Question 1

Because perfectly competitive markets rarely exist in the real world,the model has limited usefulness.

Accepted Answer

A) True 
 B)False

Question 2

When entry of new firms decreases input prices in an industry,it is a(n)

Accepted Answer

A)   increasing cost industry.
B)   decreasing cost industry.
C)   constant cost industry.
D)   input elastic industry.E) A) and C)
F) A) and B)

Question 3

The firm will do best if it produces that quantity of output for which

Accepted Answer

A)   marginal cost equals average cost
B)   profit per unit is greatest
C)   marginal revenue equals total revenue
D)   marginal revenue equals marginal cost
E)   marginal revenue exceeds marginal costF) A) and B)
G) B) and C)

Question 4

-The All-the-Rage microbrewery is represented in Figure 9-9.If the market price is $2.50 per pint,then in the short run,the microbrewery will

Accepted Answer

A)   earn the same profit by producing zero pints as by producing 50 pints per day
B)   produce zero pints per day to avoid an economic loss
C)   produce 50 pints per day and break even
D)   produce between zero and 50 pints per day
E)   produce more than 50 pints per dayF) B) and E)
G) B) and D)

Question 5

The model of perfect competition cannot be fruitfully used to analyze markets that don't perfectly fit the description of this market type.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is true regarding the cost curves faced by a firm?

Accepted Answer

A)   when MC > ATC,AVC must be falling
B)   when MC > AVC,ATC must be rising
C)   when MC > ATC,ATC must be rising
D)   MC and ATC are the same for a perfectly competitive firm
E)   when MC is a horizontal line,price is constantF) None of the above
G) A) and D)

Question 7

If new firms are currently entering a perfectly competitive market,which of the following is true?

Accepted Answer

A)   Existing firms are losing money.
B)   Existing firms are earning positive economic profits.
C)   Existing firms are just breaking even.
D)   Impossible to predict.E) B) and D)
F) B) and C)

Question 8

In perfect competition,as the long run approaches,economic losses will cause

Accepted Answer

A)   the exit of existing firms,shifting the market supply curve to the left
B)   government regulation
C)   technological innovation
D)   inflation
E)   a favorable shift in tastes and preferencesF) A) and B)
G) A) and C)

Question 9

In perfect competition,as the long run approaches,economic profit will cause

Accepted Answer

A)   the entry of new firms,shifting the market supply curve to the right
B)   the emergence of powerful monopolistic corporations
C)   inflation
D)   technological innovation
E)   government regulationF) A) and B)
G) A) and E)

Question 10

Firms are assumed to be price takers in a perfectly competitive market because

Accepted Answer

A)   they are not allowed by law to charge any price other than the market price
B)   they must accept any price offered by consumers
C)   they earn high enough profits at the market price,so they do not want to hurt consumers by raising their prices
D)   each firm is too small to influence the market price
E)   there are too few buyers in the market to absorb price changesF) C) and D)
G) C) and E)

Question 11

In order to maximize profit,a perfectly competitive firm should select the level of output where

Accepted Answer

A)   marginal revenue equals price
B)   marginal cost equals marginal revenue
C)   price exceeds marginal cost
D)   price exceeds marginal revenue
E)   total revenue equals total costF) B) and E)
G) A) and E)

Question 12

In the long run,a typical perfectly competitive firm will produce at the minimum point of its long-run average total cost curve and the minimum point of its short-run average total cost curve.

Accepted Answer

A) True 
 B)False

Question 13

In the short run,each firm in a perfectly competitive market is free to

Accepted Answer

A)   increase its plant size
B)   vary its output level within its existing capacity
C)   exit the industry without losses
D)   set a price above the market price
E)   decrease its plant sizeF) B) and E)
G) A) and D)

Question 14

A firm suffers an economic loss whenever

Accepted Answer

A)   price exceeds average total cost
B)   price is less than average total cost
C)   total revenue exceeds variable cost
D)   marginal cost is greater than marginal revenue
E)   marginal cost exceeds average costF) A) and B)
G) B) and D)

Question 15

-Figure 9-15 depicts the cost curves for a perfectly competitive firm.This firm's short run supply curve is the section of the MC curve between points

Accepted Answer

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

Question 16

In a decreasing-cost industry,the long-run industry supply curve is

Accepted Answer

A)   horizontal
B)   vertical
C)   upward sloping
D)   downward sloping
E)   the sum of the individual firm's marginal cost curvesF) A) and B)
G) C) and E)

Question 17

One of the defining characteristics of a perfectly competitive market is

Accepted Answer

A)   a small number of sellers
B)   a large number of buyers and a small number of sellers
C)   a standardized product
D)   significant nonprice competition among firms
E)   an inefficient information systemF) A) and C)
G) All of the above

Question 18

In the long run,the entry of new firms into a competitive market is typically caused by

Accepted Answer

A)   government regulation
B)   technological innovation
C)   inflation
D)   economic losses
E)   economic profitF) B) and E)
G) None of the above

Question 19

Assume that an inferior good is produced in a perfectly competitive,increasing-cost industry with external diseconomies.The market is initially in long-run equilibrium.After all long-run adjustments are made,which of the following would occur in this market as a result of an increase in consumers' incomes?

