Question 1

Examples of barriers to entry include

Accepted Answer

A)  Price taking. 
B)  Patents. 
C)  Standardized products. 
D)  Economic profits. 
A)  Price taking. 
B)  Patents. 
C)  Standardized products. 
D)  Economic profits.

Question 2

In a perfectly competitive market, when price is equal to the

Accepted Answer

A)  Minimum short-run average total cost, it has reached the shutdown point. 
B)  Minimum average variable cost, economic profit is zero. 
C)  Marginal cost, accounting profit is maximized. 
D)  Minimum average total cost, economic profit is zero. 
A)  Minimum short-run average total cost, it has reached the shutdown point. 
B)  Minimum average variable cost, economic profit is zero. 
C)  Marginal cost, accounting profit is maximized. 
D)  Minimum average total cost, economic profit is zero.

Question 3

Which of the following is consistent with long-run equilibrium for a perfectly competitive market?

Accepted Answer

A)  Average total costs of production are maximized. 
B)  Economic profits are positive. 
C)  Maximum technical efficiency is achieved. 
D)  Average variable costs of production are maximized. 
A)  Average total costs of production are maximized. 
B)  Economic profits are positive. 
C)  Maximum technical efficiency is achieved. 
D)  Average variable costs of production are maximized.

Question 4

Exit and shutdown mean the same thing.

Accepted Answer

A) True 
 B)False

Question 5

In Figure 23.3, diagram "a" presents the cost curves that are relevant to a firm's production decision, and diagram "b" shows the market demand and supply curves for the market. Use both diagrams to answer the following question: If the market demand curve is D2 in Figure 23.3, then in the long run,

Accepted Answer

A)  Economic profit is less than zero, and firms will exit. 
B)  Economic profit is greater than zero, and firms will expand production. 
C)  There are zero economic profits, so there will be no entry or exit. 
D)  There are zero economic profits, so firms will exit. 
A)  Economic profit is less than zero, and firms will exit. 
B)  Economic profit is greater than zero, and firms will expand production. 
C)  There are zero economic profits, so there will be no entry or exit. 
D)  There are zero economic profits, so firms will exit.

Question 6

If catfish farmers expect catfish prices to fall in the future, then right now

Accepted Answer

A)  There will be a movement down along the market supply curve for catfish. 
B)  There will be a movement up along the market supply curve for catfish. 
C)  The market supply curve for catfish will shift to the left. 
D)  The market supply curve for catfish will shift to the right. 
A)  There will be a movement down along the market supply curve for catfish. 
B)  There will be a movement up along the market supply curve for catfish. 
C)  The market supply curve for catfish will shift to the left. 
D)  The market supply curve for catfish will shift to the right.

Question 7

Entry and exit are long-run investment decisions.

Accepted Answer

A) True 
 B)False

Question 8

Most product markets are perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following characterizes a firm that is in long-run perfectly competitive equilibrium where profits are maximized?

Accepted Answer

A)  Price equals minimum ATC. 
B)  Positive economic profit. 
C)  Price equals marginal cost. 
D)  Price exceeds marginal cost. 
A)  Price equals minimum ATC. 
B)  Positive economic profit. 
C)  Price equals marginal cost. 
D)  Price exceeds marginal cost.

Question 10

Which of the following is a production decision?

Accepted Answer

A)  Whether to enter or exit an industry. 
B)  Whether to increase or decrease plant capacity. 
C)  Whether to increase or decrease output. 
D)  Whether to share information with a competitor. 
A)  Whether to enter or exit an industry. 
B)  Whether to increase or decrease plant capacity. 
C)  Whether to increase or decrease output. 
D)  Whether to share information with a competitor.

Question 11

In Figure 23.3, diagram "a" presents the cost curves that are relevant to a firm's production decision, and diagram "b" shows the market demand and supply curves for the market. Use both diagrams to answer the following question: In the long run, at prices below p2 in Figure 23.3,

Accepted Answer

A)  There is economic profit. 
B)  The firm will produce the quantity where MC = MR. 
C)  Firms will enter the market. 
D)  Firms will exit the market. 
A)  There is economic profit. 
B)  The firm will produce the quantity where MC = MR. 
C)  Firms will enter the market. 
D)  Firms will exit the market.

