Question 1

If a firm in a perfectly competitive market faces the cost curves in the graph shown, which of the following is true?  If the price is higher than $15 and if the firm produces at the profit-maximizing level of output, it will earn positive profits.The firm should always produce at least 43 units in order to maximize profits.The firm will shut down if the market price is below $15 but above $11.

Accepted Answer

A)  I only
B)  II and III only
C)  II only
D)  I, II, and IIIE) A) and D)
F) A) and B)

Question 2

For firms that sell one product in a perfectly competitive market, the market price is:

Accepted Answer

A)  constant, regardless of quantity sold.
B)  equal to a firm's average revenue.
C)  equal to a firm's marginal revenue.
D)  All of these are true.E) A) and D)
F) B) and C) D

Question 3

If demand in a perfectly competitive market decreases, supply will:

Accepted Answer

A)  not change in the short run.
B)  increase in the long run.
C)  increase in the short run.
D)  decrease in the short run.E) C) and D)
F) A) and D)

Question 4

The number of firms in a perfectly competitive market:

Accepted Answer

A)  is fixed in the short run.
B)  is fixed in the long run.
C)  varies in the short run.
D)  is the same at all possible long run equilibria.E) All of the above
F) C) and D)

Question 5

A good that is perfectly standardized is:

Accepted Answer

A)  likely to be complementary to other goods in the market.
B)  indistinguishable from other goods in the market.
C)  completely different from other goods in the market.
D)  determined by government to be a standard good.E) C) and D)
F) All of the above

Question 6

In the long run, a firm should exit the industry if:

Accepted Answer

A)  price is greater than average variable cost.
B)  price is less than average variable cost.
C)  price is greater than average total cost.
D)  price is less than average total cost.E) All of the above
F) A) and C)

Question 7

When a market contains standardized goods:

Accepted Answer

A)  government regulations must promote competition for the market to be efficient.
B)  there are no information asymmetries.
C)  the similarity in products may be real or perceived.
D)  the market has a low degree of competition.E) A) and D)
F) C) and D)

Question 8

Firms in perfectly competitive markets who wish to maximize profits should produce:

Accepted Answer

A)  where marginal revenue equals market price.
B)  as many units as their scale allows.
C)  at capacity, planning to expand in the long run.
D)  where total profit is the greatest.E) C) and D)
F) None of the above

Question 9

The graph shown displays the marginal cost and marginal revenue curves for a perfectly competitive firm.  Producing 14 units:

Accepted Answer

A)  is not as profitable as producing 11 units.
B)  will earn the firm negative profits.
C)  is more profitable than producing 9 or 11 units.
D)  will earn the firm zero profit.E) All of the above
F) A) and B)

Question 10

In perfectly competitive markets, transaction costs are:

Accepted Answer

A)  generally quite high.
B)  approximately 10 percent of the cost of the good or service.
C)  low or nearly zero.
D)  generally ignored when making a transaction.E) C) and D)
F) None of the above

Question 11

When economic profits are zero for a firm in a perfectly competitive market, it means that:

Accepted Answer

A)  average total costs are zero.
B)  price is equal to minimum average total cost.
C)  average variable costs are minimized.
D)  marginal revenue is equal to average variable costs.E) C) and D)
F) None of the above B

Question 12

A firm in a perfectly competitive market can maximize its profits by producing the level of output:

Accepted Answer

A)  where marginal cost equals marginal revenue.
B)  below where marginal cost equals marginal revenue.
C)  above where marginal cost equals marginal revenue.
D)  that is slightly below the firm's maximum capacity.E) A) and B)
F) C) and D)

Question 13

In the short run, a firm that is earning a loss should compare the market price to its _______ in order to determine how to minimize its losses.

Accepted Answer

A)  average total costs
B)  average variable costs
C)  marginal costs
D)  fixed costsE) A) and D)
F) C) and D) B

Question 14

Which is not an essential characteristic of a perfectly competitive market?

Accepted Answer

A)  Goods are standardized.
B)  Buyers have perfect information.
C)  Goods from one seller cannot be distinguished from another's.
D)  Firms have limited market power.E) None of the above
F) A) and B)

Question 15

In the short run, we assume that the number of firms in a perfectly competitive market:

Accepted Answer

A)  varies if perfect information is present.
B)  varies more than the long run equilibrium.
C)  is fixed.
D)  is equal to the number of firms that will exist in the long run.E) A) and D)
F) A) and C)

Question 16

Of the curves displayed in the graph shown, what does curve C most likely represent?  A) Marginal cost B) Average total cost C) Average variable cost D) Marginal revenue" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  Marginal cost
B)  Average total cost
C)  Average variable cost
D)  Marginal revenueE) All of the above
F) B) and C)

Question 17

The graph shown displays the marginal cost and marginal revenue curves for a perfectly competitive firm. What is the market price?

