Question 1

Refer to Figure 7-1. In Graph B, the market demand has decreased from d0 to d1 and, as a result, _____.Figure 7-1 0 to d1 and, as a result, _____.Figure 7-1   A) both the market price and the price of the price-taking firm have increased​ B) both the market price and the price of the price-taking firm have fallen to $4 C) the quantity of goods transacted in the market has fallen D) the firm will be unable to sell any of its output at the new equilibrium price E) some firms will sell their output at a higher price than others" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  both the market price and the price of the price-taking firm have increased​
B)  both the market price and the price of the price-taking firm have fallen to $4
C)  the quantity of goods transacted in the market has fallen
D)  the firm will be unable to sell any of its output at the new equilibrium price
E)  some firms will sell their output at a higher price than othersF) A) and D)
G) D) and E)

Question 2

Which of the following is true?

Accepted Answer

A)  The long run supply curve for a competitive increasing-cost industry will be upward sloping.
B)  The long run supply curve for a competitive increasing-cost industry will be less elastic than the industry's short run supply curve.
C)  The long run supply curve for a competitive increasing-cost industry will be vertical.
D)  The long run supply curve for a competitive increasing-cost industry will be downward sloping.
E)  The long run supply curve for a competitive increasing-cost industry will be parabolic in shape.F) A) and E)
G) B) and D)

Question 3

What are the characteristics of a perfectly competitive industry?

Accepted Answer

Answers will vary. In a perfectly compet...

Question 4

Perfect competition describes:

Accepted Answer

A)  an industry in which a few price-taking firms produce identical products.
B)  an industry in which numerous price-taking firms produce identical products.
C)  an industry in which price-taking firms compete for market share by varying the qualitative characteristics of products.
D)  an industry in which numerous firms are price makers and produce identical products.
E)  an industry in which two sellers sell identical goods at an identical price.F) B) and E)
G) C) and D)

Question 5

If the market demand curve in a perfectly competitive industry shifts right, the demand curve for each existing firm will:

Accepted Answer

A)  shift up.
B)  shift down.
C)  shift right.
D)  shift left.
E)  become negatively sloped.F) A) and B)
G) A) and C)

Question 6

The value of elasticity of the demand curve facing a perfectly competitive firm:

Accepted Answer

A)  is equal 0.
B)  is equal to infinity.
C)  is greater than 0 but less than 0.5.
D)  is smaller than 0 but more than ─0.5.
E)  is equal to 0.5.F) A) and B)
G) A) and E)

Question 7

Typically, extractive industries such as farming, mining, or lumbering:

Accepted Answer

A)  are considered to be decreasing cost industries.
B)  are considered to be constant cost industries.
C)  use only small portions of the total supply of specialized resources.
D)  are considered to be increasing-cost industries.
E)  allow the firms to earn economic profits in the long run.F) A) and E)
G) All of the above

Question 8

What would be the long-run equilibrium result of output expansion in a decreasing-cost industry?

Accepted Answer

Answers will vary. An expansion in the o...

Question 9

Table 7-1 shows revenue and cost data for a perfectly competitive firm. What is the value of the variable X shown in the table?Table 7-1

Accepted Answer

A)  $0
B)  $50
C)  $20
D)  $40
E)  $10F) A) and E)
G) A) and B)

Question 10

The graph represents a price-taking firm producing below the AVC curve. Is the firm making a profit, experiencing a loss, or earning a normal profit? Should the firm increase output, decrease output, or shut down? Explain.

Accepted Answer

Answers will vary. This price-taking fir...

Question 11

Firms should shut down in the short run whenever price is less than the average total cost.

Accepted Answer

A) True 
 B)False

Question 12

Under perfect competition, in long-run equilibrium, _____.​

Accepted Answer

A)  price will equal minimum average fixed cost
B)  firms will earn economic profits because of the existence of barriers to entry
C)  the demand curve facing individual firms will fall to the level tangent to the minimum average total cost curve
D)  firms will produce at the level of output where marginal revenue exceeds marginal cost by the greatest dollar amount
E)  each firm will produce and supply equal amount of goodF) B) and C)
G) A) and E)

Question 13

The behavior of an individual perfectly competitive firm has a perceptible influence on the market price.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is true of perfect competition?