Question 12

The behavior expected in a competitive market includes

Accepted Answer

A)  Very little entry and exit. 
B)  Marginal cost pricing. 
C)  Aggressive behavior among competitors to control prices. 
D)  Little technological growth. 
A)  Very little entry and exit. 
B)  Marginal cost pricing. 
C)  Aggressive behavior among competitors to control prices. 
D)  Little technological growth.

Question 13

Which of the following is true about a competitive market supply curve?

Accepted Answer

A)  It is horizontal. 
B)  It is downward-sloping to the right. 
C)  It is the sum of the marginal cost curves of all firms. 
D)  It is vertical. 
A)  It is horizontal. 
B)  It is downward-sloping to the right. 
C)  It is the sum of the marginal cost curves of all firms. 
D)  It is vertical.

Question 14

Patents are a barrier to entry.

Accepted Answer

A) True 
 B)False

Question 15

In making an investment decision, an entrepreneur

Accepted Answer

A)  Makes a decision to exit if price is above marginal cost. 
B)  Makes a short-run decision. 
C)  Must consider only variable costs. 
D)  Must take account of diminishing returns. 
A)  Makes a decision to exit if price is above marginal cost. 
B)  Makes a short-run decision. 
C)  Must consider only variable costs. 
D)  Must take account of diminishing returns.

Question 16

In a competitive market where firms are earning economic losses, which of the following should be expected as the industry moves to long-run equilibrium, ceteris paribus?

Accepted Answer

A)  A higher price and more firms. 
B)  A higher price and fewer firms. 
C)  A lower price and more firms. 
D)  A lower price and fewer firms. 
A)  A higher price and more firms. 
B)  A higher price and fewer firms. 
C)  A lower price and more firms. 
D)  A lower price and fewer firms.

Question 17

Explain how a perfectly competitive market promotes productive efficiency (minimum average costs).

Accepted Answer

If economic profits exist in a competiti

Question 18

Competitive market pressures were a driving force in the spectacular growth of the computer industry.

Accepted Answer

A) True 
 B)False

Question 19

Perfectly competitive firms always earn economic profits in the short run.

Accepted Answer

A) True 
 B)False

Question 20

For a perfectly competitive market, long-run equilibrium is characterized by all of the following but which one?

Accepted Answer

A)  P = MR. 
B)  P = MC. 
C)  P = minimum ATC. 
D)  P = maximum ATC. 
A)  P = MR. 
B)  P = MC. 
C)  P = minimum ATC. 
D)  P = maximum ATC.

Exam 9: Aggregate Demand

Examples of barriers to entry include

In a perfectly competitive market, when price is equal to the

Which of the following is consistent with long-run equilibrium for a perfectly competitive market?

Exit and shutdown mean the same thing.

If catfish farmers expect catfish prices to fall in the future, then right now

Entry and exit are long-run investment decisions.

Most product markets are perfectly competitive.

Which of the following characterizes a firm that is in long-run perfectly competitive equilibrium where profits are maximized?

Which of the following is a production decision?

In Figure 23.3, diagram "a" presents the cost curves that are relevant to a firm's production decision, and diagram "b" shows the market demand and supply curves for the market. Use both diagrams to answer the following question: In the long run, at prices below p2 in Figure 23.3,

The behavior expected in a competitive market includes

Which of the following is true about a competitive market supply curve?

Patents are a barrier to entry.

In making an investment decision, an entrepreneur

In a competitive market where firms are earning economic losses, which of the following should be expected as the industry moves to long-run equilibrium, ceteris paribus?

Explain how a perfectly competitive market promotes productive efficiency (minimum average costs).

Competitive market pressures were a driving force in the spectacular growth of the computer industry.

Perfectly competitive firms always earn economic profits in the short run.

For a perfectly competitive market, long-run equilibrium is characterized by all of the following but which one?

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In Figure 23.3, diagram "a" presents the cost curves that are relevant to a firm's production decision, and diagram "b" shows the market demand and supply curves for the market. Use both diagrams to answer the following question: In the long run, at prices below p₂ in Figure 23.3,