Question 1

A perfectly competitive industry with constant costs initially operates in long-run equilibrium. When demand increases:

Accepted Answer

A)   in the short run, prices and profits will be higher, but in the long run, price will fall back to its original level and firms will again earn zero economic profit.
B)   in the long run and the short run, prices and profits will be higher than before the demand increase.
C)   in the short run, prices and profits will fall, but in the long run, price will rise back to its initial level, as will profits.
D)   in the long run and the short run, prices and profits will be lower than before the demand increase.E) B) and C)
F) A) and D)

Question 2

Individuals in a market who must take the market price as given are:

Accepted Answer

A)   quantity minimizers.
B)   quantity takers.
C)   price takers.
D)   price searchers.E) A) and B)
F) A) and C)

Question 3

Use the following to answer questions:
Figure: A Perfectly Competitive Firm in the Short Run 
-(Figure: A Perfectly Competitive Firm in the Short Run)  Look at the figure A Perfectly Competitive Firm in the Short Run. The firm will produce in the short run if the price is at least as high as point:

Accepted Answer

A)   F.
B)   E.
C)   N.
D)   P.E) None of the above
F) A) and C)

Question 4

If the price is consistently below the average variable cost, then in the short run a perfectly competitive firm should:

Accepted Answer

A)   raise the price.
B)   sell more output.
C)   shut down.
D)   lower the price to sell more.E) A) and B)
F) B) and D)

Question 5

Which of the following is a necessary condition for perfect competition?

Accepted Answer

A)   A small number of firms control a large share of the total market.
B)   Movement into and out of the market is limited.
C)   Firms produce a standardized product.
D)   Extensive advertising is used to promote the firm's product.E) B) and C)
F) C) and D)

Question 6

Which of the following statements is NOT characteristic of perfect competition?

Accepted Answer

A)   All firms produce the same standardized product.
B)   There are many producers, and each has only a small market share.
C)   There are many producers; one firm has a 25% market share, and all of the remaining firms have a market share of less than 2% each.
D)   There are no obstacles to entry into or exit from the industry.E) None of the above
F) A) and B)

Question 7

Which of the following is TRUE?

Accepted Answer

A)   If price falls below average variable cost, the firm will shut down in the short run.
B)   Total revenue and marginal revenue are the same in perfect competition.
C)   Economic profit per unit is found by subtracting MC from price.
D)   Economic profit is always positive in the long run.E) A) and C)
F) All of the above

Question 8

Use the following to answer questions: 
-(Table: Total Cost and Output)  Look at the table Total Cost and Output, which describes Sergei's total costs for his perfectly competitive all-natural ice cream firm. If the market price of a tub of ice cream is $67.50, how much is Sergei's total cost at the profit-maximizing output?

Accepted Answer

A)   $270.00
B)   $170.00
C)   $135.00
D)   $67.50E) A) and B)
F) None of the above

Question 9

Use the following to answer questions:
Figure: The Marginal Decision Rule 1) : A)  economic profit is the vertical distance between curves B and MC. B)  the firm is not maximizing profits. C)  the firm is maximizing profits. D)  the firm should produce less." class="answers-bank-image d-inline" rel="preload" >
-(Figure: Marginal Decision Rule)  Look at the figure The Marginal Decision Rule. To the left of point C (e.g., at q1) :

Accepted Answer

A)   economic profit is the vertical distance between curves B and MC.
B)   the firm is not maximizing profits.
C)   the firm is maximizing profits.
D)   the firm should produce less.E) C) and D)
F) A) and D)

Question 10

In the model of perfect competition:

Accepted Answer

A)   the consumer is at the mercy of powerful firms that can set prices wherever they prefer.
B)   individual firms can influence the price, but only slightly.
C)   no individual or firm has enough power to affect price.
D)   the price is determined by how many years are left in the product's patent.E) A) and B)
F) All of the above

Question 11

In the short run, a perfectly competitive firm produces output and earns ZERO economic profit if:

Accepted Answer

A)   P 
B)   P = ATC.
C)   P 
D)   P > ATC.E) None of the above
F) B) and D)

Question 12

Use the following to answer questions: 
-(Table: Soybean Cost)  Look at the table Soybean Cost. If the market price of a bushel of soybeans is $15, what will be the farmer's short-run maximum profit?

