Question 1

Suppose a perfectly competitive firm is experiencing zero economic profits.In an effort to increase profits,the firm decides to initiate an advertising campaign for its product.The most likely short-run result of this campaign,ceteris paribus,would be

Accepted Answer

A)  Economic losses for the firm.
B)  The ability to sell more at the existing market price.
C)  The ability to sell more at a lower price.

Question 2

Which of the following is least likely to occur during the long run in a perfectly competitive market experiencing economic profits?

Accepted Answer

A)  A rightward shift in the market supply curve.
B)  An increase in the market quantity demanded.
C)  An increase in marginal revenue.

Question 3

-Refer to Figure 23.2 for a perfectly competitive firm.Given the current market price of $100,we expect to see

Accepted Answer

A)  Entry into this industry.
B)  Exit from this industry.
C)  No change in the number of firms in this industry.

Question 4

Explain why technological progress will,at best,only temporarily allow a perfectly competitive firm to earn an economic profit.

Accepted Answer

Technological progress shifts a firm's M...

Question 5

Because a perfectly competitive firm has no market power,its marginal cost curve is flat (i.e. ,horizontal).

Accepted Answer

A) True 
 B)False

Question 6

The exit of firms from a market,ceteris paribus,

Accepted Answer

A)  Shifts the market supply curve to the right.
B)  Reduces the economic losses of remaining firms in the market.
C)  Increases the equilibrium output in the market.

Question 7

If price is above the long-run competitive equilibrium level,

Accepted Answer

A)  Firms will enter the market.
B)  Firms will shut down.
C)  Firms will incur losses.

Question 8

The equilibrium price in a competitive market

Accepted Answer

A)  Ensures that anyone who wants the good can get it.
B)  Equates the demand for goods with the supply of goods.
C)  Remains unchanged forever.

Question 9

1. B) p2. C) p3." class="answers-bank-image d-inline" rel="preload" >
- In Figure 23.3,diagram "a" presents the cost curves that are relevant to a firm's production decision,and diagram "b" shows the market demand and supply curves for the market.Use both diagrams to answer the following question: In Figure 23.3,the price at which a firm makes zero economic profits is

Accepted Answer

A)  p1.
B)  p2.
C)  p3.

Question 10

Which of the following is characteristic of a perfectly competitive market?

Accepted Answer

A)  Long-run economic profit.
B)  High barriers to entry.
C)  Identical products.

Question 11

Technological improvements cause

Accepted Answer

A)  New firms to enter but existing firms to continue producing their old output levels.
B)  Some firms to exit but the remaining firms to produce more output.
C)  Existing firms to produce more output.

Question 12

When economic profits exist in the market for a particular product,this is a signal to producers that

Accepted Answer

A)  Consumers would like more scarce resources devoted to the production of this product.
B)  The market is oversupplied with this product.
C)  The best mix of goods and services is being produced with society's scarce resources.

Question 13

Which of the following is true about a competitive market supply curve?

Accepted Answer

A)  It is horizontal.
B)  It is downward-sloping to the right.
C)  It is the sum of the marginal cost curves of all firms.

Question 14

Explain how the market supply curve is derived in a perfectly competitive market.Identify five factors that would cause the market supply curve to shift.

Accepted Answer

The market supply curve is the sum of th...

Question 15

If two products are homogeneous,then they

Accepted Answer

A)  Are identical.
B)  Differ from each other.
C)  Must be used together.

Question 16

When a firm is earning positive economic profits,this is an indication that the firm

Accepted Answer

A)  Should leave this market in the long run.
B)  Is using its resources in the best possible way.
C)  Is using its resources in one of a number of ways that would yield positive economic profits.

Question 17

Technological improvements cause

Accepted Answer

A)  ATC to shift down.
B)  The supply curve to shift to the left.
C)  MC to shift up.

Question 18

If someone invents a better way to produce frozen pizzas,then

Accepted Answer

A)  The market supply curve for frozen pizzas will shift to the right.
B)  The market supply curve for frozen pizzas will shift to the left.
C)  There will be a movement up along the market supply curve for frozen pizzas.

Question 19

In which of the following cases would entry and exit cease?

Accepted Answer

A)  P > short-run ATC.
B)  P = long-run ATC.
C)  P > long-run ATC.

Question 20

One In the News article "IBM Forced to Halt PCjr Output Next Month" indicates all of the following except:

Accepted Answer

A)  Competitive pressure forced IBM to discontinue a particular PC model
B)  IBM pushed the price down to no avail
C)  IBM attempted to price below average total cost

Exam 23: Competitive Markets

Technological improvements cause

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Technological improvements cause

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Which of the following is characteristic of a perfectly competitive market?

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Because a perfectly competitive firm has no market power,its marginal cost curve is flat (i.e. ,horizontal).

Correct AnswerverifiedShow Answer

When economic profits exist in the market for a particular product,this is a signal to producers that

Correct AnswerverifiedShow Answer

If someone invents a better way to produce frozen pizzas,then

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The exit of firms from a market,ceteris paribus,

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One In the News article "IBM Forced to Halt PCjr Output Next Month" indicates all of the following except:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Explain how the market supply curve is derived in a perfectly competitive market.Identify five factors that would cause the market supply curve to shift.

Correct AnswerverifiedThe market supply curve is the sum of th...View AnswerShow Answer

-Refer to Figure 23.2 for a perfectly competitive firm.Given the current market price of $100,we expect to see

Correct AnswerverifiedShow Answer

Suppose a perfectly competitive firm is experiencing zero economic profits.In an effort to increase profits,the firm decides to initiate an advertising campaign for its product.The most likely short-run result of this campaign,ceteris paribus,would be

Correct AnswerverifiedShow Answer

The equilibrium price in a competitive market

Correct AnswerverifiedShow Answer

If two products are homogeneous,then they

Correct AnswerverifiedShow Answer

Explain why technological progress will,at best,only temporarily allow a perfectly competitive firm to earn an economic profit.

Correct AnswerverifiedTechnological progress shifts a firm's M...View AnswerShow Answer

When a firm is earning positive economic profits,this is an indication that the firm

Correct AnswerverifiedShow Answer

Which of the following is least likely to occur during the long run in a perfectly competitive market experiencing economic profits?

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In which of the following cases would entry and exit cease?

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Which of the following is true about a competitive market supply curve?

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If price is above the long-run competitive equilibrium level,

Correct AnswerverifiedShow Answer

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The market supply curve is the sum of th...
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Technological progress shifts a firm's M...
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