and the price of the price-taking firm have fallen to $4. 
C) the quantity of goods transacted in the market has fallen from Q1 to Q0. 
D) at the new equilibrium price, the firm will be unable to sell any of its output. 
A) both the market price and the price of the price-taking firm have increased to $5. 
B) both the market price and the price of the price-taking firm have fallen to $4. 
C) the quantity of goods transacted in the market has fallen from Q1 to Q0. 
D) at the new equilibrium price, the firm will be unable to sell any of its output.

Question 10

In the short run, a perfectly competitive firm will maximize profit by producing where:

Accepted Answer

A) MC = MR. 
B) MC = ATC. 
C) ATC = MR. 
D) AVC = MC. 
A) MC = MR. 
B) MC = ATC. 
C) ATC = MR. 
D) AVC = MC.

Question 11

A profit-maximizing firm that is operating in the short run will sell an additional unit of output as long as:

Accepted Answer

A) as doing so reduces the firm's per-unit costs. 
B) doing so reduces the firm's marginal costs. 
C) doing so adds more to revenue than it adds to cost. 
D) there is additional plant capacity with which to produce. 
A) as doing so reduces the firm's per-unit costs. 
B) doing so reduces the firm's marginal costs. 
C) doing so adds more to revenue than it adds to cost. 
D) there is additional plant capacity with which to produce.

Question 12

Which of the following is false of perfectly competitive firms?

Accepted Answer

A) Because the short run is too brief for new firms to enter the market, the market supply curve is the horizontal summation of the supply curves of existing firms. 
B) As new firms enter an industry where sellers are earning economic profits, the result will include a reduction in the equilibrium price. 
C) In a constant-cost industry, the industry does not use inputs in sufficient quantities to affect input prices. 
D) In a constant-cost competitive industry, the long-run effect of an increase in demand is an increase in industry output but no change in the industry price. 
E) None of the above are false; all are true. 
A) Because the short run is too brief for new firms to enter the market, the market supply curve is the horizontal summation of the supply curves of existing firms. 
B) As new firms enter an industry where sellers are earning economic profits, the result will include a reduction in the equilibrium price. 
C) In a constant-cost industry, the industry does not use inputs in sufficient quantities to affect input prices. 
D) In a constant-cost competitive industry, the long-run effect of an increase in demand is an increase in industry output but no change in the industry price. 
E) None of the above are false; all are true.

Question 13

In long-run equilibrium, a perfectly competitive firm produces the output level that minimizes average total cost.

Accepted Answer

A) True 
 B)False

Question 14

Table 7-A
Revenue and Cost Data for a Perfectly Competitive Firm
 $$\begin{array} { c c c c c c c } 
\text { Daily } & \text { Price } & \text { Total } & \text { TFC } & \text { TVC } & \text { TC } & \text { Profit } \
\text { Output } && \text { Revenue } & & & & \
0 & \$ 20 & \$0 & V&\$0& \$ 50 & - \$ 50 \
1 & \$ 20 & \$ 20 & \$ 50 & \$ 12 & \$ W & - \$ 42 \
2 & \mathbf { X } & \$ 40 & \$ 50 & Y & \$ 78 & - \$ 38 \
3 & \$ 20 & \$ 60 & \$ 50 & \$ 45 & \$ 95 & Z
\end{array}$$
-Refer to Table 7-A.What is the value of the variable Y shown in the table?

Accepted Answer

A) $0 
B) $12 
C) $16 
D) $28 
E) $40 
A) $0 
B) $12 
C) $16 
D) $28 
E) $40

Question 15

In a perfectly competitive market, in response to a permanent increase in demand:

Accepted Answer

A) the short run equilibrium price will be higher than the eventual long run equilibrium price. 
B) the short run equilibrium price will be lower than the eventual long run equilibrium price. 
C) the short run equilibrium price will be the same as than the eventual long run equilibrium price. 
D) we cannot know whether the short run equilibrium price will be above, below or equal to the eventual long run equilibrium price. 
A) the short run equilibrium price will be higher than the eventual long run equilibrium price. 
B) the short run equilibrium price will be lower than the eventual long run equilibrium price. 
C) the short run equilibrium price will be the same as than the eventual long run equilibrium price. 
D) we cannot know whether the short run equilibrium price will be above, below or equal to the eventual long run equilibrium price.

Question 16

When the marginal cost of a price-taking firm is less than the market price of its product, the firm should:

Accepted Answer

A) expand output (provided that price is not less than average variable cost). 
B) reduce output (provided that price is not less than average variable cost). 
C) maintain output (provided that price is not less than average variable cost). 
D) charge more than the market price. 
A) expand output (provided that price is not less than average variable cost). 
B) reduce output (provided that price is not less than average variable cost). 
C) maintain output (provided that price is not less than average variable cost). 
D) charge more than the market price.

