Deck 13: Perfect Competition

Question 1

Commodities:

A)are a special type of standardized good.
B)have no product differentiation.
C)are identical regardless of who produced it.
D)All of these are true.

Answer 1

All of these are true.

Question 2

In a perfectly competitive market price takers exist because:

A)there are few sellers and many buyers.
B)there are few buyers and many sellers.
C)there are many buyers and sellers.
D)there are few sellers and buyers.

Answer 2

there are many buyers and sellers.

Question 3

A good that is standardized is:

A)interchangeable with others in the market.
B)indistinguishable to others in the market.
C)identical to others in the market.
D)All of these are true.

Answer 3

All of these are true.

Question 4

An essential characteristic of a perfectly competitive market is:

A)buyers and sellers have no control over the market price.
B)sellers are selling unique products.
C)buyers have complete control over the market price and sellers have none.
D)sellers have complete control over the market price and buyers have none.

Question 5

The opposite of being a price taker is:

A)having market power.
B)having no control over the market price.
C)being able to influence the market price.
D)None of these describe the opposite of price taker.

Question 6

Standardized goods and services refers to those that:

A)are interchangeable.
B)have close substitutes.
C)are unique.
D)are regulated by the government.

Question 7

An example of a standardized good is:

A)grain.
B)iron.
C)crude oil.
D)All of these represent standardized goods.

Question 8

Standardized goods are:

A)goods which are regulated by government quality standards.
B)goods which are easily substitutable and not distinguishable.
C)the most common type of good produced.
D)those sold in markets with regulated price systems.

Question 9

Most markets in the United States:

A)have some degree of competitiveness,but are not perfectly competitive.
B)have very little competitive features and so are regulated by the government.
C)are monopolies.
D)are perfectly competitive.

Question 10

Perfectly competitive markets:

A)are more an idealized model economists use than a real-life occurrence.
B)are the most common type of market in the United States.
C)tend to have relatively few buyers.
D)tend to have relatively few sellers.

Question 11

An essential characteristic of a perfectly competitive market is:

A)buyers and sellers share market power.
B)sellers are price makers.
C)goods are standardized.
D)goods are unique.

Question 12

A characteristic that is important,but not essential to defining a perfectly competitive market is:

A)goods are standardized.
B)buyers and sellers are price takers.
C)firms can freely enter and exit the market.
D)All of these are necessary to define a perfectly competitive market.

Question 13

An essential characteristic of a perfectly competitive market is:

A)goods are standardized.
B)goods are interchangeable.
C)goods from one seller cannot be distinguished from another's.
D)All of these are true.

Question 14

A price taker is a buyer or seller who:

A)has complete control over setting the market price.
B)can influence the market price.
C)has no control over setting the market price.
D)has the goal of maximizing market share,not profits.

Question 15

One implication of goods being standardized in a market is:

A)there are no information asymmetries.
B)the government regulations must promote competition and lower prices to be efficient.
C)the similarity in products may be real or perceived.
D)None of these is an implication of standardization.

Question 16

When someone has market power,it means they:

A)can noticeably affect the market price.
B)have no control over the market price.
C)can noticeably affect the market quantity available for sale.
D)do not noticeably affect the market quantity offered for sale.

Question 17

An essential characteristic of a perfectly competitive market is that buyers and sellers:

A)have so much competition that they have no ability at all to set their own price.
B)have no competition and so must set the market price on their own.
C)have so much competition that that they must work together perfectly to set a market price.
D)None of these is true.

Question 18

A competitive market is one in which:

A)fully informed price-taking buyers and sellers easily trade a standardized good.
B)few large sellers compete for a majority of the market share.
C)government oversees its operation.
D)None of these describe a competitive market.

Question 19

When someone has market power,it means they:

A)are a price taker.
B)can noticeably affect the market price.
C)do not affect the market quantity offered for sale.
D)None of these is true.

Question 20

An example of a standardized good is:

A)grain.
B)granola cereal.
C)hamburgers.
D)digital cameras.

Question 21

Having free entry and exit in a market can help drive:

A)innovation.
B)cost-cutting.
C)quality improvements.
D)All of these are driven by the threat of entry by competitors.

Question 22

This table shows price and quantity produced for a single firm in a perfectly competitive market.
Given the information in the table shown,what is the marginal revenue when 25 units are produced?

A)$250
B)$25
C)$10
D)$20

Question 23

If a firm in a perfectly competitive market faces a market price of $5,and it decides to produce 400 units,the firm's total revenue will be:

A)$5.
B)$400.
C)$2,000.
D)Cannot be determined without knowing the firm's total cost.

Question 24

For firms that sell one product in a perfectly competitive market,average revenue:

A)is calculated by total revenue divided by total output.
B)is equal to marginal revenue.
C)is equal to the market price.
D)All of these are true.

Question 25

Collusion:

A)is more likely when the threat of market entry is missing.
B)is more likely in perfectly competitive markets.
C)is less likely when the threat of market entry is missing.
D)None of these is true.

Question 26

This table shows price and quantity produced for a single firm in a perfectly competitive market.
Given the information in the table shown,what is the total revenue when 23 units are produced?

A)$230
B)$10
C)$23
D)$2.30

Question 27

For firms that sell one product in a perfectly competitive market,the market price:

A)will remain constant regardless of an individual firm's output decision.
B)is equal to the average total cost of a firm.
C)is equal to the marginal cost of a firm.
D)All of these are true.

Question 28

For firms that sell one product in a perfectly competitive market,the market price:

A)is taken as a constant by individual firms.
B)will not be influenced by one firm's output decision.
C)is equal to the average revenue of a firm.
D)All of these are true.

Question 29

For firms that sell one product in a perfectly competitive market,the market price:

A)is constant,regardless of quantity sold.
B)is equal to average revenue for a firm.
C)is equal to marginal revenue for a firm.
D)All of these are true.

Question 30

For firms that sell one product in a perfectly competitive market,average revenue:

A)will increase if marginal revenue is greater than it.
B)will decrease if marginal revenue is greater than it.
C)will always be the same as marginal revenue.
D)None of these is true.

Question 31

This table shows price and quantity produced for a single firm in a perfectly competitive market.
Given the information in the table shown,what is the average revenue when 24 units are produced?

A)$240
B)$10
C)$24
D)$2.40

Question 32

For firms that sell one product in a perfectly competitive market,marginal revenue:

A)is always greater than market price.
B)is always less than market price.
C)is always the same as market price.
D)All of these can be true.

Question 33

If a firm in a perfectly competitive market faces a market price of $4,and it decides to produce 700 units,the firm's average revenue will be:

A)$4.
B)$2,800.
C)$175.
D)$700.

Question 34

For firms that sell one product in a perfectly competitive market,marginal revenue:

A)is the additional revenue gained from selling one more unit.
B)is equal to average revenue.
C)is equal to market price.
D)All of these are true.

Question 35

This table shows price and quantity produced for a single firm in a perfectly competitive market.
Given the information in the table shown,what is the market price?

A)$20
B)$10
C)$2
D)$260

Question 36

For firms that sell one product in a perfectly competitive market,average revenue:

A)is calculated by total output divided by total revenue.
B)is equal to marginal cost.
C)is equal to the market price.
D)None of these is true.

Question 37

In a perfectly competitive market,producers:

A)are able to sell as much as they want without affecting the market price.
B)can influence the price upward by restricting output.
C)often undercut the competition's price and force firms to leave the market.
D)None of these is true of perfectly competitive markets.

Question 38

In a perfectly competitive market,total revenue:

A)measures how much revenue the firm takes in from all sales.
B)is equal to price multiplied by quantity sold.
C)only varies due to changes in quantity,since price is constant.
D)All of these are true.

Question 39

If a perfectly competitive firm faces a market price of $3 per unit,and it decides to produce 30,000 units,the market price will likely:

A)increase.
B)decrease.
C)stay the same.
D)Cannot answer without more information.

Question 40

For firms that sell one product in a perfectly competitive market,average revenue:

A)is always greater than market price.
B)is always less than market price.
C)is always the same as market price.
D)None of these is true.

Question 41

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market.
According to the table shown,what is the market price?

A)$500
B)$150
C)$50
D)It depends on the level of output.

Question 42

If a firm in a perfectly competitive market faces a market price of $7,and it decides to increase its production from 4,000 to 12,000 units,the firm's marginal revenue:

A)will diminish once diminishing marginal product sets in.
B)will rise once diminishing marginal product sets in.
C)will stay the same.
D)will increase from $28,000 to $84,000.

Question 43

For a firm in a perfectly competitive market,if it is producing at a level of output where marginal costs are equal to marginal revenue:

A)it should cut back production to increase profits.
B)it should increase production to increase profits.
C)it is producing a profit-maximizing quantity.
D)The firm is not maximizing profits,but it is impossible to tell how quantity should be changed without more information.

Question 44

A firm in a perfectly competitive market can maximize its profits by:

A)producing the level of output where marginal cost equals marginal revenue.
B)producing any level below where marginal cost equals marginal revenue.
C)producing any level beyond where marginal cost equals marginal revenue.
D)producing at capacity.

Question 45

Firms in perfectly competitive markets who wish to maximize profits should produce:

A)more as long as marginal cost is greater than marginal revenue.
B)less as long as marginal cost is less than marginal revenue.
C)at the level where marginal cost equals marginal revenue.
D)All of these are true.

Question 46

The profit-maximizing level of output for any firm in a perfectly competitive market is to produce where:

A)MC = MR.
B)MC > MR.
C)MC < MR.
D)MR = P*.

Question 47

Because firms in perfectly competitive markets can sell any quantity without driving down prices,they should:

A)produce as much as possible to maximize profits.
B)produce at the lowest cost per unit to maximize profits.
C)try to flood the market.
D)None of these is true.

Question 48

If a firm in a perfectly competitive market faces a market price of $2,and it decides to increase its production from 2,000 units to 4,000 units,the firm's marginal revenue:

A)will increase from $4,000 to $8,000.
B)will decrease from $8,000 to $4,000.
C)will stay the same.
D)None of these is true.

Question 49

Firms in perfectly competitive markets typically have:

A)one profit-maximizing level of output.
B)several profit-maximizing levels of output to choose from.
C)two profit-maximizing levels of output to choose from.
D)no chance of maximizing profits,since they have no control over market price.

Question 50

For a firm in a perfectly competitive market,if it is producing at a level of output where marginal costs are less than marginal revenue:

A)it should cut back production to increase profits.
B)it should increase production to increase profits.
C)it is producing a profit-maximizing quantity.
D)The firm is not maximizing profits,but it is impossible to tell how quantity should be changed without more information.

Question 51

Firms in perfectly competitive markets who wish to maximize profits should produce where:

A)marginal revenue and marginal cost are equal.
B)marginal revenue and market price are equal.
C)marginal revenue and average revenue are equal.
D)marginal cost and average cost are equal.

Question 52

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market.
According to the table shown,what is the firm's total revenue when 4 units are produced?

A)$160
B)$50
C)$200
D)$40

Question 53

Firms in perfectly competitive markets who wish to maximize profits should:

A)keep producing more as long as marginal cost is less than marginal revenue.
B)produce less as long as marginal cost is greater than marginal revenue.
C)produce where marginal cost and marginal revenue are equal.
D)All of these are true.

Question 54

Firms in perfectly competitive markets who wish to maximize profits ought to:

A)produce where marginal revenue equals market price.
B)produce as many units as their scale allows.
C)produce at capacity and plan to expand in the long run.
D)None of these is true.

Question 55

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market.
According to the table shown,what is the firm's marginal revenue from the 3^rd unit produced?

A)$50
B)$90
C)$150
D)$60

Question 56

If a firm in a perfectly competitive market is producing at a level of output where marginal costs exceed marginal revenue:

A)its profits must be negative.
B)its profits are maximized.
C)its profits will increase if they produce less.
D)None of these is true.

Question 57

For a firm in a perfectly competitive market,if it produces where marginal cost exceeds marginal revenue:

A)it should cut back production to increase profits.
B)it should increase production to increase profits.
C)it is producing a profit-maximizing quantity.
D)The firm is not maximizing profits,but it is impossible to tell how quantity should be changed without more information.

Question 58

When a firm faces a perfectly competitive market and buys its inputs from perfectly competitive markets,the only choice the firm has to affect its profits is to:

A)increase its selling price.
B)change the quantity it produces.
C)decrease the selling price.
D)None of these is true.

Question 59

If a firm in a perfectly competitive market is producing at a level of output where marginal costs are less than marginal revenue:

A)its profits must be positive.
B)its profits are maximized.
C)its profits will increase if they produce less.
D)None of these is true.

Question 60

If a firm in a perfectly competitive market faces a market price of $8,and it decides to increase its production from 300 units to 550 units,the firm's total revenue:

A)will increase from $2,400 to $4,400.
B)will decrease from $4,400 to $2,400.
C)will stay the same at $8.
D)will likely rise,but it cannot be determined by how much.

Question 61

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market.
According to the table shown,the firm's profit:

A)is maximized at 3 units of output.
B)is maximized at 4 units of output.
C)is maximized at 5 units of output.
D)is not maximized at any level of output given.

Question 62

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market.
According to the table shown,fixed costs must be:

A)$10.
B)$200.
C)$60.
D)Fixed costs cannot be determined by the information in the table.

Question 63

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market.
According to the table shown,what is the firm's marginal cost from producing the 2^nd unit?

A)$10.00
B)$7.50
C)$27.50
D)$20.00

Question 64

If the market price falls below the bottom of the firm's ATC curve:

A)there is no level of output at which the firm can make a profit.
B)the firm is earning profits.
C)the market price must be lower than the firm's AVC.
D)None of these is true.

Question 65

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market.
According to the table shown,the firm's marginal costs:

A)are constant.
B)increase as output increases.
C)decrease until the 2^nd unit,then increase.
D)increase until the 4^th unit,then decrease.

Question 66

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market.
According to the table shown,the firm's marginal revenue:

A)is constant.
B)increases as output increases.
C)decreases as output increases.
D)increases until the 3^rd unit,then decreases.

Question 67

A firm realizes that the market price has fallen below its average total costs,and it is now earning a loss.What is the best action for the firm to take in the short run?

A)Stay open if price is greater than average variable costs.
B)Shut down immediately and pay fixed costs only.
C)Stay open if total revenue is greater than fixed costs.
D)Shut down if price is greater than average variable costs.

Question 68

In the short run,a firm that finds itself earning a loss should compare the market price to which cost in order to determine how to minimize its losses?

A)Average total costs
B)Average variable costs
C)Marginal costs
D)Fixed costs

Question 69

For a firm in a perfectly competitive market,a price decrease:

A)lowers the profit-maximizing quantity.
B)increases the profit-maximizing quantity.
C)is unrelated to the profit-maximizing quantity.
D)signifies the firm should leave the market.

Question 70

If a firm is earning a profit,then:

A)total revenue must be higher than total cost.
B)the ATC must be higher than the market price.
C)the ATC must be higher than AR.
D)All of these are true.

Question 71

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market.
According to the table shown,when 1 unit is produced:

A)marginal costs exceed marginal revenue,and the firm should produce more.
B)marginal revenue exceeds marginal costs,and the firm should produce more.
C)marginal revenue exceeds marginal costs,and the firm should produce less.
D)marginal costs exceed marginal revenue,and the firm should produce less.

Question 72

A firm realizes that the market price has fallen below its average total costs,and it is now earning a loss.What is the best action for the firm to take in the short run?

A)Produce where MC = MR to minimize losses if P > AVC.
B)Shut down if price is greater than average variable costs.
C)Produce where MC = MR to minimize losses if P < AVC.
D)Shut down if total revenue is less than fixed costs.

Question 73

As long as average revenue remains above average total cost:

A)total revenue will be higher than total cost.
B)the firm will be making profits.
C)price will be greater than average total cost.
D)All of these are true.

Question 74

In the short run,the fixed costs of a firm:

A)must be paid regardless of level of output.
B)are irrelevant in deciding whether to shut down production.
C)are greater than zero when quantity produced is zero.
D)All of these are true.

Question 75

The MC of a firm:

A)crosses ATC at its minimum.
B)crosses AVC at its minimum.
C)crosses MR at the profit-maximizing level of output.
D)All of these are true.

Question 76

If the market price falls below a firm's minimum average total cost,the firm should:

A)definitely stop production.
B)definitely continue to operate at a loss.
C)consider how to minimize its losses.
D)pay only fixed costs.

Question 77

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market.
According to the table shown,when 5 units are produced:

A)profits are maximized.
B)profits are positive.
C)the firm is producing less than the profit-maximizing amount.
D)the firm is producing more than the profit-maximizing amount.

Question 78

In the short run,the relevant costs for a firm to consider whether to shut down production are:

A)average total costs.
B)average variable costs.
C)average fixed costs.
D)fixed costs.

Question 79

As long as market price remains above the average total cost,and the firm chooses the profit-maximizing level of output,it will:

A)make profits.
B)Any of these is possible.
C)earn a loss.
D)earn zero profits.

Question 80

In the short run,when a firm stops producing:

A)it avoids paying fixed costs.
B)it avoids paying variable costs.
C)it can avoid earning profits less than zero.
D)None of these is true.