Question 1

For a firm in a perfectly competitive market, a price decrease:

Accepted Answer

A)  raises the profit-maximizing quantity.
B)  lowers the profit-maximizing quantity.
C)  does not affect the profit-maximizing quantity.
D)  signifies that the firm should leave the market.E) B) and D)
F) C) and D)

Question 2

The table shown displays the total costs for various levels of output for a firm operating in a perfectly competitive market.

This firm's marginal costs:

Accepted Answer

A)  are constant.
B)  increase as output increases.
C)  decrease up through the second unit, then increase.
D)  increase up through the fourth unit, then decrease.E) All of the above
F) B) and D)

Question 3

In theory, which of the following characterizes the long run supply curve for firms in a perfectly competitive market that are identical to each other?

Accepted Answer

A)  Perfectly elastic
B)  Perfectly inelastic
C)  Upward sloping
D)  Downward slopingE) A) and B)
F) All of the above

Question 4

If the market price falls below the minimum of the firm's average total cost 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 average variable cost.
D)  total revenue must be higher than total cost.E) A) and B)
F) A) and C)

Question 5

If a firm in a perfectly competitive market is producing at a level of output where marginal costs are equal to marginal revenue, it:

Accepted Answer

A)  should cut back production to increase profits.
B)  should increase production to increase profits.
C)  is producing a profit-maximizing quantity.
D)  may or may not need to change production, but this cannot be known without more information.E) A) and B)
F) None of the above

Question 6

If a firm in a perfectly competitive market facing a market price of $2 decides to increase its production from 2,000 units to 4,000 units, the firm's marginal revenue:

Accepted Answer

A)  will increase from $4,000 to $8,000.
B)  will decrease from $8,000 to $4,000.
C)  will stay the same.
D)  None of these are correct.E) None of the above
F) B) and C)

Question 7

If a firm in a perfectly competitive market facing a market price of $4 decides to produce 700 units of a good, what will the firm's average revenue be?

Accepted Answer

A)  $4
B)  $2,800
C)  $175
D)  $700E) C) and D)
F) None of the above

Question 8

If a firm in a perfectly competitive market is producing at a level of output where marginal cost exceeds marginal revenue, it:

Accepted Answer

A)  should cut back production to increase profits.
B)  should increase production to increase profits.
C)  is producing a profit-maximizing quantity.
D)  may or may not be maximizing profits.E) A) and B)
F) A) and C)

Question 9

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

Accepted Answer

A)  Buyers and sellers have no control over the market price.
B)  Sellers are selling unique products.
C)  Buyers have complete control over the market price and sellers have none.
D)  Sellers have complete control over the market price and buyers have none.E) None of the above
F) B) and D)

Question 10

In the short run in a perfectly competitive market:

Accepted Answer

A)  the number of firms is fixed.
B)  the total quantity supplied is fixed.
C)  the price is fixed.
D)  All of these are true in the short run.E) B) and C)
F) A) and D)

Question 11

Which of the following is an example of a standardized good?

Accepted Answer

A)  Grain
B)  Granola cereal
C)  Hamburgers
D)  Digital camerasE) All of the above
F) B) and C)

Question 12

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) A) and D)
F) All of the above

Question 13

If a firm in a perfectly competitive market faces the cost curves in the graph shown and produces at the profit-maximizing level of output, which of the following is true?

Accepted Answer

A)  The firm will plan to exit the industry in the long run if the price falls below $15.
B)  The firm will continue to operate in the short run as long as the price is below $11.
C)  The firm will earn positive profits any time the price is greater than $11.
D)  The firm will earn maximum profits at a quantity of 35.E) B) and D)
F) A) and D)

Question 14

The graph shown represents the cost and revenue curves of a firm in a perfectly competitive market.  The long run output decision for this firm is:

Accepted Answer

A)  Q1, P1.
B)  Q1, P2.
C)  Q2, P1.
D)  Q3, P3.E) C) and D)
F) A) and C)

Question 15

An essential characteristic of a perfectly competitive market is that buyers and sellers have:

Accepted Answer

A)  no competition and must set the market price on their own.
B)  so much competition that they must work together perfectly to set a market price.
C)  so much competition that they have no ability to set their own prices.
D)  no control over the price they set because it is determined by government.E) A) and D)
F) All of the above

Question 16

If a firm in a perfectly competitive market facing a market price of $5 decides to produce 400 units, what will the firm's total revenue be?

Accepted Answer

A)  $5
B)  $400
C)  $2,000
D)  $405E) B) and D)
F) A) and B)

Question 17

Firms are more likely to collude:

Accepted Answer

A)  when there are barriers to market entry.
B)  in perfectly competitive markets.
C)  when they can easily enter the market.
D)  when the market has no transactions costs.E) B) and C)
F) None of the above

Question 18

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)  increase quantity until the additional profit earned on the last unit sold is zero.E) A) and B)
F) C) and D)

Question 19

Allowing firms to freely enter and exit a market can: drive business profits up. increase demand for a product. encourage innovation. reduce prices for consumers.

Accepted Answer

A)  I and II
B)  III and IV
C)  II and IV
D)  I, II, and IIIE) None of the above
F) B) and C)

Question 20

Standardized goods and services:

Accepted Answer

A)  are interchangeable.
B)  have close substitutes.
C)  are unique.
D)  are regulated by government.E) A) and C)
F) A) and B)

Exam 13: Perfect Competition

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

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The graph shown represents the cost and revenue curves of a firm in a perfectly competitive market. The long run output decision for this firm is:

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If a firm in a perfectly competitive market is producing at a level of output where marginal costs are equal to marginal revenue, it:

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If the market price falls below the minimum of the firm's average total cost curve:

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If a firm in a perfectly competitive market facing a market price of $5 decides to produce 400 units, what will the firm's total revenue be?

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In the short run in a perfectly competitive market:

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An essential characteristic of a perfectly competitive market is that buyers and sellers have:

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The table shown displays the total costs for various levels of output for a firm operating in a perfectly competitive market. This firm's marginal costs:

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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 a firm in a perfectly competitive market is producing at a level of output where marginal cost exceeds marginal revenue, it:

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Firms are more likely to collude:

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Which of the following is an example of a standardized good?

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Standardized goods and services:

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For a firm in a perfectly competitive market, a price decrease:

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If a firm in a perfectly competitive market facing a market price of $2 decides to increase its production from 2,000 units to 4,000 units, the firm's marginal revenue:

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<p><b><b><span style="font-size:20pt;"><span style="color:#FF0000;"> </span></span> </b> If a firm in a perfectly competitive market faces the cost curves in the graph shown and produces at the profit-maximizing level of output, which of the following is true?

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Allowing firms to freely enter and exit a market can: drive business profits up. increase demand for a product. encourage innovation. reduce prices for consumers.

Correct AnswerverifiedShow Answer

In theory, which of the following characterizes the long run supply curve for firms in a perfectly competitive market that are identical to each other?

Correct AnswerverifiedShow Answer

If a firm in a perfectly competitive market facing a market price of $4 decides to produce 700 units of a good, what will the firm's average revenue be?

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

Correct AnswerverifiedShow Answer

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

Correct Answer
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