Accepted Answer

A)   $75
B)   $69
C)   $6
D)   $5E) A) and C)
F) B) and C)

Question 13

Use the following to answer questions:
Figure: Short-Run Costs 
-(Figure: Short-Run Costs)  Look at the figure Short-Run Costs. This firm's short-run supply curve begins at quantity:

Accepted Answer

A)   Q.
B)   R.
C)   S.
D)   T.E) None of the above
F) B) and D)

Question 14

Use the following to answer question : 
-(Table: Lilly's Apple Orchard)  Look at the table Lilly's Apple Orchard. Lilly is the price-taking owner of an apple orchard; the orchard's variable costs are given in the table. Her orchard has fixed costs of $30. If the price of a bushel of apples is $85, we would expect total industry output to _____ and Lilly's output to _____ in the long run.

Accepted Answer

A)   rise; rise
B)   fall; fall
C)   fall; rise
D)   rise; fallE) B) and C)
F) C) and D)

Question 15

Use the following to answer questions:
Figure: The Profit-Maximizing Firm in the Short Run 3, the firm will produce quantity _____ and _____ in the short run. A)  q2; make a profit B)  q1; break even C)  q2; incur a loss D)  q4; incur a loss" class="answers-bank-image d-inline" rel="preload" >
-(Figure: The Profit-Maximizing Firm in the Short Run)  Look at the figure The Profit-Maximizing Firm in the Short Run. If the market price is P3, the firm will produce quantity _____ and _____ in the short run.

Accepted Answer

A)   q2; make a profit
B)   q1; break even
C)   q2; incur a loss
D)   q4; incur a lossE) A) and D)
F) B) and C)

Question 16

A perfectly competitive tomato industry is in long-run equilibrium. Now suppose that some consumers are getting sick by eating tomatoes that contain salmonella. Describe how this change will affect short-run economic profits. What will happen to the number of tomato growers in the long run? How will price and output in this industry adjust in the long run?

Accepted Answer

In long-run equilibrium, price equals av...

Question 17

Total revenue is a firm's:

Accepted Answer

A)   change in revenue resulting from a unit change in output.
B)   ratio of revenue to quantity.
C)   difference between revenue and cost.
D)   total output times the price of that output.E) B) and D)
F) None of the above

Question 18

In a perfectly competitive market, tastes and preferences lead to an increase in the demand for the good. Holding everything else constant, this will lead to an increase in price that will result in _____, which will _____, which will _____.

Accepted Answer

A)   positive economic profits; attract new firms; reduce the price
B)   economic losses; attract new firms; reduce the price
C)   positive economic profits; lead some firms to leave the industry; further increase the price
D)   economic losses; lead some firms to leave the industry; further increase the priceE) A) and B)
F) None of the above

Question 19

Which of the following is MOST likely to cause firms to exit a perfectly competitive industry?

Accepted Answer

A)   Consumer tastes and preferences for this product get stronger.
B)   A technological advance allows all firms to produce more efficiently.
C)   The price of a key variable input falls.
D)   Consumer income falls.E) All of the above
F) None of the above

Question 20

When a firm cannot affect the market price of the good that it sells, it is said to be a:

Accepted Answer

A)   price taker.
B)   natural monopoly.
C)   dominant firm.
D)   cartel.E) None of the above
F) All of the above

Exam 11: Perfect Competition and the Supply Curve

When a firm cannot affect the market price of the good that it sells, it is said to be a:

Correct Answer
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Which of the following is TRUE?

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Which of the following is MOST likely to cause firms to exit a perfectly competitive industry?

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Correct Answer
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In long-run equilibrium, price equals av...
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In the short run, a perfectly competitive firm produces output and earns ZERO economic profit if:

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Use the following to answer questions: Figure: Short-Run Costs -(Figure: Short-Run Costs) Look at the figure Short-Run Costs. This firm's short-run supply curve begins at quantity:

Correct Answer
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Which of the following is a necessary condition for perfect competition?

