Question 1

Which of the following is NOT a characteristic of perfect competition?

Accepted Answer

A)  differentiated products
B)  large number of buyers and sellers
C)  price taking by each firm
D)  easy entry and exit into the marketE) A) and D)
F) A) and B)

Question 2

Suppose the perfectly competitive equilibrium occurs such that too many units of the good are produced. This is an example of

Accepted Answer

A)  marginal cost pricing.
B)  market failure.
C)  firms have not yet exited the industry.
D)  greedy business people behaving in an inappropriate manner.E) A) and C)
F) B) and C)

Question 3

-Using the above figure, the perfectly competitive firm should shut down if the market price is below

Accepted Answer

A)    .
B)    .
C)    .
D)    .E) A) and B)
F) B) and D)

Question 4

A perfectly competitive firm is maximizing profits in the short run. This implies that the firm is earning the most economic profits possible, which

Accepted Answer

A)  must be positive.
B)  must be either zero or positive.
C)  can be positive, negative, or zero.
D)  exist at the point at which price equals total cost.E) A) and C)
F) A) and D)

Question 5

Which of the following is closest to a perfectly competitive market?

Accepted Answer

A)  the computer software market
B)  the market for handmade guitars
C)  the market for broccoli
D)  the market for athletic shoesE) C) and D)
F) B) and C)

Question 6

Perfectly competitive markets are efficient because

Accepted Answer

A)  they always reach equilibrium.
B)  firms in the market are price takers.
C)  the cost to society for producing the goods is exactly equal to the value that society places on the good.
D)  the long run equilibrium assures that the prices of resources will not increase.E) A) and B)
F) B) and C)

Question 7

MR = MC. B) MR = P > MC. C) MR 
-For a perfectly competitive firm, the short-run break-even point occurs at the level of output where

Accepted Answer

A)  P > MR = MC.
B)  MR = P > MC.
C)  MR 
D)  P = MC = ATC.E) All of the above
F) B) and D)

Question 8

-In the long run, a perfect competitor

Accepted Answer

A)  earns positive profits but will not make losses.
B)  earns positive economic profits.
C)  earns zero economic profits.
D)  produces at its shutdown point.E) A) and C)
F) C) and D)

Question 9

We assume that firms, when they are deciding the best rate of output at which to produce,

Accepted Answer

A)  try to get the highest price possible.
B)  want to maximize sales.
C)  want to minimize costs.
D)  want to maximize profits.E) All of the above
F) A) and C)

Question 10

Suppose the price of an item in a perfectly competitive market is $3. For a firm in this market, MC = MR at an output of 100 units. The average total cost at this output level is $4 per unit, and TVC is $80. We may conclude that

Accepted Answer

A)  the firm should shut down because TC > TR.
B)  the firm should continue to produce because P>AVC.
C)  the firm should shut down because its TFC is $320 and its TC is $400.
D)  the firm should shut down because other firms will enter the industry as the market is perfectly competitive.E) A) and B)
F) All of the above

Question 11

What does it mean when the products sold by the firms in an industry are homogeneous?

Accepted Answer

A)  The product sold by one firm is a perfect substitute of the product sold by another firm in the same industry.
B)  Firms in the industry can produce the same product with different inputs.
C)  All firms in the industry are identical in size.
D)  The product sold by one firm is a perfect complement of the product sold by another firm in the same industry.E) A) and C)
F) A) and B)

Question 12

The short-run supply curve for the perfectly competitive firm is the portion of its

Accepted Answer

A)  MC curve above the AVC curve.
B)  MC curve above the AFC curve.
C)  MC curve above the ATC curve.
D)  MC curve above the MR curve.E) C) and D)
F) All of the above

Question 13

Factors that cause the short-run supply curve to change are factors that affect

Accepted Answer

A)  demand.
B)  fixed costs.
C)  variable costs.
D)  the market but not the individual firm.E) None of the above
F) B) and C)

Question 14

-If the costs of production do not increase as output increases in the long run in a perfectly competitive industry, then this is a