Accepted Answer

A)  $15
B)  $9
C)  $11
D)  $20E) C) and D)
F) None of the above

Question 18

In the long run, firms in a perfectly competitive market choose to produce a quantity:

Accepted Answer

A)  that earns zero economic profits.
B)  that does not cover minimum average variable costs.
C)  where marginal costs are less than average variable costs.
D)  where average total cost and average variable cost are at their minimum values.E) B) and C)
F) All of the above

Question 19

If a firm in a perfectly competitive market faces the cost curves in the graph shown and observes a market price of $13, the firm:  A) can earn positive profits by producing more than 35 units. B) can earn positive profits by producing where marginal revenue equals marginal cost. C) cannot make positive profits and should shut down in the short run. D) should continue to operate in the short run, but plan to exit in the long run." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  can earn positive profits by producing more than 35 units.
B)  can earn positive profits by producing where marginal revenue equals marginal cost.
C)  cannot make positive profits and should shut down in the short run.
D)  should continue to operate in the short run, but plan to exit in the long run.E) A) and B)
F) B) and C)

Question 20

The market price has fallen below a firm's average total costs, and the firm is now earning a loss. What is the best action for the firm to take in the short run?

Accepted Answer

A)  Stay open as long as price is greater than average variable costs.
B)  Shut down immediately and pay fixed costs only.
C)  Stay open as long as total revenue is greater than fixed costs.
D)  Shut down as long as price is greater than average variable costs.E) A) and B)
F) A) and C)

Exam 13: Perfect Competition

Correct Answer
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For firms that sell one product in a perfectly competitive market, the market price is:

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D

If demand in a perfectly competitive market decreases, supply will:

Correct Answer
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The number of firms in a perfectly competitive market:

Correct Answer
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A good that is perfectly standardized is:

Correct Answer
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In the long run, a firm should exit the industry if:

Correct Answer
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When a market contains standardized goods:

Correct Answer
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Firms in perfectly competitive markets who wish to maximize profits should produce:

Correct Answer
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The graph shown displays the marginal cost and marginal revenue curves for a perfectly competitive firm. Producing 14 units:

Correct Answer
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In perfectly competitive markets, transaction costs are:

Correct Answer
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When economic profits are zero for a firm in a perfectly competitive market, it means that:

Correct Answer
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B

A firm in a perfectly competitive market can maximize its profits by producing the level of output:

Correct Answer
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In the short run, a firm that is earning a loss should compare the market price to its _______ in order to determine how to minimize its losses.

Correct Answer
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B

Which is not an essential characteristic of a perfectly competitive market?

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In the short run, we assume that the number of firms in a perfectly competitive market:

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Of the curves displayed in the graph shown, what does curve C most likely represent?

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<p><b><b><span style="font-size:20pt;"><span style="color:#FF0000;"> </span></span> </b> The graph shown displays the marginal cost and marginal revenue curves for a perfectly competitive firm. What is the market price?

Correct Answer
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In the long run, firms in a perfectly competitive market choose to produce a quantity:

Correct Answer
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If a firm in a perfectly competitive market faces the cost curves in the graph shown and observes a market price of $13, the firm:

Correct Answer
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The market price has fallen below a firm's average total costs, and the firm is now earning a loss. What is the best action for the firm to take in the short run?

Correct Answer
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Exam 13: Perfect Competition

Correct AnswerverifiedShow Answer

For firms that sell one product in a perfectly competitive market, the market price is:

Correct AnswerverifiedD

If demand in a perfectly competitive market decreases, supply will:

Correct AnswerverifiedShow Answer

The number of firms in a perfectly competitive market:

Correct AnswerverifiedShow Answer

A good that is perfectly standardized is:

Correct AnswerverifiedShow Answer

In the long run, a firm should exit the industry if:

Correct AnswerverifiedShow Answer

When a market contains standardized goods:

Correct AnswerverifiedShow Answer

Firms in perfectly competitive markets who wish to maximize profits should produce:

Correct AnswerverifiedShow Answer

The graph shown displays the marginal cost and marginal revenue curves for a perfectly competitive firm. Producing 14 units:

Correct AnswerverifiedShow Answer

In perfectly competitive markets, transaction costs are:

Correct AnswerverifiedShow Answer

When economic profits are zero for a firm in a perfectly competitive market, it means that:

Correct AnswerverifiedB

A firm in a perfectly competitive market can maximize its profits by producing the level of output:

Correct AnswerverifiedShow Answer

In the short run, a firm that is earning a loss should compare the market price to its _______ in order to determine how to minimize its losses.

Correct AnswerverifiedB

Which is not an essential characteristic of a perfectly competitive market?

Correct AnswerverifiedShow Answer

In the short run, we assume that the number of firms in a perfectly competitive market:

Correct AnswerverifiedShow Answer

Of the curves displayed in the graph shown, what does curve C most likely represent?

Correct AnswerverifiedShow Answer

<p><b><b><span style="font-size:20pt;"><span style="color:#FF0000;"> </span></span> </b> The graph shown displays the marginal cost and marginal revenue curves for a perfectly competitive firm. What is the market price?

Correct AnswerverifiedShow Answer

In the long run, firms in a perfectly competitive market choose to produce a quantity:

Correct AnswerverifiedShow Answer

If a firm in a perfectly competitive market faces the cost curves in the graph shown and observes a market price of $13, the firm:

Correct AnswerverifiedShow Answer

The market price has fallen below a firm's average total costs, and the firm is now earning a loss. What is the best action for the firm to take in the short run?

Correct AnswerverifiedShow Answer

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D

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B

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B

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