Question 1

The demand curve facing a perfectly competitive firm is:

Accepted Answer

A) perfectly inelastic. 
B) perfectly elastic. 
C) unit elastic. 
D) downward sloping. 
E) upward sloping. 
A) perfectly inelastic. 
B) perfectly elastic. 
C) unit elastic. 
D) downward sloping. 
E) upward sloping.

Question 2

A profit maximizing perfectly competitive firm would never operate at an output level where

Accepted Answer

A) it would not cover all of its variable costs. 
B) it was not earning a positive economic profit. 
C) it was not earning a zero economic profit. 
D) it was not earning an accounting profit. 
A) it would not cover all of its variable costs. 
B) it was not earning a positive economic profit. 
C) it was not earning a zero economic profit. 
D) it was not earning an accounting profit.

Question 3

The long-run supply curve for a decreasing-cost industry is:

Accepted Answer

A) upward sloping. 
B) downward sloping. 
C) vertical. 
D) horizontal. 
A) upward sloping. 
B) downward sloping. 
C) vertical. 
D) horizontal.

Question 4

In a perfectly competitive market, marginal revenue is the same as the market price.

Accepted Answer

A) True 
 B)False

Question 5

Beginning from a long run equilibrium in an increasing cost industry, if there is a substantial, permanent fall in demand for industry output:

Accepted Answer

A) firms will leave the industry, the quantity produced will fall, and prices will end up lower than their initial long run equilibrium level. 
B) firms will leave the industry, the quantity produced will fall, and prices will end up higher than their initial long run equilibrium level. 
C) firms will leave the industry, the quantity produced will fall, and prices will end up at the same level as their initial long run equilibrium level. 
D) firms will enter the industry, the quantity produced will rise, and prices will end up lower than their initial long run equilibrium level. 
A) firms will leave the industry, the quantity produced will fall, and prices will end up lower than their initial long run equilibrium level. 
B) firms will leave the industry, the quantity produced will fall, and prices will end up higher than their initial long run equilibrium level. 
C) firms will leave the industry, the quantity produced will fall, and prices will end up at the same level as their initial long run equilibrium level. 
D) firms will enter the industry, the quantity produced will rise, and prices will end up lower than their initial long run equilibrium level.

Question 6

Which of the following is most likely to be a price taker?

Accepted Answer

A) a respected heart surgeon 
B) an ice cream shop owner located in Atlanta, Georgia 
C) a beachside tourist resort 
D) a Kansas wheat farmer 
A) a respected heart surgeon 
B) an ice cream shop owner located in Atlanta, Georgia 
C) a beachside tourist resort 
D) a Kansas wheat farmer

Question 7

Figure 7-D  
-Refer to Figure 7-D.The firm's supply curve corresponds to which segment of the marginal cost curve in the diagram?

Accepted Answer

A) ABCDE 
B) BCDE 
C) CDE 
D) DE 
E) BCD 
A) ABCDE 
B) BCDE 
C) CDE 
D) DE 
E) BCD

Question 8

In long-run perfectly competitive equilibrium:

Accepted Answer

A) all firms suffer economic losses. 
B) all firms earn zero economic profits. 
C) all firms earn positive economic profits. 
D) barriers prevent the entry of new firms. 
A) all firms suffer economic losses. 
B) all firms earn zero economic profits. 
C) all firms earn positive economic profits. 
D) barriers prevent the entry of new firms.

Question 9

A perfectly competitive firm has no influence over price because:

Accepted Answer

A) its output is insignificant relative to the market as a whole. 
B) antitrust laws constrain perfectly competitive firms. 
C) consumers establish the prices of products. 
D) it is unaware of the demand curve it faces. 
A) its output is insignificant relative to the market as a whole. 
B) antitrust laws constrain perfectly competitive firms. 
C) consumers establish the prices of products. 
D) it is unaware of the demand curve it faces.