Accepted Answer

A)  constant-return-to-scale industry.
B)  constant-competitive industry.
C)  constant-cost industry.
D)  constant-price industry.E) A) and C)
F) None of the above

Question 15

A firm in a perfectly competitive industry faces the following cost and revenue conditions: ATC = $6; AVC = $3; MR = MC = $5. The firm is

Accepted Answer

A)  earning economic profits.
B)  experiencing economic losses.
C)  experiencing zero profits.
D)  in a position in which it should shut down.E) A) and B)
F) A) and D)

Question 16

The exiting of firms from a perfectly competitive industry occurs when

Accepted Answer

A)  opportunity costs cannot be covered.
B)  P = ATC.
C)  accounting profit is less than economic profit.
D)  MR equals MC.E) A) and D)
F) A) and C)

Question 17

What is the short-run shutdown price? Using a graph and a market price of P, show that losses are less when shutting down than when producing.

Accepted Answer

<img  loading="lazy" src="/assets/images/blured-textbook.svg" class="d-inline m-1" alt="blured image" width="139" height="30"> The short-run shutdown price is the pri...

Question 18

In the short run, in a perfectly competitive market, a firm will shut down if

Accepted Answer

A)  P 
B)  P 
C)  ATC > P > AVC for all levels of output.
D)  P > AFC for all levels of output.E) A) and B)
F) A) and C)

Question 19

For a perfectly competitive firm at its long-run competitive equilibrium point,

Accepted Answer

A)  P = AR = MR = LATC = SATC = MC.
B)  P = AR = MR = LATC > SATC = MC.
C)  P = AR = MR = MC = LATC = AVC.
D)  P > MR > AR > MC > LATC > SATC.E) None of the above
F) A) and B)

Question 20

If a perfectly competitive firm is producing at an output at which marginal cost exceeds marginal revenue,

Accepted Answer

A)  price will be at the profit maximizing level.
B)  sales will be at the profit maximizing level.
C)  the firm should expand production.
D)  the firm should reduce production.E) A) and D)
F) A) and C)

Exam 23: Perfect Competition

-For a perfectly competitive firm, the short-run break-even point occurs at the level of output where

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Which of the following is closest to a perfectly competitive market?

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Suppose the perfectly competitive equilibrium occurs such that too many units of the good are produced. This is an example of

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-If the costs of production do not increase as output increases in the long run in a perfectly competitive industry, then this is a

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For a perfectly competitive firm at its long-run competitive equilibrium point,

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Perfectly competitive markets are efficient because

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-Using the above figure, the perfectly competitive firm should shut down if the market price is below

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Which of the following is NOT a characteristic of perfect competition?

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Factors that cause the short-run supply curve to change are factors that affect

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The short-run supply curve for the perfectly competitive firm is the portion of its

Correct AnswerverifiedShow Answer

A perfectly competitive firm is maximizing profits in the short run. This implies that the firm is earning the most economic profits possible, which

Correct AnswerverifiedShow Answer

We assume that firms, when they are deciding the best rate of output at which to produce,

Correct AnswerverifiedShow Answer

Suppose the price of an item in a perfectly competitive market is $3. For a firm in this market, MC = MR at an output of 100 units. The average total cost at this output level is $4 per unit, and TVC is $80. We may conclude that

Correct AnswerverifiedShow Answer

A firm in a perfectly competitive industry faces the following cost and revenue conditions: ATC = $6; AVC = $3; MR = MC = $5. The firm is

Correct AnswerverifiedShow Answer

What is the short-run shutdown price? Using a graph and a market price of P, show that losses are less when shutting down than when producing.

Correct Answerverified The short-run shutdown price is the pri...View AnswerShow Answer

What does it mean when the products sold by the firms in an industry are homogeneous?

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-In the long run, a perfect competitor

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The exiting of firms from a perfectly competitive industry occurs when

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If a perfectly competitive firm is producing at an output at which marginal cost exceeds marginal revenue,

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In the short run, in a perfectly competitive market, a firm will shut down if

Correct AnswerverifiedShow Answer

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The short-run shutdown price is the pri...
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