Question 1

In the long run, the firms in a perfectly competitive market

Accepted Answer

A)  maximize their profit. 
B)  make an economic profit. 
C)  display price setting behavior. 
D)  are protected by barriers to entry. 
A)  maximize their profit. 
B)  make an economic profit. 
C)  display price setting behavior. 
D)  are protected by barriers to entry. A

Question 2

-The table above shows some of the costs for a perfectly competitive firm. The firm will produce 9 units of output if the price per unit is

Accepted Answer

A)  $1750. 
B)  $200. 
C)  $300. 
D)  $500. 
A)  $1750. 
B)  $200. 
C)  $300. 
D)  $500. B

Question 3

The industry that produces zangs is in long-run equilibrium. Then the demand for zangs increases permanently. As a result, firms in the industry will ________. Some firms will ________ the industry, and the industry supply curve will shift ________.

Accepted Answer

A)  make economic an profit; enter; rightward 
B)  make zero economic profit; exit; leftward 
C)  incur economic losses; exit; rightward 
D)  incur economic losses; exit; leftward 
A)  make economic an profit; enter; rightward 
B)  make zero economic profit; exit; leftward 
C)  incur economic losses; exit; rightward 
D)  incur economic losses; exit; leftward A

Question 4

-The figure above shows a perfectly competitive firm. The figure shows a firm

Accepted Answer

A)  in the short run. 
B)  in the long run. 
C)  at its shutdown point. 
D)  Both answers A and C are correct. 
A)  in the short run. 
B)  in the long run. 
C)  at its shutdown point. 
D)  Both answers A and C are correct.

Question 5

Which of the following is NOT an assumption of perfect competition?

Accepted Answer

A)  Firms compete by making their product different from products produced by other firms. 
B)  There are no restrictions on entry into the market. 
C)  Established firms have no advantage over new firms. 
D)  Sellers and buyers are well informed about prices. 
A)  Firms compete by making their product different from products produced by other firms. 
B)  There are no restrictions on entry into the market. 
C)  Established firms have no advantage over new firms. 
D)  Sellers and buyers are well informed about prices.

Question 6

-In the above figure, if the price is $12, a profit-maximizing perfectly competitive firm will have an economic profit

Accepted Answer

A)  of less than $100 but more than $0. 
B)  of more than $100. 
C)  that is negative, that is, it will have an economic loss. 
D)  of zero, that is, it will break even with a normal profit. 
A)  of less than $100 but more than $0. 
B)  of more than $100. 
C)  that is negative, that is, it will have an economic loss. 
D)  of zero, that is, it will break even with a normal profit.

Question 7

-Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. What is Archibald's shut-down point?

Accepted Answer

A)  $10.00 
B)  $16.67 
C)  $15.00 
D)  $12.50 
A)  $10.00 
B)  $16.67 
C)  $15.00 
D)  $12.50

Question 8

If the price of its product just equals the average variable cost of production for a competitive firm,

Accepted Answer

A)  total revenue equals total fixed cost and the firm's loss equals total variable cost. 
B)  total revenue equals total variable cost and the firm's loss equals total fixed cost. 
C)  total fixed cost is zero. 
D)  total variable cost equals total fixed cost. 
A)  total revenue equals total fixed cost and the firm's loss equals total variable cost. 
B)  total revenue equals total variable cost and the firm's loss equals total fixed cost. 
C)  total fixed cost is zero. 
D)  total variable cost equals total fixed cost.

Question 9

Suppose firms in a perfectly competitive market are earning an economic profit. As new firms enter, the price ________ and the economic profit of each existing firm ________.

Accepted Answer

A)  rises; increases 
B)  rises; decreases 
C)  falls; increases 
D)  falls; decreases 
A)  rises; increases 
B)  rises; decreases 
C)  falls; increases 
D)  falls; decreases

Question 10

In a perfectly competitive market, if a firm finds it is producing an amount of output such that its marginal cost exceeds its price, it will

Accepted Answer

A)  immediately shut down for the short run. 
B)  be maximizing profits. 
C)  increase its output to increase its profit. 
D)  decrease its output to increase its profit. 
A)  immediately shut down for the short run. 
B)  be maximizing profits. 
C)  increase its output to increase its profit. 
D)  decrease its output to increase its profit.

Question 11

In perfect competition, the firm's marginal revenue curve

Accepted Answer

A)  cuts its demand curve from below, going from left to right. 
B)  cuts its demand curve from above, going from left to right. 
C)  always lies below its demand curve. 
D)  is the same as its demand curve. 
A)  cuts its demand curve from below, going from left to right. 
B)  cuts its demand curve from above, going from left to right. 
C)  always lies below its demand curve. 
D)  is the same as its demand curve.

Question 12

In perfect competition, an individual firm

Accepted Answer

A)  sets the price and determines the quantity it sells in the marketplace. 
B)  sets the price but does not determine the quantity it sells in the marketplace. 
C)  determines the quantity it sells in the marketplace but has no influence over its price. 
D)  can not affect its price nor determine the quantity it sells in the marketplace. 
A)  sets the price and determines the quantity it sells in the marketplace. 
B)  sets the price but does not determine the quantity it sells in the marketplace. 
C)  determines the quantity it sells in the marketplace but has no influence over its price. 
D)  can not affect its price nor determine the quantity it sells in the marketplace.

