Question 1

If in the long run a firm makes zero profit,it should exit the industry.

Accepted Answer

A) True 
 B)False

Question 2

Table 8-1
   Table 8-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases.Assume that output can only be increased in batches of 100 units.
-Refer to Table 8-1.What is the fixed cost of production?

Accepted Answer

A) $0 
B) $500 
C) $1000 
D) It cannot be determined. 
A) $0 
B) $500 
C) $1000 
D) It cannot be determined.

Question 3

Fill in the columns in the following table and use the values in the table to determine the profit-maximising level of output.

Accepted Answer

@#IMG-DLM& The profit-maximisi

Question 4

If a firm's fixed cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Accepted Answer

A) True 
 B)False

Question 5

Firms in perfect competition are price takers because

Accepted Answer

A) one firm determines the price that all other firms in the industry will charge. 
B) consumers have enough market power to set prices. 
C) firms accept the price determined by the government. 
D) each firm is too small relative to the market to be able to influence price. 
A) one firm determines the price that all other firms in the industry will charge. 
B) consumers have enough market power to set prices. 
C) firms accept the price determined by the government. 
D) each firm is too small relative to the market to be able to influence price.

Question 6

An industry's long-run supply curve shows

Accepted Answer

A) the relationship in the long run between market price and quantity supplied. 
B) how the government determines the price of the product. 
C) how average productivity is changing. 
D) greater than normal profit. 
A) the relationship in the long run between market price and quantity supplied. 
B) how the government determines the price of the product. 
C) how average productivity is changing. 
D) greater than normal profit.

Question 7

If firms do not earn economic profits in a competitive equilibrium,why would the firms choose to stay in business?

Accepted Answer

When firms earn no economic profit but e

Question 8

If a perfectly competitive firm raises the price it charges to consumers,which of the following is the most likely outcome?

Accepted Answer

A) The firm's revenue will not change because some consumers will refuse to pay the higher price. 
B) The firm will not sell any output. 
C) The firm's total revenue will increase only if the demand for its product is inelastic. 
D) The firm's total revenue will increase only if the demand for its product is elastic. 
A) The firm's revenue will not change because some consumers will refuse to pay the higher price. 
B) The firm will not sell any output. 
C) The firm's total revenue will increase only if the demand for its product is inelastic. 
D) The firm's total revenue will increase only if the demand for its product is elastic.

Question 9

Figure 8-2  
-Refer to Figure 8-2.Why is the total revenue curve a ray from the origin?

Accepted Answer

A) because revenue increases at an increasing rate 
B) because revenue increases at a decreasing rate 
C) because the firm can sell its product at a constant price 
D) because the firm must lower its price to sell more 
A) because revenue increases at an increasing rate 
B) because revenue increases at a decreasing rate 
C) because the firm can sell its product at a constant price 
D) because the firm must lower its price to sell more

Question 10

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Accepted Answer

A) each seller is too small to affect market price. 
B) the price is set by the government. 
C) all the sellers get together and set the price. 
D) all the demanders get together and set the price. 
A) each seller is too small to affect market price. 
B) the price is set by the government. 
C) all the sellers get together and set the price. 
D) all the demanders get together and set the price.

Question 11

Both individual buyers and sellers in perfect competition

Accepted Answer

A) can influence the market price by their own individual actions. 
B) can influence the market price by joining with a few of their competitors. 
C) have to take the market price as a given. 
D) have the market price dictated to them by government. 
A) can influence the market price by their own individual actions. 
B) can influence the market price by joining with a few of their competitors. 
C) have to take the market price as a given. 
D) have the market price dictated to them by government.

Question 12

A perfectly competitive firm has to charge the same price as every other firm in the market.Therefore,the firm

Accepted Answer

A) faces a perfectly inelastic demand curve. 
B) is not able to make a profit in the short run. 
C) is a price taker. 
D) faces a perfectly elastic supply curve. 
A) faces a perfectly inelastic demand curve. 
B) is not able to make a profit in the short run. 
C) is a price taker. 
D) faces a perfectly elastic supply curve.

Question 13

Firms in perfect competition produce the productively efficient output level in the short run and in the long run.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not an assumption of perfectly competitive markets?

Accepted Answer

A) There are many sellers and many buyers,all of which are small relative to the market. 
B) Each firm produces a similar but not identical product. 
C) There are no barriers to new firms entering the market. 
D) The products sold by all firms in the market are identical. 
A) There are many sellers and many buyers,all of which are small relative to the market. 
B) Each firm produces a similar but not identical product. 
C) There are no barriers to new firms entering the market. 
D) The products sold by all firms in the market are identical.

