Question 1

If firms do not earn economic profits in a competitive equilibrium,why would the firms choose to stay in business?

Accepted Answer

When firms earn no economic profit but e...

Question 2

The long-run supply curve for a perfectly competitive,constant-cost industry

Accepted Answer

A)  is upward-sloping.
B)  is horizontal.
C)  is downward-sloping.
D)  is found by adding up the marginal cost curves for all firms in the industry.E) B) and D)
F) All of the above

Question 3

Assume the market for cage-free eggs is perfectly competitive.All else equal,as more farmers choose to produce and sell cage-free eggs,what is likely to happen to the equilibrium price of the eggs and profits of these farmers in the long run?

Accepted Answer

A)  The equilibrium price is likely to increase and profits are likely to remain unchanged.
B)  The equilibrium price is likely to remain unchanged and profits are likely to increase.
C)  The equilibrium price is likely to decrease and profits are likely to decrease.
D)  The equilibrium price is likely to increase and profits are likely to increase.E) None of the above
F) B) and C) C

Question 4

Quantity  Total Cost  Average  Total Cost  Marginal  Cost 0$10.00−−−−−−−−115.00$15.00$5.00217.508.752.50322.507.505.00430.007.507.50540.008.0010.00652.508.7512.50767.509.6415.00885.0010.6317.509105.0011.6720.00\begin{array} { | c | c | c | c | } \hline 	ext { Quantity } & 	ext { Total Cost } & \begin{array} { c } 	ext { Average } \	ext { Total Cost }\end{array} & \begin{array} { c } 	ext { Marginal } \	ext { Cost }\end{array} \\hline 0 & \$ 10.00 & - - - - & - - - - \\hline 1 & 15.00 & \$ 15.00 & \$ 5.00 \\hline 2 & 17.50 & 8.75 & 2.50 \\hline 3 & 22.50 & 7.50 & 5.00 \\hline 4 & 30.00 & 7.50 & 7.50 \\hline 5 & 40.00 & 8.00 & 10.00 \\hline 6 & 52.50 & 8.75 & 12.50 \\hline 7 & 67.50 & 9.64 & 15.00 \\hline 8 & 85.00 & 10.63 & 17.50 \\hline 9 & 105.00 & 11.67 & 20.00 \\hline\end{array} Quantity 0123456789​ Total Cost $10.0015.0017.5022.5030.0040.0052.5067.5085.00105.00​ Average  Total Cost ​−−−−$15.008.757.507.508.008.759.6410.6311.67​ Marginal  Cost ​−−−−$5.002.505.007.5010.0012.5015.0017.5020.00​​  Arnie sells basketballs in a perfectly competitive market.Table 12-3 summarizes Arnie's output per day (Q) ,total cost (TC) ,average total cost (ATC) and marginal cost (MC) .
-Refer to Table 12-3.What price (P) will Arnie charge and how much profit will he earn if the market price of basketballs is $12.50?

Accepted Answer

A)  Price and profit cannot be determined from the information given.
B)  P = $12.50;profit = $52.50
C)  P = $12.50;profit = $22.50
D)  P = $20;profit = $75.00. E) A) and C)
F) All of the above

Question 5

Hogrocket,which developed the Tiny Invaders game for the iPhone,found that to maintain sales in a profitable competitive market,the price of a product

Accepted Answer

A)  will usually rise.
B)  will usually fall.
C)  will usually remain stable.
D)  will eventually fall to zero.E) A) and B)
F) None of the above

Question 6

In perfect competition

Accepted Answer

A)  the market demand curve and the individual's demand curve are identical.
B)  the market demand curve is perfectly inelastic while demand for an individual seller's product is perfectly elastic.
C)  the market demand curve is perfectly elastic while demand for an individual seller's product is perfectly inelastic.
D)  the market demand curve is downward sloping while demand for an individual seller's product is perfectly elastic.E) All of the above
F) A) and B)

Question 7

What is the difference between "shutting down temporarily" and "exiting the industry"?

Accepted Answer

The difference between the two has to do...

Question 8

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

Accepted Answer

A)  Each firm produces up to the point where the price of the good equals the marginal cost of producing the last unit.
B)  Each firm produces up to the point where all scale economies are exhausted.
C)  Production occurs at the lowest average total cost.
D)  Firms use an input combination that minimizes cost and maximizes output.E) A) and D)
F) None of the above A

Question 9

In a decreasing-cost industry,the entry of new firms lowers average cost at each level of output.