Accepted Answer

A)  Since a perfectly competitive firm can sell all it wants at the market price, the firm's demand curve is vertical at the market price over the entire range of output that it could possibly produce.
B)  Because perfectly competitive markets have many buyers and sellers, each firm is so small in relation to the industry that its production decisions have no impact on the market price.
C)  Since perfectly competitive markets are highly competitive, entering a market is very difficult.
D)  Since there are large number of sellers in a perfectly competitive market, slightly differentiated products are considered identical.
E)  Since all the products in a perfectly competitive market are identical, sellers can change the price of their product, but not the quantity supplied.F) C) and D)
G) All of the above

Question 15

Figure 7-6 shows a firm in a perfectly competitive market in the long run. Which of the following is most likely to happen in the given market?Figure 7-6​

Accepted Answer

A)  New firms would be likely to enter, increasing the market price.
B)  New firms would be likely to enter, decreasing the market price.
C)  Existing firms would be likely to exit, increasing the market price.
D)  Existing firms would be likely to exit, decreasing the market price.
E)  Firms would neither enter nor exit, and the market price would remain unchanged.F) A) and E)
G) B) and C)

Question 16

In the short run, a perfectly competitive firm will maximize profit by producing where:

Accepted Answer

A)  MC = MR.
B)  MC = ATC.
C)  ATC = MR.
D)  AVC = MC.
E)  TR = MRF) A) and E)
G) B) and D)

Question 17

Productive efficiency occurs in perfect competition because the firm produces at the minimum of the:

Accepted Answer

A)  average fixed cost curve.
B)  average variable cost curve.
C)  average total cost curve.
D)  marginal revenue curve.
E)  marginal cost curve.F) C) and E)
G) B) and D)

Question 18

In a perfectly competitive industry, influence over price is exerted by:

Accepted Answer

A)  individual sellers.
B)  individual buyers.
C)  the largest firms.
D)  the forces of market supply and demand.
E)  the largest buyer.F) C) and E)
G) B) and E)

Question 19

Figure 7-5 shows cost and revenue curves for a perfectly competitive firm. The short-run _____ for this firm is represented by the area _____.Figure 7-5 1Bq B) loss; OP1Bq C) profit; PABP1 D) loss; PABP1 E) loss; OPAq" class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  profit; OP1Bq
B)  loss; OP1Bq
C)  profit; PABP1
D)  loss; PABP1
E)  loss; OPAqF) A) and E)
G) A) and D)

Question 20

The demand curve facing an individual firm in a perfectly competitive market:

Accepted Answer

A)  violates the law of demand, which states that demand curves slope downward.
B)  is a reflection of the firm's small size relative to the total market.
C)  is maintained only with the help of high barriers to entry.
D)  is a reflection of the inelastic demand for its product.
E)  shows that the firm can sell its output at any price.F) None of the above
G) A) and B)

Exam 7: Firms in Perfectly Competitive Markets

Under perfect competition, in long-run equilibrium, _____.​

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In a perfectly competitive industry, influence over price is exerted by:

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The value of elasticity of the demand curve facing a perfectly competitive firm:

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What are the characteristics of a perfectly competitive industry?

Correct AnswerverifiedAnswers will vary. In a perfectly compet...View AnswerShow Answer

The behavior of an individual perfectly competitive firm has a perceptible influence on the market price.

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Productive efficiency occurs in perfect competition because the firm produces at the minimum of the:

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What would be the long-run equilibrium result of output expansion in a decreasing-cost industry?

Correct AnswerverifiedAnswers will vary. An expansion in the o...View AnswerShow Answer

Perfect competition describes:

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Refer to Figure 7-1. In Graph B, the market demand has decreased from d0 to d1 and, as a result, _____.Figure 7-1

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Firms should shut down in the short run whenever price is less than the average total cost.

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The demand curve facing an individual firm in a perfectly competitive market:

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Table 7-1 shows revenue and cost data for a perfectly competitive firm. What is the value of the variable X shown in the table?Table 7-1

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Which of the following is true?

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In the short run, a perfectly competitive firm will maximize profit by producing where:

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Figure 7-5 shows cost and revenue curves for a perfectly competitive firm. The short-run _____ for this firm is represented by the area _____.Figure 7-5

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Typically, extractive industries such as farming, mining, or lumbering:

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Which of the following is true of perfect competition?

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If the market demand curve in a perfectly competitive industry shifts right, the demand curve for each existing firm will:

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Figure 7-6 shows a firm in a perfectly competitive market in the long run. Which of the following is most likely to happen in the given market?Figure 7-6​

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The graph represents a price-taking firm producing below the AVC curve. Is the firm making a profit, experiencing a loss, or earning a normal profit? Should the firm increase output, decrease output, or shut down? Explain.

Correct AnswerverifiedAnswers will vary. This price-taking fir...View AnswerShow Answer

Under perfect competition, in long-run equilibrium, _____.

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Refer to Figure 7-1. In Graph B, the market demand has decreased from d₀ to d₁ and, as a result, _____.Figure 7-1

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Figure 7-5 shows cost and revenue curves for a perfectly competitive firm. The short-run _ for this firm is represented by the area _.Figure 7-5

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Figure 7-6 shows a firm in a perfectly competitive market in the long run. Which of the following is most likely to happen in the given market?Figure 7-6

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