Question 1

If,as a perfectly competitive industry expands,it can supply larger quantities only at a higher long-run equilibrium price,it is

Accepted Answer

A)  a constant-cost industry.
B)  an increasing-cost industry.
C)  a decreasing-cost industry.
D)  a fixed-cost industry.

Question 2

Figure 9-2
 
-Refer to Figure 9-2.Suppose the firm is currently producing Q₂ units.What happens if it expands output to Q₃ units?

Accepted Answer

A)  Its profit increases by the size of the vertical distance df.
B)   It makes less profit.
C)  It incurs a loss.
D)  It will be moving toward its profit maximizing output.

Question 3

Figure 9-12
 
-Refer to Figure 9-12.Consider a typical firm in a perfectly competitive industry that makes short-run profits.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Accepted Answer

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

Question 4

Figure 9-4
  
Figure 9-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
-Refer to Figure 9-4.If the market price is $30,the firm's profit-maximizing output level is

Accepted Answer

A)  0.
B)  130.
C)  180.
D)  240.

Question 5

Competition has driven the economic profits in the video rental business to zero.Surya Bacha,who owns a video rental business,would be better off leaving the industry for another alternative.

Accepted Answer

A) True 
 B)False

Question 6

What is productive efficiency?

Accepted Answer

A)  a situation in which resources are allocated to their highest profit use
B)  a situation in which resources are allocated such that goods can be produced at their lowest possible average cost
C)  a situation in which resources are allocated such the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it
D)  a situation in which firms produce as much as possible

Question 7

Figure 9-9
  
Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm.
-Refer to Figure 9-9.At price P₄,the firm would

Accepted Answer

A)  lose an amount equal to its fixed cost.
B)  make a profit.
C)  lose an amount less than fixed cost.
D)  make a normal profit.

Question 8

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.

Question 9

Consider the market for wheat which is a perfectly competitive market.Is the market demand curve the same as the demand curve facing an individual producer? If not,explain how and why they are different? Illustrate your answer graphically.

Accepted Answer

The market demand is downward sloping wh...

Question 10

Which of the following is the best example of a perfectly competitive firm?

Accepted Answer

A)  a corn farmer in Illinois
B)  a Taco Bell restaurant
C)  the Ford Motor Company
D)  the United Parcel Service (UPS)

Question 11

If the market price is $40 in a perfectly competitive market,the marginal revenue from selling the fifth unit is

Accepted Answer

A)  $8.
B)  $20.
C)  $40.
D)  $200.

Question 12

Figure 9-5
  
Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 9-5.What is the minimum price the firm requires to produce output?

Accepted Answer

A)  $20
B)  $14
C)  $5
D)  It cannot be determined

Question 13

Assume that the personal computer industry is perfectly competitive.The fact that the price of personal computers over the last decade has fallen despite increases in demand signifies that the industry is a decreasing-cost industry.

Accepted Answer

A) True 
 B)False

Question 14

Figure 9-5
  
Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry.
-Refer to Figure 9-5.If the market price is $20,what is the firm's profit-maximizing output?

Accepted Answer

A)  750 units
B)  1,100 units
C)  1,350 units
D)  1,800 units

Question 15

Figure 9-10
 
-Refer to Figure 9-10.Total revenue at the profit-maximizing level of output is

Accepted Answer

A)  $1,200.
B)  $2,500.
C)  $4,800.
D)  $6,000.

Question 16

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

Accepted Answer

A)  The firm cannot make a profit in the short run because it is too small a part of the total market.
B)  The firm can make a profit in the long run but not in the short run.
C)  The firm can sell as much as it wants without having to lower its price.
D)  The firm must lower its price in order to increase quantity demanded.

Question 17

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

Accepted Answer

A) True 
 B)False

Question 18

A perfectly competitive wheat farmer in a constant-cost industry produces 3,000 bushels of wheat at a total cost of $36,000.The prevailing market price is $15.What will happen to the market price of wheat in the long run?