Accepted Answer

A)   The market price would remain unchanged;the market quantity would rise.
B)   The market price would rise;the market quantity would fall.
C)   The market price would remain unchanged;the market quantity would fall.
D)   Both the market price and the market quantity would fall.
E)   Both the market price and the market quantity would rise.F) C) and E)
G) A) and E)

Question 20

All of the following conditions,except one,are satisfied when a perfectly competitive market is in short-run equilibrium.Which is the exception?

Accepted Answer

A)   No firm is suffering an economic loss.
B)   Each buyer purchases the quantity he wants at the market price.
C)   Each seller produces the quantity she wants at the market price.
D)   Suppliers want to sell the same quantity that buyers want to purchase.
E)   The market coordinates the independent decisions of all the participants.F) A) and C)
G) None of the above

Exam 9: Perfect Competition

One of the defining characteristics of a perfectly competitive market is

Correct Answer
verified

The firm will do best if it produces that quantity of output for which

Correct Answer
verified

In perfect competition,as the long run approaches,economic profit will cause

Correct Answer
verified

In order to maximize profit,a perfectly competitive firm should select the level of output where

Correct Answer
verified

In perfect competition,as the long run approaches,economic losses will cause

Correct Answer
verified

Firms are assumed to be price takers in a perfectly competitive market because

Correct Answer
verified

In a decreasing-cost industry,the long-run industry supply curve is

Correct Answer
verified

In the long run,a typical perfectly competitive firm will produce at the minimum point of its long-run average total cost curve and the minimum point of its short-run average total cost curve.

Correct Answer
verified

-The All-the-Rage microbrewery is represented in Figure 9-9.If the market price is $2.50 per pint,then in the short run,the microbrewery will

Correct Answer
verified

Which of the following is true regarding the cost curves faced by a firm?

Correct Answer
verified

The model of perfect competition cannot be fruitfully used to analyze markets that don't perfectly fit the description of this market type.

Correct Answer
verified

Correct Answer
verified

A firm suffers an economic loss whenever

Correct Answer
verified

In the short run,each firm in a perfectly competitive market is free to

Correct Answer
verified

-Figure 9-15 depicts the cost curves for a perfectly competitive firm.This firm's short run supply curve is the section of the MC curve between points

Correct Answer
verified

In the long run,the entry of new firms into a competitive market is typically caused by

Correct Answer
verified

If new firms are currently entering a perfectly competitive market,which of the following is true?

Correct Answer
verified

All of the following conditions,except one,are satisfied when a perfectly competitive market is in short-run equilibrium.Which is the exception?

Correct Answer
verified

When entry of new firms decreases input prices in an industry,it is a(n)

Correct Answer
verified

Because perfectly competitive markets rarely exist in the real world,the model has limited usefulness.

Correct Answer
verified

Exam 9: Perfect Competition

One of the defining characteristics of a perfectly competitive market is

Correct AnswerverifiedShow Answer

The firm will do best if it produces that quantity of output for which

Correct AnswerverifiedShow Answer

In perfect competition,as the long run approaches,economic profit will cause

Correct AnswerverifiedShow Answer

In order to maximize profit,a perfectly competitive firm should select the level of output where

Correct AnswerverifiedShow Answer

In perfect competition,as the long run approaches,economic losses will cause

Correct AnswerverifiedShow Answer

Firms are assumed to be price takers in a perfectly competitive market because

Correct AnswerverifiedShow Answer

In a decreasing-cost industry,the long-run industry supply curve is

Correct AnswerverifiedShow Answer

In the long run,a typical perfectly competitive firm will produce at the minimum point of its long-run average total cost curve and the minimum point of its short-run average total cost curve.

Correct AnswerverifiedShow Answer

-The All-the-Rage microbrewery is represented in Figure 9-9.If the market price is $2.50 per pint,then in the short run,the microbrewery will

Correct AnswerverifiedShow Answer

Which of the following is true regarding the cost curves faced by a firm?

Correct AnswerverifiedShow Answer

The model of perfect competition cannot be fruitfully used to analyze markets that don't perfectly fit the description of this market type.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A firm suffers an economic loss whenever

Correct AnswerverifiedShow Answer

In the short run,each firm in a perfectly competitive market is free to

Correct AnswerverifiedShow Answer

-Figure 9-15 depicts the cost curves for a perfectly competitive firm.This firm's short run supply curve is the section of the MC curve between points

Correct AnswerverifiedShow Answer

In the long run,the entry of new firms into a competitive market is typically caused by

Correct AnswerverifiedShow Answer

If new firms are currently entering a perfectly competitive market,which of the following is true?

Correct AnswerverifiedShow Answer

All of the following conditions,except one,are satisfied when a perfectly competitive market is in short-run equilibrium.Which is the exception?

Correct AnswerverifiedShow Answer

When entry of new firms decreases input prices in an industry,it is a(n)

Correct AnswerverifiedShow Answer

Because perfectly competitive markets rarely exist in the real world,the model has limited usefulness.

Correct AnswerverifiedShow Answer

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