Question 15

Perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit.This condition is referred to as

Accepted Answer

A) productive efficiency. 
B) constant returns to scale. 
C) allocative efficiency. 
D) perfectly competitive efficiency. 
A) productive efficiency. 
B) constant returns to scale. 
C) allocative efficiency. 
D) perfectly competitive efficiency.

Question 16

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Accepted Answer

A) True 
 B)False

Question 17

Suppose the equilibrium price in a perfectly competitive industry is $10 and a firm in the industry charges $12.Which of the following will happen?

Accepted Answer

A) The firm will sell more output than its competitors. 
B) The firm's revenue will increase. 
C) The firm will not sell any output. 
D) The firm's profits will increase. 
A) The firm will sell more output than its competitors. 
B) The firm's revenue will increase. 
C) The firm will not sell any output. 
D) The firm's profits will increase.

Question 18

A perfectly competitive firm earns a profit when price is

Accepted Answer

A) equal to minimum average total cost. 
B) above minimum average total cost. 
C) equal to minimum average variable cost. 
D) equal to minimum average fixed cost. 
A) equal to minimum average total cost. 
B) above minimum average total cost. 
C) equal to minimum average variable cost. 
D) equal to minimum average fixed cost.

Question 19

Why would a company continue to operate for many years while never once turning a profit rather than shut down immediately? Using revenue and cost analysis,explain when the company would shut down.

Accepted Answer

A company would continue to op

Question 20

Why are individual buyers and sellers in perfect competition called price takers?

Accepted Answer

They are called price takers b

If in the long run a firm makes zero profit,it should exit the industry.

Table 8-1 Table 8-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases.Assume that output can only be increased in batches of 100 units. -Refer to Table 8-1.What is the fixed cost of production?

Fill in the columns in the following table and use the values in the table to determine the profit-maximising level of output.

If a firm's fixed cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Firms in perfect competition are price takers because

An industry's long-run supply curve shows

If firms do not earn economic profits in a competitive equilibrium,why would the firms choose to stay in business?

If a perfectly competitive firm raises the price it charges to consumers,which of the following is the most likely outcome?

Figure 8-2 -Refer to Figure 8-2.Why is the total revenue curve a ray from the origin?

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Both individual buyers and sellers in perfect competition

A perfectly competitive firm has to charge the same price as every other firm in the market.Therefore,the firm

Firms in perfect competition produce the productively efficient output level in the short run and in the long run.

Which of the following is not an assumption of perfectly competitive markets?

Perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit.This condition is referred to as

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Suppose the equilibrium price in a perfectly competitive industry is $10 and a firm in the industry charges $12.Which of the following will happen?

A perfectly competitive firm earns a profit when price is

Why would a company continue to operate for many years while never once turning a profit rather than shut down immediately? Using revenue and cost analysis,explain when the company would shut down.

Why are individual buyers and sellers in perfect competition called price takers?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 8: Firms in Perfectly Competitive Markets

If in the long run a firm makes zero profit,it should exit the industry.

Table 8-1 Table 8-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases.Assume that output can only be increased in batches of 100 units. -Refer to Table 8-1.What is the fixed cost of production?

Fill in the columns in the following table and use the values in the table to determine the profit-maximising level of output.

If a firm's fixed cost exceeds its total revenue,the firm should stop production by shutting down temporarily.

Firms in perfect competition are price takers because

An industry's long-run supply curve shows

If firms do not earn economic profits in a competitive equilibrium,why would the firms choose to stay in business?

If a perfectly competitive firm raises the price it charges to consumers,which of the following is the most likely outcome?

Figure 8-2 -Refer to Figure 8-2.Why is the total revenue curve a ray from the origin?

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Both individual buyers and sellers in perfect competition

A perfectly competitive firm has to charge the same price as every other firm in the market.Therefore,the firm

Firms in perfect competition produce the productively efficient output level in the short run and in the long run.

Which of the following is not an assumption of perfectly competitive markets?

Perfectly competitive firms produce up to the point where the price of the good equals the marginal cost of producing the last unit.This condition is referred to as

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Suppose the equilibrium price in a perfectly competitive industry is $10 and a firm in the industry charges $12.Which of the following will happen?

A perfectly competitive firm earns a profit when price is

Why would a company continue to operate for many years while never once turning a profit rather than shut down immediately? Using revenue and cost analysis,explain when the company would shut down.

Why are individual buyers and sellers in perfect competition called price takers?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Monopoly Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters