Question 1

All of the following are characteristics of a perfectly competitive industry EXCEPT

Accepted Answer

A)  the product sold is homogeneous. 
B)  firms in the industry are price takers. 
C)  buyers and sellers have equal access to information. 
D)  there are a large number of buyers and sellers with only a few being able to influence the market price. 
A)  the product sold is homogeneous. 
B)  firms in the industry are price takers. 
C)  buyers and sellers have equal access to information. 
D)  there are a large number of buyers and sellers with only a few being able to influence the market price.

Question 2

-In the above figure, what is the profit-maximizing output and price?

Accepted Answer

A)  8, $7 
B)  10, $8 
C)  12, $10 
D)  10, $10 
A)  8, $7 
B)  10, $8 
C)  12, $10 
D)  10, $10

Question 3

What does a perfectly competitive firm do to maximize profits?

Accepted Answer

The perfect competitor cannot influence

Question 4

The perfectly competitive firm cannot influence the market price because

Accepted Answer

A)  it has market power. 
B)  its production is too small to affect the market. 
C)  a few buyers have control over the market price. 
D)  its costs are too high. 
A)  it has market power. 
B)  its production is too small to affect the market. 
C)  a few buyers have control over the market price. 
D)  its costs are too high.

Question 5

A perfectly elastic demand function

Accepted Answer

A)  shows that a consumer is willing to pay any amount for the product. 
B)  is characteristic of an individual firm operating in a perfectly competitive market. 
C)  shows that the individual firm can increase sales by lowering the price of output. 
D)  has a marginal revenue that is always decreasing. 
A)  shows that a consumer is willing to pay any amount for the product. 
B)  is characteristic of an individual firm operating in a perfectly competitive market. 
C)  shows that the individual firm can increase sales by lowering the price of output. 
D)  has a marginal revenue that is always decreasing.

Question 6

What determines whether the industry long-run supply curve is upward sloping or horizontal?

Accepted Answer

When firms enter and exit the industry,

Question 7

All firms in a perfect competition industry

Accepted Answer

A)  are price makers. 
B)  produce differentiated products. 
C)  produce identical products. 
D)  lose money. 
A)  are price makers. 
B)  produce differentiated products. 
C)  produce identical products. 
D)  lose money.

Question 8

-When a firm is earning zero economic profits

Accepted Answer

A)  accounting profit is zero. 
B)  total revenue is greater than total cost. 
C)  P = ATC. 
D)  P is greater than ATC. 
A)  accounting profit is zero. 
B)  total revenue is greater than total cost. 
C)  P = ATC. 
D)  P is greater than ATC.

Question 9

Along a perfectly competitive industry's long-run supply curve

Accepted Answer

A)  economic profits are positive. 
B)  economic profits are zero. 
C)  the market price is higher than the marginal costs of firms 
D)  the number of firms is constant. 
A)  economic profits are positive. 
B)  economic profits are zero. 
C)  the market price is higher than the marginal costs of firms 
D)  the number of firms is constant.

Question 10

The perfectly competitive seller's short-run supply curve is

Accepted Answer

A)  its entire marginal cost curve. 
B)  its marginal revenue curve. 
C)  the part of its marginal cost curve above the average variable cost curve. 
D)  the part of its marginal cost curve above the average total cost curve. 
A)  its entire marginal cost curve. 
B)  its marginal revenue curve. 
C)  the part of its marginal cost curve above the average variable cost curve. 
D)  the part of its marginal cost curve above the average total cost curve.

Question 11

A perfectly competitive firm cannot earn an economic profit in the long run because

Accepted Answer

A)  it is a "price-maker." 
B)  it faces a perfectly inelastic demand curve. 
C)  there are no barriers to entry into the industry. 
D)  all firms in the industry earn accounting profits. 
A)  it is a "price-maker." 
B)  it faces a perfectly inelastic demand curve. 
C)  there are no barriers to entry into the industry. 
D)  all firms in the industry earn accounting profits.

Question 12

Which of the following is NOT a characteristic of a perfectly competitive industry?

Accepted Answer

A)  There are large numbers of buyers and sellers. 
B)  The firms in the industry produce a homogeneous product. 
C)  Sellers have better information about the product than consumers. 
D)  Any firm can enter or leave the industry without serious impediments. 
A)  There are large numbers of buyers and sellers. 
B)  The firms in the industry produce a homogeneous product. 
C)  Sellers have better information about the product than consumers. 
D)  Any firm can enter or leave the industry without serious impediments.