Accepted Answer

A)  The price remains constant at $15.
B)  The price falls to $12.
C)  The price rises above $15.
D)   There is insufficient information to answer the question.

Question 19

Figure 9-1
 
-Refer to Figure 9-1.If the firm is producing 700 units,

Accepted Answer

A)  it is making a profit.
B)   it is making a loss.
C)  it should cut back its output to maximize profit.
D)  it should increase its output to maximize profit.

Question 20

Firms in perfectly competitive industries are unable to control the prices of the products they sell and earn a profit in the long run.Which of the following is one reason for this?

Accepted Answer

A)  Owners of perfectly competitive firms realize that their short-run profits are temporary.Therefore, they either sell their businesses or develop other products that will earn short-run profits.
B)  Firms in perfectly competitive industries can use advertising in the short run to persuade consumers that their products are better than those of other firms.But eventually consumers realize that all of the firms sell virtually identical products.
C)  Firms from other countries are able to produce similar products at lower costs.
D)  Firms in these industries sell identical products.

Exam 9: Firms in Perfectly Competitive Markets

Competition has driven the economic profits in the video rental business to zero.Surya Bacha,who owns a video rental business,would be better off leaving the industry for another alternative.

Correct AnswerverifiedShow Answer

Figure 9-1 -Refer to Figure 9-1.If the firm is producing 700 units,

Correct AnswerverifiedShow Answer

A perfectly competitive wheat farmer in a constant-cost industry produces 3,000 bushels of wheat at a total cost of $36,000.The prevailing market price is $15.What will happen to the market price of wheat in the long run?

Correct AnswerverifiedShow Answer

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

Correct AnswerverifiedShow Answer

Figure 9-12 -Refer to Figure 9-12.Consider a typical firm in a perfectly competitive industry that makes short-run profits.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Correct AnswerverifiedShow Answer

Consider the market for wheat which is a perfectly competitive market.Is the market demand curve the same as the demand curve facing an individual producer? If not,explain how and why they are different? Illustrate your answer graphically.

Correct AnswerverifiedThe market demand is downward sloping wh...View AnswerShow Answer

Firms in perfectly competitive industries are unable to control the prices of the products they sell and earn a profit in the long run.Which of the following is one reason for this?

Correct AnswerverifiedShow Answer

If the market price is $40 in a perfectly competitive market,the marginal revenue from selling the fifth unit is

Correct AnswerverifiedShow Answer

Figure 9-2 -Refer to Figure 9-2.Suppose the firm is currently producing Q₂ units.What happens if it expands output to Q₃ units?

Correct AnswerverifiedShow Answer

If,as a perfectly competitive industry expands,it can supply larger quantities only at a higher long-run equilibrium price,it is

Correct AnswerverifiedShow Answer

Figure 9-5 Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 9-5.If the market price is $20,what is the firm's profit-maximizing output?

Correct AnswerverifiedShow Answer

What is productive efficiency?

Correct AnswerverifiedShow Answer

Figure 9-10 -Refer to Figure 9-10.Total revenue at the profit-maximizing level of output is

Correct AnswerverifiedShow Answer

Figure 9-9 Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 9-9.At price P₄,the firm would

Correct AnswerverifiedShow Answer

Figure 9-5 Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 9-5.What is the minimum price the firm requires to produce output?

Correct AnswerverifiedShow Answer

Figure 9-4 Figure 9-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. -Refer to Figure 9-4.If the market price is $30,the firm's profit-maximizing output level is

Correct AnswerverifiedShow Answer

Assume that the personal computer industry is perfectly competitive.The fact that the price of personal computers over the last decade has fallen despite increases in demand signifies that the industry is a decreasing-cost industry.

Correct AnswerverifiedShow Answer

For a perfectly competitive firm,average revenue is equal to

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is the best example of a perfectly competitive firm?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The market demand is downward sloping wh...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified