Question 1

Suppose that 100 firms operate in a perfectly competitive industry and each firm has the same technology and cost structure. If each firm maximizes profits by selling 20 units of output at $5.00, then the quantity supplied in the market at $5.00 is

Accepted Answer

A)   2,000.
B)   less than 2,000.
C)   greater than 2,000.
D)   zero.E) A) and D)
F) B) and C)

Question 2

A perfectly competitive firm is producing a good at a level where P = $90 and MC = $90. The firm will continue to produce as long as

Accepted Answer

A)   AVC is less than $90.
B)   AFC is less than $90.
C)   price does not increase.
D)   ATC is greater than $90.E) All of the above
F) B) and C)

Question 3

If a profit-maximizing firm in a perfectly competitive market is currently producing the output where (price - average variable cost)  = average fixed cost, the firm is

Accepted Answer

A)   making a positive economic profit.
B)   making a zero economic profit.
C)   suffering an economic loss.
D)   none of the above.E) All of the above
F) B) and C)

Question 4

In which of the following market structures do you find no barriers to entry?

Accepted Answer

A)   monopoly
B)   perfect competition
C)   monopolistic competition
D)   monopolistic competition and perfect competitionE) A) and B)
F) A) and C)

Question 5

A perfectly competitive market

Accepted Answer

A)   is dominated by one firm.
B)   consists of at most five firms.
C)   is made up of a large number of firms.
D)   consists of only one firm.E) B) and C)
F) A) and C)

Question 6

If the price a firm charges in a perfectly competitive industry is less than average total cost

Accepted Answer

A)   the firm is earning positive economic profit.
B)   the firm is earning zero economic profit.
C)   the firm is earning negative economic profit.
D)   It is not possible to determine anything about profits.E) A) and D)
F) None of the above

Question 7

You notice that the price of butter rises and then falls. The best explanation for this is that

Accepted Answer

A)   demand for butter increased causing price to rise, which attracted other firms to enter the market causing supply to increase, which caused the price to go back down.
B)   demand for butter decreased causing price to rise, which attracted other firms to enter the market causing supply to increase, which caused the price to go back down.
C)   demand for butter increased causing price to rise, which induced other firms to exit the market causing supply to decrease, which caused the price to go back down.
D)   demand for butter increased causing price to rise, which attracted other firms to enter the market causing supply to decrease, which caused the price to go back down.E) None of the above
F) B) and C)

Question 8

For a perfectly competitive firm, price always equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 9

A perfectly competitive industry is in long-run equilibrium. If demand for the product decreases, we can expect the price of the good to

Accepted Answer

A)   rise at first and then fall.
B)   fall at first and then rise.
C)   rise and remain at the higher price.
D)   fall and remain at the lower price.E) B) and D)
F) A) and D)

Question 10

A firm will not shut down in the long run as long as the firms revenue

Accepted Answer

A)   is larger than the firm's variable cost.
B)   is greater than the firm's marginal cost.
C)   is greater than the fixed cost.
D)   is less than the total cost.E) A) and B)
F) B) and C)

Question 11

What characterizes a constant cost industry and what causes it to be a constant cost industry?

Accepted Answer

A constant cost industry is on...

Question 12

Sheila sells corn in a perfectly competitive market. This month Sheila receives a lower price for a bushel of corn than she did last month. This might have happened because

Accepted Answer

A)   the market demand increased for corn.
B)   the market demand decreased for corn.
C)   firms exited the market.
D)   Sheila's costs have increased.E) C) and D)
F) A) and D)

Question 13

If the market demand increases for a good sold in a perfectly competitive market, individual firms in the market

Accepted Answer

A)   will be able to charge a higher price for their product.
B)   will need to lower price in order to remain competitive.
C)   will not be able to change their price.
D)   will begin earning economic losses.E) B) and C)
F) A) and B)

Question 14

A perfectly competitive firm maximizes profit where marginal revenue or pice equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 15

Figure 6.5
-Figure 6.5 shows the short-run and long-run effects of an increase in demand of an industry. The market is in equilibrium at point A, where 100 identical firms produce 6 units of a product per hour. Suppose that the market demand curve shifts to the right. Why is the short-run supply curve steeper than the long-run supply curve?

Accepted Answer

A)   because production facilities are fixed in the short run
B)   because each firm experiences diminishing returns in the short run
C)   because production becomes costlier as firms squeeze more output from the existing production facilities
D)   all of the aboveE) A) and B)
F) A) and C)

Question 16

Recall the Application about the shutdown price for zinc to answer the following question(s) .
-Recall the Application. If the cost of mining zinc varies from one mine to another, the shutdown price for mining zinc

Accepted Answer

A)   can also vary for each mine.
B)   must remain uniform for all zinc mines.
C)   will only vary in the long run.
D)   cannot exist without uniform costs.E) A) and D)
F) A) and C)

Question 17

What are the similarities between perfect competition and monopolistic competition?

Accepted Answer

In both market struc...

Question 18

In a constant cost industry, inputs prices do not change with changes in output.

Accepted Answer

A) True 
 B)False

Exam 6: Perfect Competition

A perfectly competitive market

Correct Answer
verified

If the price a firm charges in a perfectly competitive industry is less than average total cost

Correct Answer
verified

What characterizes a constant cost industry and what causes it to be a constant cost industry?

Correct Answer
verified
A constant cost industry is on...
View Answer

For a perfectly competitive firm, price always equals marginal cost.

Correct Answer
verified

Correct Answer
verified

A perfectly competitive industry is in long-run equilibrium. If demand for the product decreases, we can expect the price of the good to

Correct Answer
verified

A firm will not shut down in the long run as long as the firms revenue

Correct Answer
verified

Suppose that 100 firms operate in a perfectly competitive industry and each firm has the same technology and cost structure. If each firm maximizes profits by selling 20 units of output at $5.00, then the quantity supplied in the market at $5.00 is

Correct Answer
verified

In which of the following market structures do you find no barriers to entry?

Correct Answer
verified

A perfectly competitive firm maximizes profit where marginal revenue or pice equals marginal cost.

Correct Answer
verified

A perfectly competitive firm is producing a good at a level where P = $90 and MC = $90. The firm will continue to produce as long as

Correct Answer
verified

If the market demand increases for a good sold in a perfectly competitive market, individual firms in the market

Correct Answer
verified

If a profit-maximizing firm in a perfectly competitive market is currently producing the output where (price - average variable cost) = average fixed cost, the firm is

Correct Answer
verified

You notice that the price of butter rises and then falls. The best explanation for this is that

Correct Answer
verified

In a constant cost industry, inputs prices do not change with changes in output.

Correct Answer
verified

What are the similarities between perfect competition and monopolistic competition?

Correct Answer
verified
In both market struc...
View Answer

Recall the Application about the shutdown price for zinc to answer the following question(s) . -Recall the Application. If the cost of mining zinc varies from one mine to another, the shutdown price for mining zinc

Correct Answer
verified

Sheila sells corn in a perfectly competitive market. This month Sheila receives a lower price for a bushel of corn than she did last month. This might have happened because

Correct Answer
verified

Exam 6: Perfect Competition

A perfectly competitive market

Correct AnswerverifiedShow Answer

If the price a firm charges in a perfectly competitive industry is less than average total cost

Correct AnswerverifiedShow Answer

What characterizes a constant cost industry and what causes it to be a constant cost industry?

Correct AnswerverifiedA constant cost industry is on...View AnswerShow Answer

For a perfectly competitive firm, price always equals marginal cost.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A perfectly competitive industry is in long-run equilibrium. If demand for the product decreases, we can expect the price of the good to

Correct AnswerverifiedShow Answer

A firm will not shut down in the long run as long as the firms revenue

Correct AnswerverifiedShow Answer

Suppose that 100 firms operate in a perfectly competitive industry and each firm has the same technology and cost structure. If each firm maximizes profits by selling 20 units of output at $5.00, then the quantity supplied in the market at $5.00 is

Correct AnswerverifiedShow Answer

In which of the following market structures do you find no barriers to entry?

Correct AnswerverifiedShow Answer

A perfectly competitive firm maximizes profit where marginal revenue or pice equals marginal cost.

Correct AnswerverifiedShow Answer

A perfectly competitive firm is producing a good at a level where P = $90 and MC = $90. The firm will continue to produce as long as

Correct AnswerverifiedShow Answer

If the market demand increases for a good sold in a perfectly competitive market, individual firms in the market

Correct AnswerverifiedShow Answer

If a profit-maximizing firm in a perfectly competitive market is currently producing the output where (price - average variable cost) = average fixed cost, the firm is

Correct AnswerverifiedShow Answer

You notice that the price of butter rises and then falls. The best explanation for this is that

Correct AnswerverifiedShow Answer

In a constant cost industry, inputs prices do not change with changes in output.

Correct AnswerverifiedShow Answer

What are the similarities between perfect competition and monopolistic competition?

Correct AnswerverifiedIn both market struc...View AnswerShow Answer

Recall the Application about the shutdown price for zinc to answer the following question(s) . -Recall the Application. If the cost of mining zinc varies from one mine to another, the shutdown price for mining zinc

Correct AnswerverifiedShow Answer

Sheila sells corn in a perfectly competitive market. This month Sheila receives a lower price for a bushel of corn than she did last month. This might have happened because

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A constant cost industry is on...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
In both market struc...
View Answer

Correct Answer
verified

Correct Answer
verified