Question 10

Say that Japanese firms commit not to lay off their employees when demand for their products is low, but American firms often lay off workers when demand is low.As a result, ceteris paribus, we would expect Japanese firms to:

Accepted Answer

A) face more elastic demand curves than American firms. 
B) have relatively greater variable costs than American firms. 
C) continue to produce at some prices at which American firms would shut down. 
D) shut down at prices at which American firms would continue to operate. 
A) face more elastic demand curves than American firms. 
B) have relatively greater variable costs than American firms. 
C) continue to produce at some prices at which American firms would shut down. 
D) shut down at prices at which American firms would continue to operate.

Question 11

What is the maximum amount of profit the perfectly competitive firm depicted below could earn in the short run?

Accepted Answer

A) $900 
B) $1,120 
C) $1,260 
D) $2,000 
E) $2,800 
A) $900 
B) $1,120 
C) $1,260 
D) $2,000 
E) $2,800

Question 12

Table 7-B
The long-run total cost schedule of a perfectly competitive firm that produces walnuts is as follows:
 $\begin{array}{llcc}
  \text {  Pounds of} & 1,000&2,000&3,000&4,000&5,000&6,000 \
 \text {  Walnuts } &\
 \text {   Total Cost} &\$3,000&\$5,500&\$7,500&\$8,000&\$11,000&\$15,000\
\end{array}$

-Refer to Table 7-B.The average total cost of producing 6,000 pounds of walnuts in the long run is:

Accepted Answer

A) $2.00 
B) $2.20. 
C) $2.50. 
D) $2.75. 
E) $3.00 
A) $2.00 
B) $2.20. 
C) $2.50. 
D) $2.75. 
E) $3.00

Question 13

In a perfectly competitive industry, influence over price is exerted by:

Accepted Answer

A) individual sellers. 
B) individual buyers. 
C) the largest firms. 
D) the forces of supply and demand. 
A) individual sellers. 
B) individual buyers. 
C) the largest firms. 
D) the forces of supply and demand.

Question 14

If a perfectly competitive industry uses a large proportion of the available inputs in a resource market, then the long-run market supply curve for the industry will most likely be:

Accepted Answer

A) vertical. 
B) horizontal. 
C) upward sloping. 
D) downward sloping. 
E) none of the above. 
A) vertical. 
B) horizontal. 
C) upward sloping. 
D) downward sloping. 
E) none of the above.

Question 15

A perfectly competitive firm faces a perfectly elastic demand curve.

Accepted Answer

A) True 
 B)False

Question 16

The behavior of an individual perfectly competitive firm has a perceptible influence on the market price.

Accepted Answer

A) True 
 B)False

Question 17

Toys for Twerps, Inc., sells in a perfectly competitive market, with an equilibrium price of $5.Its marginal revenue:

Accepted Answer

A) is greater than $5. 
B) is $5. 
C) is less than $5. 
D) is less than zero. 
E) cannot be determined from the above information. 
A) is greater than $5. 
B) is $5. 
C) is less than $5. 
D) is less than zero. 
E) cannot be determined from the above information.

Question 18

Figure 7-D  
-Refer to Figure 7-D.The lowest price at which the firm can earn at least zero economic profit is:

Accepted Answer

A) $60. 
B) $45. 
C) $30. 
D) $10. 
E) none of the above. 
A) $60. 
B) $45. 
C) $30. 
D) $10. 
E) none of the above.

Question 19

Which of the following is false about the long run?

Accepted Answer

A) The long-run equilibrium output for a firm in perfect competition occurs at the lowest point on the average total cost curve. 
B) The shape of the long-run supply curve depends on the extent to which input costs change when there is entry or exit of firms in the industry. 
C) In a constant-cost industry, the prices of inputs do not change as output is expanded. 
D) In an increasing-cost industry, the cost curves of the individual firms rise as the total output of the industry decreases. 
E) All of the above are true. 
A) The long-run equilibrium output for a firm in perfect competition occurs at the lowest point on the average total cost curve. 
B) The shape of the long-run supply curve depends on the extent to which input costs change when there is entry or exit of firms in the industry. 
C) In a constant-cost industry, the prices of inputs do not change as output is expanded. 
D) In an increasing-cost industry, the cost curves of the individual firms rise as the total output of the industry decreases. 
E) All of the above are true.

Question 20

Farmer Brady sells wheat in a market where sellers are price takers.Which of the following is true in regard to Farmer Brady's production and pricing decisions?