Correct Answer
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A perfectly competitive industry with constant costs initially operates in long-run equilibrium. When demand increases:

Correct Answer
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Correct Answer
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Individuals in a market who must take the market price as given are:

Correct Answer
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Use the following to answer questions: Figure: The Marginal Decision Rule -(Figure: Marginal Decision Rule) Look at the figure The Marginal Decision Rule. To the left of point C (e.g., at q₁) :

Correct Answer
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Total revenue is a firm's:

Correct Answer
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In a perfectly competitive market, tastes and preferences lead to an increase in the demand for the good. Holding everything else constant, this will lead to an increase in price that will result in ___, which will _, which will ___.

Correct Answer
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Use the following to answer questions: Figure: A Perfectly Competitive Firm in the Short Run -(Figure: A Perfectly Competitive Firm in the Short Run) Look at the figure A Perfectly Competitive Firm in the Short Run. The firm will produce in the short run if the price is at least as high as point:

Correct Answer
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Which of the following statements is NOT characteristic of perfect competition?

Correct Answer
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If the price is consistently below the average variable cost, then in the short run a perfectly competitive firm should:

Correct Answer
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Use the following to answer questions: Figure: The Profit-Maximizing Firm in the Short Run -(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The Profit-Maximizing Firm in the Short Run. If the market price is P₃, the firm will produce quantity _ and _ in the short run.

Correct Answer
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Use the following to answer questions: -(Table: Soybean Cost) Look at the table Soybean Cost. If the market price of a bushel of soybeans is $15, what will be the farmer's short-run maximum profit?

Correct Answer
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Correct Answer
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In the model of perfect competition:

Correct Answer
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Exam 11: Perfect Competition and the Supply Curve

When a firm cannot affect the market price of the good that it sells, it is said to be a:

Correct AnswerverifiedShow Answer

Which of the following is TRUE?

Correct AnswerverifiedShow Answer

Which of the following is MOST likely to cause firms to exit a perfectly competitive industry?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedIn long-run equilibrium, price equals av...View AnswerShow Answer

In the short run, a perfectly competitive firm produces output and earns ZERO economic profit if:

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: Short-Run Costs -(Figure: Short-Run Costs) Look at the figure Short-Run Costs. This firm's short-run supply curve begins at quantity:

Correct AnswerverifiedShow Answer

Which of the following is a necessary condition for perfect competition?

Correct AnswerverifiedShow Answer

A perfectly competitive industry with constant costs initially operates in long-run equilibrium. When demand increases:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Individuals in a market who must take the market price as given are:

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: The Marginal Decision Rule -(Figure: Marginal Decision Rule) Look at the figure The Marginal Decision Rule. To the left of point C (e.g., at q1) :

Correct AnswerverifiedShow Answer

Total revenue is a firm's:

Correct AnswerverifiedShow Answer

In a perfectly competitive market, tastes and preferences lead to an increase in the demand for the good. Holding everything else constant, this will lead to an increase in price that will result in _____, which will _____, which will _____.

Correct AnswerverifiedShow Answer

Use the following to answer questions: Figure: A Perfectly Competitive Firm in the Short Run -(Figure: A Perfectly Competitive Firm in the Short Run) Look at the figure A Perfectly Competitive Firm in the Short Run. The firm will produce in the short run if the price is at least as high as point:

Correct AnswerverifiedShow Answer

Which of the following statements is NOT characteristic of perfect competition?

Correct AnswerverifiedShow Answer

If the price is consistently below the average variable cost, then in the short run a perfectly competitive firm should:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Use the following to answer questions: -(Table: Soybean Cost) Look at the table Soybean Cost. If the market price of a bushel of soybeans is $15, what will be the farmer's short-run maximum profit?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the model of perfect competition:

Correct AnswerverifiedShow Answer

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Correct Answer
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Correct Answer
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Correct Answer
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In long-run equilibrium, price equals av...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Use the following to answer questions: Figure: The Marginal Decision Rule -(Figure: Marginal Decision Rule) Look at the figure The Marginal Decision Rule. To the left of point C (e.g., at q₁) :

Correct Answer
verified

Correct Answer
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In a perfectly competitive market, tastes and preferences lead to an increase in the demand for the good. Holding everything else constant, this will lead to an increase in price that will result in ___, which will _, which will ___.

Correct Answer
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Correct Answer
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Correct Answer
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