Question 1

Figure 10-1 
-If the profit-maximizing firm depicted in Figure 10-1 is perfectly competitive, how much output should it produce?

Accepted Answer

A)  A
B)  B
C)  C
D)  D

Question 2

The short-run market demand schedule in perfect competition is positively sloped.

Accepted Answer

A) True 
 B)False

Question 3

The process of adjustment to a new long-run equilibrium in a perfectly competitive industry is complete when

Accepted Answer

A)  no firms want to enter or exit the industry.
B)  every firm has adjusted its production process to make the most efficient use of its resources.
C)  investors in the industry receive the standard economy-wide rate of return on their investments.
D)  All of the above are correct.

Question 4

Under the theory of perfect competition, firms and buyers know the availability and prices associated with all products in the market.

Accepted Answer

A) True 
 B)False

Question 5

Figure 10-5 
-In Figure 10-5, points which lie on the firm's short-run supply curve are

Accepted Answer

A)  A, B, C.
B)  C, D, H.
C)  F, E, G.
D)  A, C, H.

Question 6

The firm whose short-run cost curves are given in Exhibit 10-1 has a long-run fixed cost of

Accepted Answer

A)  $0.
B)  $2.
C)  $3.
D)  $4.

Question 7

In the long run, a perfectly competitive firm maximizes profit so P = MC = AC.

Accepted Answer

A) True 
 B)False

Question 8

When a perfectly competitive industry is in long-run equilibrium, firms maximize profits, and entry forces the price down

Accepted Answer

A)  until all loss making firms leave the industry.
B)  until each firm can earn acceptable level of economic profit.
C)  until price becomes tangent to the long run average cost curve.
D)  until the long average cost curve rises above the demand curve.

Question 9

The long-run supply curve of an industry equals the industry's

Accepted Answer

A)  long-run marginal cost curve.
B)  the horizontal sum of all firms' supply curves at any point in time.
C)  long-run average cost curve.
D)  long-run total variable cost curve.

Question 10

What is the difference between the short run and the long run as economists define the two?

Accepted Answer

The short run is a period of time within...

Question 11

Figure 10-2 
-Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm.At its profit-maximizing level of output, the firm's short-run TC is represented by area

Accepted Answer

A)  ADFO.
B)  BGHC.
C)  BGIO.
D)  ADGIO.

Question 12

In perfect competition, marginal revenue always equals

Accepted Answer

A)  total revenue.
B)  price.
C)  average cost.
D)  marginal fixed cost.

Question 13

In the short run, a perfectly competitive firm can make a profit, a loss, or shut down.

Accepted Answer

A) True 
 B)False

Question 14

We expect the demand curve in the perfectly competitive industry to be

Accepted Answer

A)  negatively sloped.
B)  vertical.
C)  horizontal.
D)  perfectly elastic.

Question 15

The short run for the industry is defined as a period

Accepted Answer

A)  too brief for new firms to enter the industry.
B)  too brief for old firms to leave the industry.
C)  in which the number of firms in the industry is fixed.
D)  All of the above are correct.

Question 16

The long-run industry supply curve in perfect competition is derived from the

Accepted Answer

A)  short-run industry supply curve which shifts as new firms enter the industry.
B)  short-run industry supply curve which shifts as old firms exit the industry.
C)  freedom of firms from sunk costs so that new cost curves become long-run curves.
D)  All of the above reasons.

Question 17

A firm sells in a competitive market in which price is $10.Its marginal cost is 2 + .5Q.Determine the profit-maximizing level of output.

Accepted Answer

The solution requires equating...

Question 18

The perfectly competitive firm's short-run shutdown rule is to shut down immediately if

Accepted Answer

A)  TR 
B)  TR 
C)  TR 
D)  TR  Q.

Question 19

What makes the demand curve of the perfectly competitive firm uniquely different from that of firms in other kinds of market structures?

Accepted Answer

The perfectly competitive firm's demand ...

Question 20

At a perfectly competitive firm's short-run equilibrium level of output,

Accepted Answer

A)  P = MR = MC.
B)  P = MR, but MR does not equal MC.
C)  P = MC, but MR does not equal MC.
D)  MR = MC and P < MR.

Exam 10: The Firm and the Industry Under Perfect Competition

The short-run market demand schedule in perfect competition is positively sloped.

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In perfect competition, marginal revenue always equals

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The short run for the industry is defined as a period

Correct AnswerverifiedShow Answer

What is the difference between the short run and the long run as economists define the two?

Correct AnswerverifiedThe short run is a period of time within...View AnswerShow Answer

Figure 10-1 -If the profit-maximizing firm depicted in Figure 10-1 is perfectly competitive, how much output should it produce?

Correct AnswerverifiedShow Answer

The perfectly competitive firm's short-run shutdown rule is to shut down immediately if

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At a perfectly competitive firm's short-run equilibrium level of output,

Correct AnswerverifiedShow Answer

The long-run industry supply curve in perfect competition is derived from the

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Figure 10-5 -In Figure 10-5, points which lie on the firm's short-run supply curve are

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When a perfectly competitive industry is in long-run equilibrium, firms maximize profits, and entry forces the price down

Correct AnswerverifiedShow Answer

The process of adjustment to a new long-run equilibrium in a perfectly competitive industry is complete when

Correct AnswerverifiedShow Answer

The long-run supply curve of an industry equals the industry's

Correct AnswerverifiedShow Answer

Under the theory of perfect competition, firms and buyers know the availability and prices associated with all products in the market.

Correct AnswerverifiedShow Answer

A firm sells in a competitive market in which price is $10.Its marginal cost is 2 + .5Q.Determine the profit-maximizing level of output.

Correct AnswerverifiedThe solution requires equating...View AnswerShow Answer

In the short run, a perfectly competitive firm can make a profit, a loss, or shut down.

Correct AnswerverifiedShow Answer

We expect the demand curve in the perfectly competitive industry to be

Correct AnswerverifiedShow Answer

The firm whose short-run cost curves are given in Exhibit 10-1 has a long-run fixed cost of

Correct AnswerverifiedShow Answer

Figure 10-2 -Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm.At its profit-maximizing level of output, the firm's short-run TC is represented by area

Correct AnswerverifiedShow Answer

In the long run, a perfectly competitive firm maximizes profit so P = MC = AC.

Correct AnswerverifiedShow Answer

What makes the demand curve of the perfectly competitive firm uniquely different from that of firms in other kinds of market structures?

Correct AnswerverifiedThe perfectly competitive firm's demand ...View AnswerShow Answer

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The short run is a period of time within...
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The solution requires equating...
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The perfectly competitive firm's demand ...
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