Question 1

Which of the following is a characteristic of a monopoly?

Accepted Answer

A)   It is easy for new firms to enter the market.
B)   There is only one seller in the market.
C)   The product is not unique.
D)   The firm has no control over price.E) A) and C)
F) All of the above

Question 2

Figure 12-9 3, the firm would produce A)  Q2 units B)  Q3 units. C)  Q4 units. D)  Q5 units." class="answers-bank-image d-inline" rel="preload" > Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 12-9. At price P3, the firm would produce

Accepted Answer

A)   Q2 units
B)   Q3 units.
C)   Q4 units.
D)   Q5 units.E) All of the above
F) B) and D)

Question 3

If a firm in a perfectly competitive industry introduces a lower-cost way of producing an existing product, the firm will be able to earn economic profits in the long run.

Accepted Answer

A) True 
 B)False

Question 4

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

Accepted Answer

A) True 
 B)False

Question 5

In the long run, the entry of new firms in an industry

Accepted Answer

A)   harms consumers by forcing prices up above the level of average cost
B)   benefits consumers by forcing prices down to the level of total cost.
C)   harms consumers by forcing prices up above the level of total cost
D)   benefits consumers by forcing prices down to the level of average cost.E) C) and D)
F) B) and D)

Question 6

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm

Accepted Answer

A)   is earning a profit.
B)   should shut down.
C)   is incurring a loss.
D)   is breaking even.E) All of the above
F) A) and D)

Question 7

Which of the following is a characteristic of an oligopolistic market structure?

Accepted Answer

A)   There are few dominant sellers.
B)   Each firm sells a unique product.
C)   It is easy for new firms to enter the industry.
D)   Each firm need not react to the actions of rivals.E) None of the above
F) C) and D)

Question 8

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen?

Accepted Answer

A)   The firm's profits will increase.
B)   The firm's revenue will increase.
C)   The firm will not sell any output.
D)   The firm will sell more output than its competitors.E) B) and C)
F) A) and D)

Question 9

Figure 12-2 
-Refer to Figure 12-2. Why is the total revenue curve a ray from the origin?

Accepted Answer

A)   because revenue increases at an increasing rate
B)   because revenue increases at a decreasing rate
C)   because the firm can sell its product at a constant price
D)   because the firm must lower its price to sell moreE) A) and B)
F) A) and C)

Question 10

Table 12-1
  Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases. Assume that output can only be increased in batches of 100 units.
-Refer to Table 12-1. Suppose the fixed cost of production rises by $500 and the price per unit is still $8. What happens to the firm's profit-maximizing output level?

Accepted Answer

A)   It must fall.
B)   It must rise to offset the increased cost.
C)   It will remain the same.
D)   The firm will shut down.E) C) and D)
F) A) and B)

Question 11

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Accepted Answer

A)   each seller is too small to affect the market price.
B)   the price is set by the government.
C)   all the sellers get together and set the price.
D)   all the demanders get together and set the price.E) None of the above
F) A) and B)

Question 12

In early 2007, Pioneer and JVC, two Japanese electronics firms, each announced that their profits were going to be lower than expected because they both had to cut prices for LCD and plasma television sets. Which of the following could explain why these firms did not simply raise their prices and increase their profits?

Accepted Answer

A)   The move to cut prices is probably just a temporary one to gain market share. In the long run the firms will raise prices and be able to increase their profits.
B)   Most likely, intense competition between these two major producers probably pushed prices down. Thereafter, each feared that it would lose its customers to the other if it raised its prices.
C)   In perfect competition, prices are determined by the market and firms will keep lowering prices until there are no profits to be earned.
D)   The firms are still making profits, just not as high as expected so there is room to lower prices until one can force the other out of business.E) None of the above
F) A) and B)

Question 13

What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency?

Accepted Answer

Productive efficiency refers to the situ...

Question 14

Figure 12-15 
-Refer to Figure 12-15. Suppose a typical firm in a perfectly competitive market is earning economic profits in the short run. Which of the diagrams in the figure depicts what happens in the industry as it transitions to a long-run equilibrium?

Accepted Answer

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

Question 15

The price of a seller's product in perfect competition is determined by

Accepted Answer

A)   the individual seller.
B)   a few of the sellers.
C)   market demand and market supply.
D)   the individual demander.E) B) and D)
F) A) and B)

Question 16

If a perfectly competitive apple farm's marginal revenue exceeds the marginal cost of the last bushel of apples sold, what should the farm do to maximize its profit?