Accepted Answer

A) Farmer Brady will be able to increase the total revenue from the sale of his wheat if he increases the price of the wheat. 
B) Since the market dictates the price of his product, Farmer Brady will have no incentive to minimize per-unit production costs. 
C) Since the market dictates the price of his product, Farmer Brady has no production decisions to make. 
D) It would be senseless for Farmer Brady to try to increase sales by lowering the price of his product. His entire output can be sold at the market price. 
A) Farmer Brady will be able to increase the total revenue from the sale of his wheat if he increases the price of the wheat. 
B) Since the market dictates the price of his product, Farmer Brady will have no incentive to minimize per-unit production costs. 
C) Since the market dictates the price of his product, Farmer Brady has no production decisions to make. 
D) It would be senseless for Farmer Brady to try to increase sales by lowering the price of his product. His entire output can be sold at the market price.

The demand curve facing a perfectly competitive firm is:

A profit maximizing perfectly competitive firm would never operate at an output level where

The long-run supply curve for a decreasing-cost industry is:

In a perfectly competitive market, marginal revenue is the same as the market price.

Beginning from a long run equilibrium in an increasing cost industry, if there is a substantial, permanent fall in demand for industry output:

Which of the following is most likely to be a price taker?

Figure 7-D -Refer to Figure 7-D.The firm's supply curve corresponds to which segment of the marginal cost curve in the diagram?

In long-run perfectly competitive equilibrium:

A perfectly competitive firm has no influence over price because:

Say that Japanese firms commit not to lay off their employees when demand for their products is low, but American firms often lay off workers when demand is low.As a result, ceteris paribus, we would expect Japanese firms to:

What is the maximum amount of profit the perfectly competitive firm depicted below could earn in the short run?

In a perfectly competitive industry, influence over price is exerted by:

If a perfectly competitive industry uses a large proportion of the available inputs in a resource market, then the long-run market supply curve for the industry will most likely be:

A perfectly competitive firm faces a perfectly elastic demand curve.

The behavior of an individual perfectly competitive firm has a perceptible influence on the market price.

Toys for Twerps, Inc., sells in a perfectly competitive market, with an equilibrium price of $5.Its marginal revenue:

Figure 7-D -Refer to Figure 7-D.The lowest price at which the firm can earn at least zero economic profit is:

Which of the following is false about the long run?

Farmer Brady sells wheat in a market where sellers are price takers.Which of the following is true in regard to Farmer Brady's production and pricing decisions?

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

The demand curve facing a perfectly competitive firm is:

A profit maximizing perfectly competitive firm would never operate at an output level where

The long-run supply curve for a decreasing-cost industry is:

In a perfectly competitive market, marginal revenue is the same as the market price.

Beginning from a long run equilibrium in an increasing cost industry, if there is a substantial, permanent fall in demand for industry output:

Which of the following is most likely to be a price taker?

Figure 7-D -Refer to Figure 7-D.The firm's supply curve corresponds to which segment of the marginal cost curve in the diagram?

In long-run perfectly competitive equilibrium:

A perfectly competitive firm has no influence over price because:

Say that Japanese firms commit not to lay off their employees when demand for their products is low, but American firms often lay off workers when demand is low.As a result, ceteris paribus, we would expect Japanese firms to:

What is the maximum amount of profit the perfectly competitive firm depicted below could earn in the short run?

In a perfectly competitive industry, influence over price is exerted by:

If a perfectly competitive industry uses a large proportion of the available inputs in a resource market, then the long-run market supply curve for the industry will most likely be:

A perfectly competitive firm faces a perfectly elastic demand curve.

The behavior of an individual perfectly competitive firm has a perceptible influence on the market price.

Toys for Twerps, Inc., sells in a perfectly competitive market, with an equilibrium price of $5.Its marginal revenue:

Figure 7-D -Refer to Figure 7-D.The lowest price at which the firm can earn at least zero economic profit is:

Which of the following is false about the long run?

Farmer Brady sells wheat in a market where sellers are price takers.Which of the following is true in regard to Farmer Brady's production and pricing decisions?

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