Accepted Answer

A) True 
 B)False

Question 10

After an increase in demand in a constant-cost industry,firms will find themselves with higher average cost curves.

Accepted Answer

A) True 
 B)False

Question 11

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000.The price of each good is $10.Calculate the firm's short-run profit or loss.

Accepted Answer

A)  loss of $6,000
B)  profit of $6,000
C)  profit of $30,000
D)  There is insufficient information to answer the question.E) A) and D)
F) A) and B)

Question 12

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?

Accepted Answer

A)  productive efficiency
B)  allocative efficiency
C)  marginal efficiency
D)  profit maximizationE) B) and C)
F) A) and B)

Question 13

Figure 12-6 shows the demand,marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples.
-Refer to Figure 12-6.Jason is currently producing 20 thousand pounds of apples.To maximize his profit Jason should

Accepted Answer

A)  keep production at 20 thousand pounds.
B)  increase production to the output rate indicated by point d.
C)  increase production to the output rate indicated by point e.
D)  decrease production to the output rate indicated by point a.E) A) and C)
F) A) and B)

Question 14

Both buyers and sellers are price takers in a perfectly competitive market because

Accepted Answer

A)  the price is determined by government intervention and dictated to buyers and sellers.
B)  each buyer and seller knows it is illegal to conspire to affect price.
C)  both buyers and sellers in a perfectly competitive market are concerned for the welfare of others.
D)  each buyer and seller is too small relative to others to independently affect the market price.E) None of the above
F) B) and C)

Question 15

Firms in perfect competition produce the allocatively efficient output in the short run and in the long run.

Accepted Answer

A) True 
 B)False

Question 16

Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost,perfectly competitive industry.
-Refer to Figure 12-5.What is the minimum price the firm requires to produce output?

Accepted Answer

A)  $20
B)  $14
C)  $5
D)  It cannot be determinedE) A) and D)
F) A) and B)

Question 17

Assume that a perfectly competitive market is in long-run equilibrium.Suppose as a result of a health hazard associated with the industry's product,demand decreases drastically.What is the immediate result of this event?

Accepted Answer

A)  The market price falls and the typical firm suffers an economic loss.
B)  The market supply increases to offset the fall in demand.
C)  The typical firm's average total cost curve shifts downward.
D)  The typical firm's marginal cost curve shifts to the left.E) B) and C)
F) All of the above A

Question 18

Figure 12-15 
-Refer to Figure 12-15.Assume that the medical screening industry is perfectly competitive and that some firms are making short-run losses.Suppose the medical screening industry runs an effective advertising campaign which convinces a large number of people that yearly CT scans are critical for good health.Which of the diagrams in the figure best describes what happens in the industry?

Accepted Answer

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

Question 19

Which of the following is not a characteristic of a perfectly competitive market structure?

Accepted Answer

A)  There are a very large number of firms that are small compared to the market.
B)  All firms sell identical products.
C)  There are no restrictions to entry by new firms.
D)  There are restrictions on exit of firms.E) A) and C)
F) A) and B)

Question 20

When firms exit a perfectly competitive industry,the market supply curve shifts to the left.

Accepted Answer

A) True 
 B)False

Exam 12: Firms in Perfectly Competitive Markets

If firms do not earn economic profits in a competitive equilibrium,why would the firms choose to stay in business?

Correct Answer
verified
When firms earn no economic profit but e...
View Answer

The long-run supply curve for a perfectly competitive,constant-cost industry

Correct Answer
verified

Assume the market for cage-free eggs is perfectly competitive.All else equal,as more farmers choose to produce and sell cage-free eggs,what is likely to happen to the equilibrium price of the eggs and profits of these farmers in the long run?

Correct Answer
verified
C

Correct Answer
verified

Hogrocket,which developed the Tiny Invaders game for the iPhone,found that to maintain sales in a profitable competitive market,the price of a product

Correct Answer
verified

In perfect competition

Correct Answer
verified

What is the difference between "shutting down temporarily" and "exiting the industry"?

Correct Answer
verified
The difference between the two has to do...
View Answer

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

Correct Answer
verified
A

In a decreasing-cost industry,the entry of new firms lowers average cost at each level of output.

Correct Answer
verified

After an increase in demand in a constant-cost industry,firms will find themselves with higher average cost curves.

Correct Answer
verified

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000.The price of each good is $10.Calculate the firm's short-run profit or loss.

Correct Answer
verified

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?

Correct Answer
verified

Figure 12-6 shows the demand,marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples. -Refer to Figure 12-6.Jason is currently producing 20 thousand pounds of apples.To maximize his profit Jason should

Correct Answer
verified

Both buyers and sellers are price takers in a perfectly competitive market because

Correct Answer
verified

Firms in perfect competition produce the allocatively efficient output in the short run and in the long run.

Correct Answer
verified

Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost,perfectly competitive industry. -Refer to Figure 12-5.What is the minimum price the firm requires to produce output?

Correct Answer
verified

Assume that a perfectly competitive market is in long-run equilibrium.Suppose as a result of a health hazard associated with the industry's product,demand decreases drastically.What is the immediate result of this event?

Correct Answer
verified
A

Correct Answer
verified

Which of the following is not a characteristic of a perfectly competitive market structure?

Correct Answer
verified

When firms exit a perfectly competitive industry,the market supply curve shifts to the left.

Correct Answer
verified

Exam 12: Firms in Perfectly Competitive Markets

If firms do not earn economic profits in a competitive equilibrium,why would the firms choose to stay in business?

Correct AnswerverifiedWhen firms earn no economic profit but e...View AnswerShow Answer

The long-run supply curve for a perfectly competitive,constant-cost industry

Correct AnswerverifiedShow Answer

Assume the market for cage-free eggs is perfectly competitive.All else equal,as more farmers choose to produce and sell cage-free eggs,what is likely to happen to the equilibrium price of the eggs and profits of these farmers in the long run?

Correct AnswerverifiedC

Correct AnswerverifiedShow Answer

Hogrocket,which developed the Tiny Invaders game for the iPhone,found that to maintain sales in a profitable competitive market,the price of a product

Correct AnswerverifiedShow Answer

In perfect competition

Correct AnswerverifiedShow Answer

What is the difference between "shutting down temporarily" and "exiting the industry"?

Correct AnswerverifiedThe difference between the two has to do...View AnswerShow Answer

A perfectly competitive industry achieves allocative efficiency in the long run.What does allocative efficiency mean?

Correct AnswerverifiedA

In a decreasing-cost industry,the entry of new firms lowers average cost at each level of output.

Correct AnswerverifiedShow Answer

After an increase in demand in a constant-cost industry,firms will find themselves with higher average cost curves.

Correct AnswerverifiedShow Answer

A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000.The price of each good is $10.Calculate the firm's short-run profit or loss.

Correct AnswerverifiedShow Answer

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?

Correct AnswerverifiedShow Answer

Figure 12-6 shows the demand,marginal cost (MC) and average total cost (ATC) curves for Jason's House of Apples. -Refer to Figure 12-6.Jason is currently producing 20 thousand pounds of apples.To maximize his profit Jason should

Correct AnswerverifiedShow Answer

Both buyers and sellers are price takers in a perfectly competitive market because

Correct AnswerverifiedShow Answer

Firms in perfect competition produce the allocatively efficient output in the short run and in the long run.

Correct AnswerverifiedShow Answer

Figure 12-5 shows cost and demand curves facing a typical firm in a constant-cost,perfectly competitive industry. -Refer to Figure 12-5.What is the minimum price the firm requires to produce output?

Correct AnswerverifiedShow Answer

Assume that a perfectly competitive market is in long-run equilibrium.Suppose as a result of a health hazard associated with the industry's product,demand decreases drastically.What is the immediate result of this event?

Correct AnswerverifiedA

Correct AnswerverifiedShow Answer

Which of the following is not a characteristic of a perfectly competitive market structure?

Correct AnswerverifiedShow Answer

When firms exit a perfectly competitive industry,the market supply curve shifts to the left.

Correct AnswerverifiedShow Answer

Correct Answer
verified
When firms earn no economic profit but e...
View Answer

Correct Answer
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C

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Correct Answer
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The difference between the two has to do...
View Answer

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A

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A

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