Question 1

When economic profits are zero for a firm in a perfectly competitive market,it means that:

Accepted Answer

A)  average total costs are zero.
B)  price is equal to minimum average total cost.
C)  average variable costs are minimized.
D)  All of these are true.E) A) and B)
F) C) and D)

Question 2

Firms in perfectly competitive markets who wish to maximize profits should produce:

Accepted Answer

A)  more as long as marginal cost is greater than marginal revenue.
B)  less as long as marginal cost is less than marginal revenue.
C)  at the level where marginal cost equals marginal revenue.
D)  All of these are true.E) A) and B)
F) A) and C)

Question 3

Each point of a firm's supply curve represents a price-quantity pair where:

Accepted Answer

A)  MC = MR.
B)  P = min ATC.
C)  P = min AVC.
D)  MC = ATC.E) None of the above
F) All of the above

Question 4

Because firms in perfectly competitive markets can sell any quantity without driving down prices,they should:

Accepted Answer

A)  produce as much as possible to maximize profits.
B)  produce at the lowest cost per unit to maximize profits.
C)  try to flood the market.
D)  None of these is true.E) B) and D)
F) C) and D)

Question 5

When demand increases in a perfectly competitive market,in the short run __________________,and in the long run __________________.

Accepted Answer

A)  prices increase;supply increases
B)  prices increase;prices stay permanently higher
C)  quantity supplied increases;prices increase
D)  quantity supplied decreases;prices decreaseE) B) and D)
F) C) and D)

Question 6

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

Accepted Answer

A)  average total cost must be minimized.
B)  economic profits must be zero.
C)  accounting profits must be positive.
D)  All of these are true.E) All of the above
F) B) and C)

Question 7

For firms that sell one product in a perfectly competitive market,the market price:

Accepted Answer

A)  is taken as a constant by individual firms.
B)  will not be influenced by one firm's output decision.
C)  is equal to the average revenue of a firm.
D)  All of these are true.E) A) and D)
F) B) and D)

Question 8

The key difference between supply in the short run and supply in the long run is that we assume that:

Accepted Answer

A)  firms are able to enter and exit the market in the long run.
B)  firms are able to enter and exit the market in the short run.
C)  firms will not collude in the short run.
D)  firms' total supply will be constant in the long run.E) B) and C)
F) A) and D)

Question 9

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

Accepted Answer

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

Question 10

In the long run,firms in a perfectly competitive market will:

Accepted Answer

A)  exit if the price is lower than their lowest average total cost.
B)  attract other firms to the market if the price is higher than their lowest average total cost.
C)  not attract other firms if they are earning zero economic profits.
D)  All of these are true.E) A) and D)
F) A) and C)

Question 11

A firm in a perfectly competitive market can maximize its profits by:

Accepted Answer

A)  producing the level of output where marginal cost equals marginal revenue.
B)  producing any level below where marginal cost equals marginal revenue.
C)  producing any level beyond where marginal cost equals marginal revenue.
D)  producing at capacity.E) A) and B)
F) B) and D)

Question 12

For firms that sell one product in a perfectly competitive market,the market price:

Accepted Answer

A)  will remain constant regardless of an individual firm's output decision.
B)  is equal to the average total cost of a firm.
C)  is equal to the marginal cost of a firm.
D)  All of these are true.E) B) and C)
F) None of the above

Question 13

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,when 5 units are produced:

Accepted Answer

A)  profits are maximized.
B)  profits are positive.
C)  the firm is producing less than the profit-maximizing amount.
D)  the firm is producing more than the profit-maximizing amount.E) None of the above
F) A) and B)

Question 14

Having free entry and exit in a market can help drive:

Accepted Answer

A)  innovation.
B)  cost-cutting.
C)  quality improvements.
D)  All of these are driven by the threat of entry by competitors.E) A) and C)
F) All of the above

Question 15

When firms enter a market,the supply increases and:

Accepted Answer

A)  price falls and profits decrease.
B)  price increases and profits decrease.
C)  price falls and profits increase.
D)  price increases and profits increase.E) A) and B)
F) All of the above

Question 16

The profit-maximizing level of output for any firm in a perfectly competitive market is to produce where:

Accepted Answer

A)  MC = MR.
B)  MC > MR.
C)  MC 
D)  MR = P*.E) None of the above
F) A) and B)

Question 17

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

Accepted Answer

A)  is always greater than market price.
B)  is always less than market price.
C)  is always the same as market price.
D)  All of these can be true.E) A) and B)
F) A) and C)

Question 18

In the short run,we assume that the number of firms in a perfectly competitive market:

Accepted Answer

A)  is fixed.
B)  varies if perfect information is present.
C)  varies more than the long-run equilibrium.
D)  None of these is true.E) A) and B)
F) All of the above

Question 19

An example of a standardized good is:

Accepted Answer

A)  grain.
B)  granola cereal.
C)  hamburgers.
D)  digital cameras.E) All of the above
F) B) and C)

Question 20

Commodities:

Accepted Answer

A)  are a special type of standardized good.
B)  have no product differentiation.
C)  are identical regardless of who produced it.
D)  All of these are true.E) B) and C)
F) A) and B)

Exam 13: Perfect Competition

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

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When economic profits are zero for a firm in a perfectly competitive market,it means that:

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When firms enter a market,the supply increases and:

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The profit-maximizing level of output for any firm in a perfectly competitive market is to produce where:

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Firms in perfectly competitive markets who wish to maximize profits should produce:

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A firm in a perfectly competitive market can maximize its profits by:

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Commodities:

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Each point of a firm's supply curve represents a price-quantity pair where:

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When demand increases in a perfectly competitive market,in the short run __________________,and in the long run __________________.

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The key difference between supply in the short run and supply in the long run is that we assume that:

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In the short run,we assume that the number of firms in a perfectly competitive market:

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In the long run,firms in a perfectly competitive market will:

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For firms that sell one product in a perfectly competitive market,the market price:

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An example of a standardized good is:

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Having free entry and exit in a market can help drive:

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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,when 5 units are produced:

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

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For firms that sell one product in a perfectly competitive market,the market price:

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Because firms in perfectly competitive markets can sell any quantity without driving down prices,they should:

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

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When demand increases in a perfectly competitive market,in the short run ,and in the long run .

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