Question 1

Which of the following is closest to the economist's definition of perfect competition?

Accepted Answer

A)  the airline industry 
B)  the soft drink industry 
C)  the fishing industry 
D)  cellular telephone serviceE) All of the above
F) A) and D)

Question 2

Long-run average cost of the perfectly competitive firm includes the

Accepted Answer

A)  cost of raw materials per unit of output.
B)  opportunity cost of labor per unit of output.
C)  opportunity cost of capital per unit of output.
D)  All of the above are correct.E) A) and B)
F) B) and C)

Question 3

At a firm's profit-maximizing level of output, its price is $200 and its short-run average total cost is $225.The firm

Accepted Answer

A)  has a profit of $25 per unit of output.
B)  should shut down if its short-run average fixed cost is less than $25.
C)  has a loss of $100 per unit of output.
D)  should shut down if its short-run average variable cost exceeds $25.E) C) and D)
F) B) and D)

Question 4

A firm sells in a competitive market in which price is $12.Its marginal cost is 6 + .25Q.Determine the profit-maximizing level of output.

Accepted Answer

The solution requires equating...

Question 5

Figure 10-1
 
-If the profit-maximizing firm depicted in Figure 10-1 is perfectly competitive, how much output should it produce?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  DE) B) and D)
F) B) and C)

Question 6

In a long-run equilibrium in a perfectly competitive market, the average firm earns positive economic profits.

Accepted Answer

A) True 
 B)False

Question 7

In the short-run, only a limited number of new firms may enter a perfectly competitive market.

Accepted Answer

A) True 
 B)False

Question 8

Illustrate the cost curves and average revenue (demand) curve for the perfectly competitive firm in long-run equilibrium.

Accepted Answer

The illustration sho...

Question 9

At its long-run equilibrium level of output, the demand curve facing an individual perfectly competitive firm is tangent to its

Accepted Answer

A)  total economic profit curve.
B)  long-run average cost curve.
C)  marginal cost curve.
D)  marginal profit curve.E) A) and D)
F) C) and D)

Question 10

Explain the reasoning behind the shutdown rules.When is it appropriate to operate with a loss?

Accepted Answer

1.The firm will make a profit if total r...

Question 11

If the opportunity cost of capital is below the rate of return to capital in the perfectly competitive beauty salon industry,

Accepted Answer

A)  resources will flow into the industry.
B)  beauty salon owners must be earning negative economic profit.
C)  the beauty salon industry cannot be in long-run equilibrium.
D)  beauty salon owners must be earning negative marginal revenue at their current levels of output.E) C) and D)
F) B) and C)

Question 12

Perfectly competitive markets are not the most efficient type.

Accepted Answer

A) True 
 B)False

Question 13

Give a complete but concise definition of the following terms.
a.perfect competition
b.perfectly competitive firm's demand curve
c.shutdown point
d.long-run equilibrium in perfect competition

Accepted Answer

a.Perfect competition is a market struct...

Question 14

Figure 10-8
 
-In the short run, the firm in Figure 10-8 will shut down if the price falls below

Accepted Answer

A)  $8.
B)  $6.
C)  $5.
D)  $1.E) B) and C)
F) A) and D)

Question 15

The short-run supply curve for the perfectly competitive firm is that part of the marginal cost curve that lies above the average fixed cost curve.

Accepted Answer

A) True 
 B)False

Question 16

Perfect competition displays the market mechanism at its best in many respects, yet most markets in operation today are monopolistic or oligopolistic, composed of a few large firms.Should government regulation break up those large firms into several smaller firms to try to achieve perfect competition?
 Why or why not?

Accepted Answer

Perfect competition prevents firms from ...

Question 17

In a perfectly competitive industry, influence over price is exerted by

Accepted Answer

A)  individual sellers.
B)  individual buyers.
C)  the largest firms.
D)  the forces of supply and demand.E) A) and B)
F) B) and C)

Question 18

Why doesn't a perfectly competitive firm charge a price slightly higher than the industry price in order to earn extra profit?

Accepted Answer

A perfectly competitive firm is producin...

Question 19

If there are no profits in competitive equilibrium, why do firms produce?
 How can they stay in business?

Accepted Answer

The "no profits" conclusion of competiti...

Question 20

If government forced a firm to charge a price equal to marginal cost in a situation where there are scale economies,

Accepted Answer

A)  new firms would enter the industry.
B)  the firm would be forced to go bankrupt.
C)  positive economic profit would grow even larger.
D)  marginal cost would exceed average cost.E) B) and C)
F) A) and D)

Exam 10: The Firm and the Industry Under Perfect Competition

Give a complete but concise definition of the following terms. a.perfect competition b.perfectly competitive firm's demand curve c.shutdown point d.long-run equilibrium in perfect competition

Correct Answer
verified
a.Perfect competition is a market struct...
View Answer

Figure 10-1 -If the profit-maximizing firm depicted in Figure 10-1 is perfectly competitive, how much output should it produce?

Correct Answer
verified

At a firm's profit-maximizing level of output, its price is $200 and its short-run average total cost is $225.The firm

Correct Answer
verified

Long-run average cost of the perfectly competitive firm includes the

Correct Answer
verified

The short-run supply curve for the perfectly competitive firm is that part of the marginal cost curve that lies above the average fixed cost curve.

