Question 1

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market. nd unit,then increase. D) increase until the 4th unit,then decrease." class="answers-bank-image d-inline" rel="preload" >
According to the table shown,the firm's marginal costs:

Accepted Answer

A)  are constant.
B)  increase as output increases.
C)  decrease until the 2nd unit,then increase.
D)  increase until the 4th unit,then decrease.E) C) and D)
F) A) and C)

Question 2

Firms in perfectly competitive markets typically have:

Accepted Answer

A)  one profit-maximizing level of output.
B)  several profit-maximizing levels of output to choose from.
C)  two profit-maximizing levels of output to choose from.
D)  no chance of maximizing profits,since they have no control over market price.E) None of the above
F) A) and B)

Question 3

When economic profits are zero for a firm,it means that:

Accepted Answer

A)  no firms will enter or exit the industry.
B)  average revenue is equal to average total cost.
C)  average total costs are minimized.
D)  All of these are true.E) A) and C)
F) None of the above

Question 4

If the demand in a perfectly competitive market decreases,the price will:

Accepted Answer

A)  temporarily increase.
B)  temporarily decrease.
C)  increase permanently.
D)  decrease permanently.E) None of the above
F) B) and C)

Question 5

If the market price falls below a firm's minimum average total cost,the firm should:

Accepted Answer

A)  definitely stop production.
B)  definitely continue to operate at a loss.
C)  consider how to minimize its losses.
D)  pay only fixed costs.E) B) and D)
F) All of the above

Question 6

If firms are producing at a profit-maximizing level of output where the price exceeds the average total cost:

Accepted Answer

A)  accounting profits must be positive.
B)  economic profits must be positive.
C)  other firms will enter the market.
D)  All of these are true.E) None of the above
F) C) and D) D

Question 7

The long-run exit rule is to exit the industry if:

Accepted Answer

A)  P > AVC.
B)  P 
C)  P > ATC.
D)  P < ATC.E) All of the above
F) A) and B)

Question 8

A price taker is a buyer or seller who:

Accepted Answer

A)  has complete control over setting the market price.
B)  can influence the market price.
C)  has no control over setting the market price.
D)  has the goal of maximizing market share,not profits.E) A) and B)
F) A) and C)

Question 9

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market. 
According to the table shown,what is the market price?

Accepted Answer

A)  $500
B)  $150
C)  $50
D)  It depends on the level of output.E) None of the above
F) A) and C) C

Question 10

Given the exit rule,where does a firm's long-run supply curve derive from?

Accepted Answer

A)  It is the section of the ATC curve to the right of its minimum.
B)  It is the section of the MC that lies above the ATC curve.
C)  It is the section of the MC that lies above the AVC curve.
D)  It is the section of the AVC curve to the right of its minimum.E) B) and C)
F) A) and B)

Question 11

In reality,the long-run supply curve for a perfectly competitive market is upward sloping because:

Accepted Answer

A)  of changing costs of production that firms may face.
B)  not all firms have identical cost structures.
C)  experienced firms will have different information and costs than new firms.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 12

If the demand increases in a perfectly competitive market,what will likely occur?

Accepted Answer

A)  Firms will temporarily make a profit due to a higher price.
B)  Firms will enter the market in hopes of capturing some profits.
C)  The short-run supply curve will shift to the right,causing price to eventually fall.
D)  All of these are true.E) A) and D)
F) C) and D)

Question 13

If the market price falls below the bottom of the firm's ATC curve:

Accepted Answer

A)  there is no level of output at which the firm can make a profit.
B)  the firm is earning profits.
C)  the market price must be lower than the firm's AVC.
D)  None of these is true.E) A) and C)
F) A) and D)

Question 14

A good that is standardized is:

Accepted Answer

A)  interchangeable with others in the market.
B)  indistinguishable to others in the market.
C)  identical to others in the market.
D)  All of these are true.E) B) and C)
F) A) and B)

Question 15

In a perfectly competitive market price takers exist because:

Accepted Answer

A)  there are few sellers and many buyers.
B)  there are few buyers and many sellers.
C)  there are many buyers and sellers.
D)  there are few sellers and buyers.E) A) and D)
F) A) and C) C

Question 16

If a firm in a perfectly competitive market is producing at a level of output where marginal costs are less than marginal revenue:

Accepted Answer

A)  its profits must be positive.
B)  its profits are maximized.
C)  its profits will increase if they produce less.
D)  None of these is true.E) A) and B)
F) A) and C)

Question 17

An example of a standardized good is:

Accepted Answer

A)  grain.
B)  iron.
C)  crude oil.
D)  All of these represent standardized goods.E) None of the above
F) B) and C)

Question 18

We assume that in the short run in a perfectly competitive market firms:

Accepted Answer

A)  can enter and exit the market.
B)  can enter,but not exit the market.
C)  can exit,but not enter the market.
D)  cannot enter or exit the market.E) A) and C)
F) None of the above

Question 19

For firms that sell one product in a perfectly competitive market,average revenue:

Accepted Answer

A)  is calculated by total revenue divided by total output.
B)  is equal to marginal revenue.
C)  is equal to the market price.
D)  All of these are true.E) C) and D)
F) A) and B)

Question 20

A characteristic that is important,but not essential to defining a perfectly competitive market is:

Accepted Answer

A)  goods are standardized.
B)  buyers and sellers are price takers.
C)  firms can freely enter and exit the market.
D)  All of these are necessary to define a perfectly competitive market.E) A) and C)
F) A) and B)

Exam 13: Perfect Competition

This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market. According to the table shown,the firm's marginal costs:

Correct AnswerverifiedShow Answer

Firms in perfectly competitive markets typically have:

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When economic profits are zero for a firm,it means that:

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If the demand in a perfectly competitive market decreases,the price will:

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If the market price falls below a firm's minimum average total cost,the firm should:

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If firms are producing at a profit-maximizing level of output where the price exceeds the average total cost:

Correct AnswerverifiedD

The long-run exit rule is to exit the industry if:

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A price taker is a buyer or seller who:

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This table shows the total costs for various levels of output for a firm operating in a perfectly competitive market. According to the table shown,what is the market price?

Correct AnswerverifiedC

Given the exit rule,where does a firm's long-run supply curve derive from?

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In reality,the long-run supply curve for a perfectly competitive market is upward sloping because:

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If the demand increases in a perfectly competitive market,what will likely occur?

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If the market price falls below the bottom of the firm's ATC curve:

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A good that is standardized is:

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In a perfectly competitive market price takers exist because:

Correct AnswerverifiedC

If a firm in a perfectly competitive market is producing at a level of output where marginal costs are less than marginal revenue:

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An example of a standardized good is:

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We assume that in the short run in a perfectly competitive market firms:

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For firms that sell one product in a perfectly competitive market,average revenue:

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A characteristic that is important,but not essential to defining a perfectly competitive market is:

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D

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C

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C

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