Question 1

An essential characteristic of a perfectly competitive market is:

Accepted Answer

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.E) A) and C)
F) A) and B)

Question 2

We assume that in the long run in a perfectly competitive market:

Accepted Answer

A)  the firms can enter or exit.
B)  the number of firms is fixed.
C)  the price will be constant.
D)  collusion will set in without government regulation.E) A) and D)
F) A) and B)

Question 3

An essential characteristic of a perfectly competitive market is:

Accepted Answer

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.E) B) and C)
F) None of the above

Question 4

Because market price always tends back to the minimum average total cost for all identical firms in a perfectly competitive market in the long run,in theory:

Accepted Answer

A)  the supply will remain a constant quantity.
B)  price will be the same at any quantity.
C)  the supply curve will be upward sloping.
D)  None of these is true.E) None of the above
F) C) and D)

Question 5

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

Accepted Answer

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.E) B) and C)
F) All of the above

Question 6

Given the shutdown rule,what does the firm's short-run supply curve look like?

Accepted Answer

A)  It is the section of the ATC curve to the right of its minimum.
B)  It is the section of the MC that lies above the ATC curve.
C)  It is the section of the MC that lies above the AVC curve.
D)  It is the section of the AVC curve to the right of its minimum.E) A) and D)
F) All of the above

Question 7

The short-run supply curve is _______________ and the long-run supply curve is _______________ in a perfectly competitive market in which all firms have identical cost structures.

Accepted Answer

A)  upward sloping;upward sloping
B)  upward sloping;perfectly elastic
C)  perfectly elastic;upward sloping
D)  downward sloping;upward slopingE) C) and D)
F) All of the above

Question 8

This graph represents the cost and revenue curves of a firm in a perfectly competitive market. 
According to the graph shown,if a firm is producing at Q2,and it is identical to others in the market:

Accepted Answer

A)  profits are not being maximized.
B)  firms will enter this market.
C)  economic profits are zero.
D)  All of these are true.E) B) and D)
F) A) and B)

Question 9

When demand increases in a perfectly competitive market,in the short run _______________,and in the long run _______________.

Accepted Answer

A)  quantity supplied increases;supply increases
B)  quantity supplied increases;supply decreases
C)  quantity supplied decreases;supply decreases
D)  quantity supplied decreases;supply increasesE) B) and C)
F) A) and D)

Question 10

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

Accepted Answer

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.E) A) and B)
F) A) and C)

Question 11

When the market price has fallen below a firm's ATC but is above its AVC,in the short run,the firm:

Accepted Answer

A)  will yield more revenue than variable costs by producing where MC = MR.
B)  can minimize its losses by staying open.
C)  is not earning positive profits.
D)  All of these are true.E) All of the above
F) A) and D)

Question 12

If a firm is earning a positive economic profit,it means that it:

Accepted Answer

A)  is using its resources in the most profitable way.
B)  should invest its resources in other business opportunities.
C)  has an opportunity cost that is larger than what the firm is currently earning.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 13

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

Accepted Answer

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.E) A) and B)
F) None of the above

Question 14

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:

Accepted Answer

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.E) A) and B)
F) None of the above

Question 15

In a perfectly competitive market,when the price is below the minimum average total cost for most firms:

Accepted Answer

A)  negative economic profits are being earned.
B)  positive accounting profits may be earned.
C)  higher accounting profits may be earned elsewhere.
D)  All of these are true.E) A) and D)
F) B) and C)

Question 16

In the long run in a perfectly competitive market:

Accepted Answer

A)  firms earn zero economic profits.
B)  firms operate at an efficient scale.
C)  supply is perfectly elastic when all firms have the same cost structure.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 17

The number of firms in a perfectly competitive market:

Accepted Answer

A)  is fixed in the short run.
B)  varies in the long run.
C)  varies in the short run.
D)  is the same at all possible long-run equilibria.E) A) and B)
F) All of the above

Question 18

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:

Accepted Answer

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.E) C) and D)
F) A) and B)

Question 19

In a perfectly competitive market,when the price is below the minimum average total cost for all firms:

Accepted Answer

A)  higher accounting profits may be earned elsewhere.
B)  firms will likely leave the market.
C)  the price will eventually rise once enough firms have left the market.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 20

When some firms leave a perfectly competitive market,the price:

Accepted Answer

A)  falls,and profits of those left rise.
B)  falls,and profits of those left fall.
C)  increases,and profits of those left rise.
D)  increases,and profits of those left fall.E) A) and C)
F) A) and D)

Exam 13: Perfect Competition

An essential characteristic of a perfectly competitive market is:

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Given the shutdown rule,what does the firm's short-run supply curve look like?

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

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In the long run in a perfectly competitive market:

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This graph represents the cost and revenue curves of a firm in a perfectly competitive market. According to the graph shown,if a firm is producing at Q2,and it is identical to others in the market:

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An essential characteristic of a perfectly competitive market is:

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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:

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In a perfectly competitive market,when the price is below the minimum average total cost for all firms:

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When demand increases in a perfectly competitive market,in the short run _______________,and in the long run _______________.

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The number of firms in a perfectly competitive market:

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

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The short-run supply curve is _______________ and the long-run supply curve is _______________ in a perfectly competitive market in which all firms have identical cost structures.

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When the market price has fallen below a firm's ATC but is above its AVC,in the short run,the firm:

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When some firms leave a perfectly competitive market,the price:

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If a firm is earning a positive economic profit,it means that it:

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Because market price always tends back to the minimum average total cost for all identical firms in a perfectly competitive market in the long run,in theory:

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In a perfectly competitive market,when the price is below the minimum average total cost for most firms:

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

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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:

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We assume that in the long run in a perfectly competitive market:

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When demand increases in a perfectly competitive market,in the short run _,and in the long run _.

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The short-run supply curve is _ and the long-run supply curve is _ in a perfectly competitive market in which all firms have identical cost structures.

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