Question 13

In a perfectly competitive industry, the industry demand curve

Accepted Answer

A)  must be horizontal. 
B)  must be vertical. 
C)  is upward sloping. 
D)  is downward sloping. 
A)  must be horizontal. 
B)  must be vertical. 
C)  is upward sloping. 
D)  is downward sloping.

Question 14

-Refer to the above table. If the price is $6 the maximum profit this firm could earn is

Accepted Answer

A)  $210. 
B)  $414. 
C)  $420. 
D)  $630. 
A)  $210. 
B)  $414. 
C)  $420. 
D)  $630.

Question 15

Suppose a perfectly competitive industry is in long-run equilibrium. If a decrease in demand leads to a higher long-run price, we know that

Accepted Answer

A)  this is a decreasing-cost industry. 
B)  this is an increasing-cost industry. 
C)  some firms will be losing money in the long run. 
D)  after further adjustments, price will fall to its original level. 
A)  this is a decreasing-cost industry. 
B)  this is an increasing-cost industry. 
C)  some firms will be losing money in the long run. 
D)  after further adjustments, price will fall to its original level.

Question 16

For a firm in a perfectly competitive industry

Accepted Answer

A)  short-run economic profits must be zero. 
B)  short-run and long-run economic profits must be zero. 
C)  short-run economic profits may be positive, but long-run economic profits must be zero. 
D)  both short-run and long-run economic profits may be negative. 
A)  short-run economic profits must be zero. 
B)  short-run and long-run economic profits must be zero. 
C)  short-run economic profits may be positive, but long-run economic profits must be zero. 
D)  both short-run and long-run economic profits may be negative.

Question 17

Using a graph, show a short-run equilibrium for the industry and the firm. Explain the graph.

Accepted Answer

@#IMG-DLM& In the above figure, the industry deman

Question 18

Which of the following is NOT a characteristic of a perfectly competitive industry?

Accepted Answer

A)  There is free entry and exit in the long run. 
B)  The industry demand curve is downward sloping. 
C)  Each firm produces the same homogeneous product. 
D)  Economic profits must be positive in the short run. 
A)  There is free entry and exit in the long run. 
B)  The industry demand curve is downward sloping. 
C)  Each firm produces the same homogeneous product. 
D)  Economic profits must be positive in the short run.

Question 19

Firms in a perfectly competitive industry are producing goods efficiently in the long run if each is producing at the minimum point of the

Accepted Answer

A)  AVC curve. 
B)  MC curve. 
C)  LAC curve. 
D)  AFC curve. 
A)  AVC curve. 
B)  MC curve. 
C)  LAC curve. 
D)  AFC curve.

Question 20

What does it mean when the products sold by the firms in an industry are homogeneous?

Accepted Answer

A)  The product sold by one firm is a perfect substitute of the product sold by another firm in the same industry. 
B)  Firms in the industry can produce the same product with different inputs. 
C)  All firms in the industry are identical in size. 
D)  The product sold by one firm is a perfect complement of the product sold by another firm in the same industry. 
A)  The product sold by one firm is a perfect substitute of the product sold by another firm in the same industry. 
B)  Firms in the industry can produce the same product with different inputs. 
C)  All firms in the industry are identical in size. 
D)  The product sold by one firm is a perfect complement of the product sold by another firm in the same industry.

Exam 23: Perfect Competition

All of the following are characteristics of a perfectly competitive industry EXCEPT

-In the above figure, what is the profit-maximizing output and price?

What does a perfectly competitive firm do to maximize profits?

The perfectly competitive firm cannot influence the market price because

A perfectly elastic demand function

What determines whether the industry long-run supply curve is upward sloping or horizontal?

All firms in a perfect competition industry

-When a firm is earning zero economic profits

Along a perfectly competitive industry's long-run supply curve

The perfectly competitive seller's short-run supply curve is

A perfectly competitive firm cannot earn an economic profit in the long run because

Which of the following is NOT a characteristic of a perfectly competitive industry?

In a perfectly competitive industry, the industry demand curve

-Refer to the above table. If the price is $6 the maximum profit this firm could earn is

Suppose a perfectly competitive industry is in long-run equilibrium. If a decrease in demand leads to a higher long-run price, we know that

For a firm in a perfectly competitive industry

Using a graph, show a short-run equilibrium for the industry and the firm. Explain the graph.

Which of the following is NOT a characteristic of a perfectly competitive industry?

Firms in a perfectly competitive industry are producing goods efficiently in the long run if each is producing at the minimum point of the

What does it mean when the products sold by the firms in an industry are homogeneous?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Monopoly

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

Filters