Accepted Answer

A)   determine what the total revenue and total cost of production are
B)   increase output
C)   decrease output
D)   lower its price to sell moreE) A) and B)
F) C) and D)

Question 17

For a perfectly competitive firm, average revenue is equal to

Accepted Answer

A)   marginal cost.
B)   the market price.
C)   total revenue.
D)   average fixed cost.E) A) and C)
F) A) and B)

Question 18

How are sunk costs and fixed costs related?

Accepted Answer

A)   They are not related in any way.
B)   Sunk costs cannot be recovered and fixed costs can be avoided by shutting down.
C)   In the short run they are equal to each other.
D)   In the long run they are equal to each other.E) A) and B)
F) A) and C)

Question 19

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) A) and B)
F) A) and C)

Question 20

What is meant by the term "long-run competitive equilibrium?

Accepted Answer

Long-run competitive equilibri...

Exam 12: Firms in Perfectly Competitive Markets

How are sunk costs and fixed costs related?

Correct Answer
verified

Which of the following is a characteristic of a monopoly?

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 productively efficient output level in the short run and in the long run.

Correct Answer
verified

What is meant by the term "long-run competitive equilibrium?

Correct Answer
verified
Long-run competitive equilibri...
View Answer

If a firm in a perfectly competitive industry introduces a lower-cost way of producing an existing product, the firm will be able to earn economic profits in the long run.

Correct Answer
verified

Correct Answer
verified

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9. At price P₃, the firm would produce

Correct Answer
verified

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm

Correct Answer
verified

Which of the following is a characteristic of an oligopolistic market structure?

Correct Answer
verified

Figure 12-2 -Refer to Figure 12-2. Why is the total revenue curve a ray from the origin?

Correct Answer
verified

The price of a seller's product in perfect competition is determined by

Correct Answer
verified

In the long run, the entry of new firms in an industry

Correct Answer
verified

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Correct Answer
verified

Figure 12-15 -Refer to Figure 12-15. Suppose a typical firm in a perfectly competitive market is earning economic profits in the short run. Which of the diagrams in the figure depicts what happens in the industry as it transitions to a long-run equilibrium?

Correct Answer
verified

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen?

Correct Answer
verified

Correct Answer
verified

If a perfectly competitive apple farm's marginal revenue exceeds the marginal cost of the last bushel of apples sold, what should the farm do to maximize its profit?

Correct Answer
verified

For a perfectly competitive firm, average revenue is equal to

Correct Answer
verified

What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency?

Correct Answer
verified
Productive efficiency refers to the situ...
View Answer

Exam 12: Firms in Perfectly Competitive Markets

How are sunk costs and fixed costs related?

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of a monopoly?

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 productively efficient output level in the short run and in the long run.

Correct AnswerverifiedShow Answer

What is meant by the term "long-run competitive equilibrium?

Correct AnswerverifiedLong-run competitive equilibri...View AnswerShow Answer

If a firm in a perfectly competitive industry introduces a lower-cost way of producing an existing product, the firm will be able to earn economic profits in the long run.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9. At price P3, the firm would produce

Correct AnswerverifiedShow Answer

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of an oligopolistic market structure?

Correct AnswerverifiedShow Answer

Figure 12-2 -Refer to Figure 12-2. Why is the total revenue curve a ray from the origin?

Correct AnswerverifiedShow Answer

The price of a seller's product in perfect competition is determined by

Correct AnswerverifiedShow Answer

In the long run, the entry of new firms in an industry

Correct AnswerverifiedShow Answer

The demand curve for each seller's product in perfect competition is horizontal at the market price because

Correct AnswerverifiedShow Answer

Figure 12-15 -Refer to Figure 12-15. Suppose a typical firm in a perfectly competitive market is earning economic profits in the short run. Which of the diagrams in the figure depicts what happens in the industry as it transitions to a long-run equilibrium?

Correct AnswerverifiedShow Answer

Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges $21. Which of the following will happen?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a perfectly competitive apple farm's marginal revenue exceeds the marginal cost of the last bushel of apples sold, what should the farm do to maximize its profit?

Correct AnswerverifiedShow Answer

For a perfectly competitive firm, average revenue is equal to

Correct AnswerverifiedShow Answer

What is meant by productive efficiency? How does a perfectly competitive firm achieve productive efficiency?

Correct AnswerverifiedProductive efficiency refers to the situ...View AnswerShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Long-run competitive equilibri...
View Answer

Correct Answer
verified

Correct Answer
verified

Figure 12-9 Figure 12-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 12-9. At price P₃, the firm would produce

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Productive efficiency refers to the situ...
View Answer