Question 17

Assume that the equilibrium price in a perfectly competitive industry is $4.25.If a firm in this industry produced and sold 10 units with an average total cost of $5.00, what would be the result would be:

Accepted Answer

A) a profit of $0.75 
B) a profit of $7.50 
C) a loss of $0.75 
D) a loss of $7.50 
E) a loss of $75.00 
A) a profit of $0.75 
B) a profit of $7.50 
C) a loss of $0.75 
D) a loss of $7.50 
E) a loss of $75.00

Question 18

Figure 7-D  
-Refer to Figure 7-D.In the short run, if the market price falls to $40 per unit, the firm should:

Accepted Answer

A) shut down temporarily. 
B) shut down permanently. 
C) continue to operate, because it is earning an economic profit. 
D) continue to operate temporarily, because it is minimizing losses by doing so. 
A) shut down temporarily. 
B) shut down permanently. 
C) continue to operate, because it is earning an economic profit. 
D) continue to operate temporarily, because it is minimizing losses by doing so.

Question 19

Which of the following best resembles a perfectly competitive market?

Accepted Answer

A) a stock market 
B) the book publishing industry 
C) the steel industry 
D) the used car industry 
A) a stock market 
B) the book publishing industry 
C) the steel industry 
D) the used car industry

Question 20

If the perfectly competitive wiffle ball industry is bearing economic losses, we would expect that:

Accepted Answer

A) output will increase, the price of wiffle balls will rise, and the economic losses would tend to disappear. 
B) output will decrease, the price of wiffle balls will fall, and the economic losses would tend to increase. 
C) output will decrease, the price of wiffle balls will rise, and the economic losses would tend to disappear. 
D) output will increase, the price of wiffle balls will fall, and the economic losses would tend to disappear. 
A) output will increase, the price of wiffle balls will rise, and the economic losses would tend to disappear. 
B) output will decrease, the price of wiffle balls will fall, and the economic losses would tend to increase. 
C) output will decrease, the price of wiffle balls will rise, and the economic losses would tend to disappear. 
D) output will increase, the price of wiffle balls will fall, and the economic losses would tend to disappear.

In short run equilibrium in a perfectly competitive industry whose firms are earning economic profits, a firm:

Which of the following is true about the long run operations of perfectly competitive firms?

Perfectly competitive markets are characterized by:

Figure 7-H -What are the characteristics of a perfectly competitive industry?

The most socially efficient market structure in the long run is:

Extractive industries such as farming, mining, or lumbering typically:

Which of the following is not true in the long run under perfect competition?

Assume a perfectly competitive firm sells its output for $250 per unit.At its current 2,000 units of output, marginal cost is $180 and increasing, and average variable cost is $160.Assuming it wants to maximize its profits, it should:

Figure 7-A -Refer to Figure 7-A.In Graph B, the market demand has decreased from d₀ to d₁, and as a result:

In the short run, a perfectly competitive firm will maximize profit by producing where:

A profit-maximizing firm that is operating in the short run will sell an additional unit of output as long as:

Which of the following is false of perfectly competitive firms?

In long-run equilibrium, a perfectly competitive firm produces the output level that minimizes average total cost.

In a perfectly competitive market, in response to a permanent increase in demand:

When the marginal cost of a price-taking firm is less than the market price of its product, the firm should:

Assume that the equilibrium price in a perfectly competitive industry is $4.25.If a firm in this industry produced and sold 10 units with an average total cost of $5.00, what would be the result would be:

Figure 7-D -Refer to Figure 7-D.In the short run, if the market price falls to $40 per unit, the firm should:

Which of the following best resembles a perfectly competitive market?

If the perfectly competitive wiffle ball industry is bearing economic losses, we would expect that:

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

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Exam 7: Firms in Competitive Markets

In short run equilibrium in a perfectly competitive industry whose firms are earning economic profits, a firm:

Which of the following is true about the long run operations of perfectly competitive firms?

Perfectly competitive markets are characterized by:

Figure 7-H -What are the characteristics of a perfectly competitive industry?

The most socially efficient market structure in the long run is:

Extractive industries such as farming, mining, or lumbering typically:

Which of the following is not true in the long run under perfect competition?

Assume a perfectly competitive firm sells its output for $250 per unit.At its current 2,000 units of output, marginal cost is $180 and increasing, and average variable cost is $160.Assuming it wants to maximize its profits, it should:

Figure 7-A -Refer to Figure 7-A.In Graph B, the market demand has decreased from d0 to d1, and as a result:

In the short run, a perfectly competitive firm will maximize profit by producing where:

A profit-maximizing firm that is operating in the short run will sell an additional unit of output as long as:

Which of the following is false of perfectly competitive firms?

In long-run equilibrium, a perfectly competitive firm produces the output level that minimizes average total cost.

In a perfectly competitive market, in response to a permanent increase in demand:

When the marginal cost of a price-taking firm is less than the market price of its product, the firm should:

Assume that the equilibrium price in a perfectly competitive industry is $4.25.If a firm in this industry produced and sold 10 units with an average total cost of $5.00, what would be the result would be:

Figure 7-D -Refer to Figure 7-D.In the short run, if the market price falls to $40 per unit, the firm should:

Which of the following best resembles a perfectly competitive market?

If the perfectly competitive wiffle ball industry is bearing economic losses, we would expect that:

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Monopoly

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

Filters

Figure 7-A -Refer to Figure 7-A.In Graph B, the market demand has decreased from d₀ to d₁, and as a result: