Question 1

The equilibrium price and quantity of a good under perfect competition are determined by the intersection of the ________.

Accepted Answer

A)   market demand and total revenue curves
B)   total revenue and total cost curves
C)   market demand and market supply curves
D)   market supply and total revenue curvesE) A) and C)
F) A) and B)

Question 2

The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive industry.
 
-Refer to the figure above.Which of the following statements is true?

Accepted Answer

A)   The firm maximizes profits if it produces 10 units of the good.
B)   If the market price is $10, the firm will suffer losses.
C)   If the market price is $2, the firm will make profits.
D)   The firm makes maximum profits if it produces 30 units.E) A) and B)
F) B) and C)

Question 3

The following figure depicts the short-run cost curves of a perfectly competitive firm.
 
-Refer to the figure above.If the current market price is $9,the profit-maximizing output of this firm is ________.

Accepted Answer

A)   15
B)   55
C)   70
D)   85E) A) and D)
F) C) and D)

Question 4

Which of the following statements is true?

Accepted Answer

A)   Price controls strengthen the functioning of the invisible hand.
B)   Price controls weaken the functioning of the invisible hand.
C)   Price controls always benefit buyers and make sellers worse off.
D)   Price controls always benefit sellers and make buyers worse off.E) A) and C)
F) None of the above

Question 5

Which of the following statements is true of market prices in a perfectly competitive market?

Accepted Answer

A)   Market prices are determined by the government.
B)   Market prices allow for the efficient allocation of scarce resources.
C)   Market prices are not stable and fluctuate widely.
D)   Market prices do not act as incentives for buyers.E) A) and B)
F) None of the above

Question 6

If firms in a competitive industry independently operate to maximize profits,the ________ are eventually equalized across the firms.

Accepted Answer

A)   total costs
B)   marginal costs
C)   profits
D)   revenuesE) B) and C)
F) All of the above

Question 7

Which of the following is a characteristic of command economies?

Accepted Answer

A)   Rewards to economic agents are based on market prices.
B)   Coordination of economic agents is automatic.
C)   It is difficult to incentivize economic agents.
D)   The invisible hand functions without any restraint.E) B) and C)
F) A) and B)

Question 8

The following figure illustrates the demand and supply curves for a good.
 
-Refer to the figure above.Which of the following is likely to happen if a price control above the equilibrium price is imposed?

Accepted Answer

A)   Quantity demanded will exceed quantity supplied.
B)   Quantity supplied will exceed quantity demanded.
C)   Consumer surplus will increase.
D)   Producer surplus will decrease.E) A) and B)
F) All of the above

Question 9

A double oral auction is an auction in which ________.

Accepted Answer

A)   sellers state asks and buyers state offers one after the other
B)   sellers state asks and buyers state bids simultaneously
C)   the highest bidders state their bids at the same time
D)   bidding starts from the lowest price and proceeds to the highest priceE) A) and B)
F) None of the above

Question 10

Scenario: There are two firms producing ballpoint pens in a perfectly competitive industry. The market price of one pen is $5. Firm A has a lower marginal cost than Firm B. The following graphs illustrate the marginal cost curves of both firms.
 
-Refer to the scenario above.If both the firms are optimizing,which of the following statements is true?

Accepted Answer

A)   Firm B will produce more than Firm A.
B)   Firm A will produce more than Firm B.
C)   Both firms will produce the same quantity.
D)   The quantity produced by both firms will depend on the demand for pens and not the marginal costs.E) B) and C)
F) None of the above

Question 11

With an increase in the demand for a good,if prices are not allowed to increase,________.

Accepted Answer

A)   social surplus will be maintained at maximum
B)   firms will have no incentive to increase the quantity supplied of the good
C)   a surplus will occur in the market
D)   overall efficiency will increase in the marketE) B) and D)
F) All of the above

Exam 7: Perfect Competition and the Invisible Hand

Which of the following is a characteristic of command economies?

Correct Answer
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The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive industry. -Refer to the figure above.Which of the following statements is true?

Correct Answer
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A double oral auction is an auction in which ________.

Correct Answer
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Which of the following statements is true?

Correct Answer
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The following figure depicts the short-run cost curves of a perfectly competitive firm. -Refer to the figure above.If the current market price is $9,the profit-maximizing output of this firm is ________.

Correct Answer
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Which of the following statements is true of market prices in a perfectly competitive market?

Correct Answer
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The following figure illustrates the demand and supply curves for a good. -Refer to the figure above.Which of the following is likely to happen if a price control above the equilibrium price is imposed?

Correct Answer
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Correct Answer
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If firms in a competitive industry independently operate to maximize profits,the ________ are eventually equalized across the firms.

Correct Answer
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The equilibrium price and quantity of a good under perfect competition are determined by the intersection of the ________.

Correct Answer
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With an increase in the demand for a good,if prices are not allowed to increase,________.

Correct Answer
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Exam 7: Perfect Competition and the Invisible Hand

Which of the following is a characteristic of command economies?

Correct AnswerverifiedShow Answer

The following figure shows the marginal cost curve and the average total cost curve of a firm operating in a perfectly competitive industry. -Refer to the figure above.Which of the following statements is true?

Correct AnswerverifiedShow Answer

A double oral auction is an auction in which ________.

Correct AnswerverifiedShow Answer

Which of the following statements is true?

Correct AnswerverifiedShow Answer

The following figure depicts the short-run cost curves of a perfectly competitive firm. -Refer to the figure above.If the current market price is $9,the profit-maximizing output of this firm is ________.

Correct AnswerverifiedShow Answer

Which of the following statements is true of market prices in a perfectly competitive market?

Correct AnswerverifiedShow Answer

The following figure illustrates the demand and supply curves for a good. -Refer to the figure above.Which of the following is likely to happen if a price control above the equilibrium price is imposed?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If firms in a competitive industry independently operate to maximize profits,the ________ are eventually equalized across the firms.

Correct AnswerverifiedShow Answer

The equilibrium price and quantity of a good under perfect competition are determined by the intersection of the ________.

Correct AnswerverifiedShow Answer

With an increase in the demand for a good,if prices are not allowed to increase,________.

Correct AnswerverifiedShow Answer

Correct Answer
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