Question 13

Suppose the bobby pin industry is perfectly competitive. The price of a packet of bobby pins is $2.00. Pins and Needles, Inc. is a firm in this industry and is producing 1,000 packets of bobby pins per day at the point where the MC = MR. The average cost of production at this output level is $1.50 per packet.
a) What is the marginal cost of the 1,000th packet?
b) Is this firm making an economic profit, zero economical profit, or an economic loss? How much?
c) Is the firm in long-run equilibrium? Why or why not?

Accepted Answer

a) The price per packet is $2, which is

Question 14

A competitive firm's total revenue minus its total opportunity cost equals its ________.

Accepted Answer

A)  marginal revenue 
B)  economic profit 
C)  opportunity cost 
D)  normal profit 
A)  marginal revenue 
B)  economic profit 
C)  opportunity cost 
D)  normal profit

Question 15

-The table above gives the total revenue and total cost for a perfectly competitive firm producing chocolate chip cookies. If the firm is producing 1 pound of cookies, to maximize its profit it will

Accepted Answer

A)  increase its output. 
B)  decrease its output. 
C)  continue producing 1 pound of cookies. 
D)  shut down. 
A)  increase its output. 
B)  decrease its output. 
C)  continue producing 1 pound of cookies. 
D)  shut down.

Question 16

The USDA maintains ethanol has an impact on food prices. "Higher ethanol production definitely and directly raises the price of corn," said USDA economist Ephraim Leibtag. In the short run, what is true if the production of ethanol increases?

Accepted Answer

A)  The demand for corn will increase. 
B)  The supply of ethanol will decrease. 
C)  The supply of corn will increase. 
D)  The demand for ethanol will increase. 
A)  The demand for corn will increase. 
B)  The supply of ethanol will decrease. 
C)  The supply of corn will increase. 
D)  The demand for ethanol will increase.

Question 17

Hubert's Copy Services is in perfect competition. Hubert currently charges 10 cents per page, which is the going market price. He thinks that he can increase his profit by raising the price. Is it possible? Why or why not?

Accepted Answer

If Hubert raises his price, his profit w

Question 18

In the short run, a perfectly competitive firm will shut down if

Accepted Answer

A)  it incurs any economic loss. 
B)  price equals average cost. 
C)  total revenue is less than total variable cost. 
D)  total revenue is less than total fixed cost. 
A)  it incurs any economic loss. 
B)  price equals average cost. 
C)  total revenue is less than total variable cost. 
D)  total revenue is less than total fixed cost.

Question 19

-Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price of a tattoo is $12.50 what is the firm's economic profit?

Accepted Answer

A)  zero 
B)  $10 per hour 
C)  -$10 per hour 
D)  $20 per hour 
A)  zero 
B)  $10 per hour 
C)  -$10 per hour 
D)  $20 per hour

Question 20

A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue will

Accepted Answer

A)  rise and its total variable cost will rise even more. 
B)  rise and its total variable cost will rise, but not by as much. 
C)  fall but its total variable cost will rise. 
D)  fall and its total variable cost will fall, but not by as much. 
A)  rise and its total variable cost will rise even more. 
B)  rise and its total variable cost will rise, but not by as much. 
C)  fall but its total variable cost will rise. 
D)  fall and its total variable cost will fall, but not by as much.

Exam 12: Perfect Competition

In the long run, the firms in a perfectly competitive market

-The table above shows some of the costs for a perfectly competitive firm. The firm will produce 9 units of output if the price per unit is

The industry that produces zangs is in long-run equilibrium. Then the demand for zangs increases permanently. As a result, firms in the industry will ________. Some firms will ________ the industry, and the industry supply curve will shift ________.

-The figure above shows a perfectly competitive firm. The figure shows a firm

Which of the following is NOT an assumption of perfect competition?

-In the above figure, if the price is $12, a profit-maximizing perfectly competitive firm will have an economic profit

-Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. What is Archibald's shut-down point?

If the price of its product just equals the average variable cost of production for a competitive firm,

Suppose firms in a perfectly competitive market are earning an economic profit. As new firms enter, the price ________ and the economic profit of each existing firm ________.

In a perfectly competitive market, if a firm finds it is producing an amount of output such that its marginal cost exceeds its price, it will

In perfect competition, the firm's marginal revenue curve

In perfect competition, an individual firm

A competitive firm's total revenue minus its total opportunity cost equals its ________.

-The table above gives the total revenue and total cost for a perfectly competitive firm producing chocolate chip cookies. If the firm is producing 1 pound of cookies, to maximize its profit it will

The USDA maintains ethanol has an impact on food prices. "Higher ethanol production definitely and directly raises the price of corn," said USDA economist Ephraim Leibtag. In the short run, what is true if the production of ethanol increases?

Hubert's Copy Services is in perfect competition. Hubert currently charges 10 cents per page, which is the going market price. He thinks that he can increase his profit by raising the price. Is it possible? Why or why not?

In the short run, a perfectly competitive firm will shut down if

-Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price of a tattoo is $12.50 what is the firm's economic profit?

A perfectly competitive firm is producing at the point where its marginal cost equals its marginal revenue. If the firm boosts its output, its total revenue will

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

The industry that produces zangs is in long-run equilibrium. Then the demand for zangs increases permanently. As a result, firms in the industry will . Some firms will the industry, and the industry supply curve will shift .

Suppose firms in a perfectly competitive market are earning an economic profit. As new firms enter, the price and the economic profit of each existing firm .