Correct Answer
verified

In the short-run, only a limited number of new firms may enter a perfectly competitive market.

Correct Answer
verified

Correct Answer
verified
Perfect competition prevents firms from ...
View Answer

If government forced a firm to charge a price equal to marginal cost in a situation where there are scale economies,

Correct Answer
verified

If the opportunity cost of capital is below the rate of return to capital in the perfectly competitive beauty salon industry,

Correct Answer
verified

In a perfectly competitive industry, influence over price is exerted by

Correct Answer
verified

Figure 10-8 -In the short run, the firm in Figure 10-8 will shut down if the price falls below

Correct Answer
verified

Why doesn't a perfectly competitive firm charge a price slightly higher than the industry price in order to earn extra profit?

Correct Answer
verified
A perfectly competitive firm is producin...
View Answer

Perfectly competitive markets are not the most efficient type.

Correct Answer
verified

Explain the reasoning behind the shutdown rules.When is it appropriate to operate with a loss?

Correct Answer
verified
1.The firm will make a profit if total r...
View Answer

A firm sells in a competitive market in which price is $12.Its marginal cost is 6 + .25Q.Determine the profit-maximizing level of output.

Correct Answer
verified
The solution requires equating...
View Answer

Illustrate the cost curves and average revenue (demand) curve for the perfectly competitive firm in long-run equilibrium.

Correct Answer
verified
The illustration sho...
View Answer

If there are no profits in competitive equilibrium, why do firms produce? How can they stay in business?

Correct Answer
verified
The "no profits" conclusion of competiti...
View Answer

Which of the following is closest to the economist's definition of perfect competition?

Correct Answer
verified

In a long-run equilibrium in a perfectly competitive market, the average firm earns positive economic profits.

Correct Answer
verified

At its long-run equilibrium level of output, the demand curve facing an individual perfectly competitive firm is tangent to its

Correct Answer
verified

Exam 10: The Firm and the Industry Under Perfect Competition

Give a complete but concise definition of the following terms. a.perfect competition b.perfectly competitive firm's demand curve c.shutdown point d.long-run equilibrium in perfect competition

Correct Answerverifieda.Perfect competition is a market struct...View AnswerShow Answer

Figure 10-1 -If the profit-maximizing firm depicted in Figure 10-1 is perfectly competitive, how much output should it produce?

Correct AnswerverifiedShow Answer

At a firm's profit-maximizing level of output, its price is $200 and its short-run average total cost is $225.The firm

Correct AnswerverifiedShow Answer

Long-run average cost of the perfectly competitive firm includes the

Correct AnswerverifiedShow Answer

The short-run supply curve for the perfectly competitive firm is that part of the marginal cost curve that lies above the average fixed cost curve.

Correct AnswerverifiedShow Answer

In the short-run, only a limited number of new firms may enter a perfectly competitive market.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedPerfect competition prevents firms from ...View AnswerShow Answer

If government forced a firm to charge a price equal to marginal cost in a situation where there are scale economies,

Correct AnswerverifiedShow Answer

If the opportunity cost of capital is below the rate of return to capital in the perfectly competitive beauty salon industry,

Correct AnswerverifiedShow Answer

In a perfectly competitive industry, influence over price is exerted by

Correct AnswerverifiedShow Answer

Figure 10-8 -In the short run, the firm in Figure 10-8 will shut down if the price falls below

Correct AnswerverifiedShow Answer

Why doesn't a perfectly competitive firm charge a price slightly higher than the industry price in order to earn extra profit?

Correct AnswerverifiedA perfectly competitive firm is producin...View AnswerShow Answer

Perfectly competitive markets are not the most efficient type.

Correct AnswerverifiedShow Answer

Explain the reasoning behind the shutdown rules.When is it appropriate to operate with a loss?

Correct Answerverified1.The firm will make a profit if total r...View AnswerShow Answer

A firm sells in a competitive market in which price is $12.Its marginal cost is 6 + .25Q.Determine the profit-maximizing level of output.

Correct AnswerverifiedThe solution requires equating...View AnswerShow Answer

Illustrate the cost curves and average revenue (demand) curve for the perfectly competitive firm in long-run equilibrium.

Correct AnswerverifiedThe illustration sho...View AnswerShow Answer

If there are no profits in competitive equilibrium, why do firms produce? How can they stay in business?

Correct AnswerverifiedThe "no profits" conclusion of competiti...View AnswerShow Answer

Which of the following is closest to the economist's definition of perfect competition?

Correct AnswerverifiedShow Answer

In a long-run equilibrium in a perfectly competitive market, the average firm earns positive economic profits.

Correct AnswerverifiedShow Answer

At its long-run equilibrium level of output, the demand curve facing an individual perfectly competitive firm is tangent to its

Correct AnswerverifiedShow Answer

Correct Answer
verified
a.Perfect competition is a market struct...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Perfect competition prevents firms from ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A perfectly competitive firm is producin...
View Answer

Correct Answer
verified

Correct Answer
verified
1.The firm will make a profit if total r...
View Answer

Correct Answer
verified
The solution requires equating...
View Answer

Correct Answer
verified
The illustration sho...
View Answer

Correct Answer
verified
The "no profits" conclusion of competiti...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified