Question 1

-The above figure shows a perfectly competitive firm.If the market price is $5,the firm

Accepted Answer

A)   might shut down but more information is needed about the AVC.
B)   is making an economic profit.
C)   is making zero economic profit.
D)   will immediately shut down.
E)   will not shut down.F) B) and E)
G) C) and D)

Question 2

If a firm shuts down,it

Accepted Answer

A)   makes zero economic profit.
B)   incurs an economic loss equal to its total variable cost.
C)   incurs an economic loss equal to its total fixed cost.
D)   makes a normal profit.
E)   might make an economic profit, zero economic profit, or incur an economic loss.F) A) and B)
G) None of the above C

Question 3

Why do you never see firms in a perfectly competitive market advertise their product?

Accepted Answer

Advertising has costs and benefits for t...

Question 4

-The above figure shows a perfectly competitive firm.If the market price is more than $20 per unit,the firm

Accepted Answer

A)   will definitely shut down to minimize its losses.
B)   will stay open to produce and will make zero economic profit.
C)   will stay open to produce and will incur an economic loss.
D)   will stay open to produce and will make an economic profit.
E)   might shut down but more information is needed about the fixed cost.F) B) and C)
G) A) and B)

Question 5

The figure above shows a firm's total revenue and total cost curves.
-When the firm maximizes its profit,it produces ________ cans per day.

Accepted Answer

A)   0
B)   more than 0 and less than 5
C)   5 or more but less than 10
D)   10
E)   more than 10F) D) and E)
G) A) and B)

Question 6

-Bill owns a lawn-care company in Windermere,Florida,whose cost curves are illustrated in the above figure.The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed.At this price,how many lawns will Bill mow per week?

Accepted Answer

A)   more than 10 and less than 30
B)   30
C)   40
D)   50
E)   0F) B) and E)
G) A) and E)

Question 7

If Henry,a perfectly competitive lime grower in Southern California,can sell his limes at a price greater than his average total cost,Henry will

Accepted Answer

A)   incur an economic loss.
B)   incur an accounting loss.
C)   have an incentive to shut down.
D)   make an economic profit.
E)   make zero economic profit.F) A) and B)
G) C) and E)

Question 8

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

Accepted Answer

If the demand for wheat decreases,the pr...

Question 9

Which of the following market types has the fewest number of firms?

Accepted Answer

A)   perfect competition
B)   monopolistic competition
C)   oligopoly
D)   monopoly
E)   perfect competition and monopolistic competitionF) None of the above
G) C) and E)

Question 10

A firm's marginal revenue is

Accepted Answer

A)   the change in total revenue that results from a one-unit increase in the quantity sold.
B)   total revenue minus total cost.
C)   the change in total revenue minus the change in total cost.
D)   the change in total revenue that results from an increase in the demand for the good or service.
E)   less than the market price for a perfectly competitive firm.F) D) and E)
G) B) and D)

Question 11

Can a perfectly competitive firm make an economic profit in the short run? Can it incur an economic loss?

Accepted Answer

In the short run,a perfectly competitive...

Question 12

The figure above shows a firm's total revenue and total cost curves.
-To maximize its profit,the firm in the figure above produces ________ cans per day and ________.

Accepted Answer

A)   0; incurs an economic loss of less than $20
B)   between 3 to 5 cans; earns a normal profit
C)   10; earns an economic profit of $2.90
D)   10; earns an economic profit of $29
E)   more than 10; earns an economic profitF) All of the above
G) A) and D)

Question 13

In the long run,existing firms exit a perfectly competitive market

Accepted Answer

A)   only if economic profits are zero.
B)   if they make a positive economic profit.
C)   if normal profits are greater than zero.
D)   only if they incur an economic loss.
E)   if they either make a normal profit or if they incur an economic loss.F) A) and E)
G) None of the above

Question 14

In part,perfect competition arises if
i.each firm's minimum efficient scale is large relative to demand.
ii.each firm produces a good or service identical to those produced by its many competitors.
iii.there are significant barriers to entry.

Accepted Answer

A)   i only
B)   ii only
C)   i and ii
D)   iii only
E)   ii and iiiF) D) and E)
G) C) and E)

Question 15

"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect.

Accepted Answer

The statement is incorrect.Perfectly com...

Question 16

A perfectly competitive firm can

Accepted Answer

A)   sell all of its output at the prevailing market price.
B)   set a higher price to customers who are willing to pay more.
C)   raise its price in order to increase its total revenue.
D)   sell additional output only by lowering its price.
E)   usually not sell all the output it produces, but still "over-produces" because there are some periods when it can sell the extra output at very profitable prices.F) B) and C)
G) A) and B) A

Question 17

In the long run,a perfectly competitive firm makes

Accepted Answer

A)   a positive economic profit.
B)   zero economic profit.
C)   negative economic profit, that is, an economic loss.
D)   zero accounting profit.
E)   either a positive economic profit or a normal profit.F) A) and B)
G) A) and C)

Question 18

If a perfectly competitive firm's average total cost is less than the price,then the firm

Accepted Answer

A)   incurs an economic loss.
B)   makes an economic profit.
C)   makes zero economic profit.
D)   makes either zero economic profit or an economic profit depending on whether the marginal revenue is equal to or greater than the price.
E)   None of the above answers is correct because the relationship between the price and average total cost has nothing to do with the firm's profit.F) C) and D)
G) B) and C)

Question 19

A firm in perfect competition is a price taker because

Accepted Answer

A)   there are no good substitutes for its good.
B)   many other firms produce identical products.
C)   it is very large.
D)   its demand curves are downward sloping.
E)   it's demand curve is vertical at the profit-maximizing quantity.F) A) and C)
G) None of the above B

Question 20

If perfectly competitive lawn care firms are making an economic profit,then

Accepted Answer

A)   wages will be bid up until the economic profit are gone.
B)   the firms must be superior and will continue to make an economic profit.
C)   new firms will enter the industry.
D)   they are not equating marginal revenue to marginal cost.
E)   government regulation will be imposed to decrease their profit.F) C) and D)
G) A) and B)

Exam 15: Perfect Competition

-The above figure shows a perfectly competitive firm.If the market price is $5,the firm

Correct AnswerverifiedShow Answer

If a firm shuts down,it

Correct AnswerverifiedC

Why do you never see firms in a perfectly competitive market advertise their product?

Correct AnswerverifiedAdvertising has costs and benefits for t...View AnswerShow Answer

-The above figure shows a perfectly competitive firm.If the market price is more than $20 per unit,the firm

Correct AnswerverifiedShow Answer

The figure above shows a firm's total revenue and total cost curves. -When the firm maximizes its profit,it produces ________ cans per day.

Correct AnswerverifiedShow Answer

-Bill owns a lawn-care company in Windermere,Florida,whose cost curves are illustrated in the above figure.The market equilibrium price in this perfectly competitive market equals $32 per lawn mowed.At this price,how many lawns will Bill mow per week?

Correct AnswerverifiedShow Answer

If Henry,a perfectly competitive lime grower in Southern California,can sell his limes at a price greater than his average total cost,Henry will

Correct AnswerverifiedShow Answer

How does a decrease in the demand for wheat ultimately lead to normal profits for wheat growers in the long run?

Correct AnswerverifiedIf the demand for wheat decreases,the pr...View AnswerShow Answer

Which of the following market types has the fewest number of firms?

Correct AnswerverifiedShow Answer

A firm's marginal revenue is

Correct AnswerverifiedShow Answer

Can a perfectly competitive firm make an economic profit in the short run? Can it incur an economic loss?

Correct AnswerverifiedIn the short run,a perfectly competitive...View AnswerShow Answer

The figure above shows a firm's total revenue and total cost curves. -To maximize its profit,the firm in the figure above produces ________ cans per day and ________.

Correct AnswerverifiedShow Answer

In the long run,existing firms exit a perfectly competitive market

Correct AnswerverifiedShow Answer

In part,perfect competition arises if i.each firm's minimum efficient scale is large relative to demand. ii.each firm produces a good or service identical to those produced by its many competitors. iii.there are significant barriers to entry.

Correct AnswerverifiedShow Answer

"Perfectly competitive firms have total control over the price they set for their product." Explain why the previous statement is correct or incorrect.

Correct AnswerverifiedThe statement is incorrect.Perfectly com...View AnswerShow Answer

A perfectly competitive firm can

Correct AnswerverifiedA

In the long run,a perfectly competitive firm makes

Correct AnswerverifiedShow Answer

If a perfectly competitive firm's average total cost is less than the price,then the firm

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A firm in perfect competition is a price taker because

Correct AnswerverifiedB

If perfectly competitive lawn care firms are making an economic profit,then

Correct AnswerverifiedShow Answer

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C

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Advertising has costs and benefits for t...
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If the demand for wheat decreases,the pr...
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In the short run,a perfectly competitive...
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The figure above shows a firm's total revenue and total cost curves. -To maximize its profit,the firm in the figure above produces cans per day and .

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The statement is incorrect.Perfectly com...
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A

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B

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