Question 1

A very large number of small sellers who sell identical products imply

Accepted Answer

A)  a multitude of vastly different selling prices.
B)  a downward sloping demand curve for each seller's product.
C)  the inability of one seller to influence price.
D)  chaos in the market.

Question 2

Figure 12-9 shows cost and demand curves facing a profit-maximizing,perfectly competitive firm.
-Refer to Figure 12-9.At price P1,the firm would produce

Accepted Answer

A)  Q1 units
B)  Q3 units.
C)  Q5 units.
D)  zero units.

Question 3

Firms that are price takers

Accepted Answer

A)  must lower their prices to increase sales.
B)  are able to sell a fixed quantity of output at the market price.
C)  can raise their prices as a result of a successful advertising campaign.
D)  are able to sell all their output at the market price.

Question 4

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Accepted Answer

A) True 
 B)False

Question 5

A perfectly competitive wheat farmer in a constant-cost industry produces 1,000 bushels of wheat at a total cost of $50,000.The prevailing market price is $48.What will happen to the market price of wheat in the long run?

Accepted Answer

A)  The price remains constant at $48.
B)  The price falls below $48.
C)  The price rises above $48.
D)  There is insufficient information to answer the question.

Question 6

The delivery of first-class mail by the U.S.Postal Service is an example of

Accepted Answer

A)  a monopoly.
B)  perfect competition because consumers have access to other methods of written communication;for example,email and text messaging.
C)  monopolistic competition,because mail delivery is a differentiated product provided by many firms.
D)  an oligopoly because a few other firms provide delivery of letters and packages.

Question 7

Figure 12-9 shows cost and demand curves facing a profit-maximizing,perfectly competitive firm.
-Refer to Figure 12-9.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)  shut down.

Question 8

Quantity  Total Cost  Average  Total Cost  Marginal  Cost 0$10.00−−−−−−−−115.00$15.00$5.00217.508.752.50322.507.505.00430.007.507.50540.008.0010.00652.508.7512.50767.509.6415.00885.0010.6317.509105.0011.6720.00\begin{array} { | c | c | c | c | } \hline 	ext { Quantity } & 	ext { Total Cost } & \begin{array} { c } 	ext { Average } \	ext { Total Cost }\end{array} & \begin{array} { c } 	ext { Marginal } \	ext { Cost }\end{array} \\hline 0 & \$ 10.00 & - - - - & - - - - \\hline 1 & 15.00 & \$ 15.00 & \$ 5.00 \\hline 2 & 17.50 & 8.75 & 2.50 \\hline 3 & 22.50 & 7.50 & 5.00 \\hline 4 & 30.00 & 7.50 & 7.50 \\hline 5 & 40.00 & 8.00 & 10.00 \\hline 6 & 52.50 & 8.75 & 12.50 \\hline 7 & 67.50 & 9.64 & 15.00 \\hline 8 & 85.00 & 10.63 & 17.50 \\hline 9 & 105.00 & 11.67 & 20.00 \\hline\end{array} Quantity 0123456789​ Total Cost $10.0015.0017.5022.5030.0040.0052.5067.5085.00105.00​ Average  Total Cost ​−−−−$15.008.757.507.508.008.759.6410.6311.67​ Marginal  Cost ​−−−−$5.002.505.007.5010.0012.5015.0017.5020.00​​  Arnie sells basketballs in a perfectly competitive market.Table 12-3 summarizes Arnie's output per day (Q) ,total cost (TC) ,average total cost (ATC) and marginal cost (MC) .
-Refer to Table 12-3.What will Arnie's output be and how much profit will he earn if the market price of basketballs is $5.00?

Accepted Answer

A)  Q = 1;profit = -$10.
B)  Q = 3;profit = -$7.50
C)  Q = 0;profit = -$10.00
D)  Price and profit cannot be determined from the information given.

Question 9

Which of the following statements is correct?

Accepted Answer

A)  Economic profit takes into account all costs involved in producing a product.
B)  Accounting profit is not relevant in preparing the firm's financial statement.
C)  Economic profit always exceeds accounting profit.
D)  Accounting profit is the same as economic profit.

Question 10

If productive efficiency characterizes a market

Accepted Answer

A)  the marginal cost of production is minimized.
B)  firms produce the goods that consumers desire most.
C)  the output is being produced at the lowest possible cost.
D)  firms use the best technology available to produce the good.

Question 11

A perfectly competitive firm has to charge the same price as every other firm in the market.Therefore,the firm

Accepted Answer

A)  faces a perfectly inelastic demand curve.
B)  is not able to make a profit in the short run.
C)  is a price taker.
D)  faces a perfectly elastic supply curve.

Question 12

What characteristic of a competitive market has made the "long run pretty short" in the market for iPhone applications?

Accepted Answer

A)  few firms in the market
B)  identical products
C)  ease of entry
D)  blocked entry

Question 13

A firm's total profit can be calculated as all of the following except

Accepted Answer

A)  total revenue minus total cost.
B)  average profit per unit times quantity sold.
C)  (price minus average total cost) times quantity sold.
D)  marginal profit times quantity sold.

Question 14

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

Accepted Answer

A)  Restaurants do not sell identical products.
B)  Restaurants compete in small market areas-neighborhoods and cities-rather than in regional or national markets.Therefore,restaurants are not small relative to their market size.
C)  Restaurants usually have entry barriers in the form of zoning restrictions and health regulations.
D)  Restaurants have significant liability costs that perfectly competitive firms do not have;for example,customers may sue if they suffer from food poisoning.

Question 15

Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market.
-Refer to Figure 12-4.If the market price is $30 and if the firm is producing output,what is the amount of its total variable cost?

Accepted Answer

A)  $7,200
B)  $6,480
C)  $5,400
D)  $3,960

Question 16

Both individual buyers and sellers in perfect competition

Accepted Answer

A)  can influence the market price by their own individual actions.
B)  can influence the market price by joining with a few of their competitors.
C)  have to take the market price as a given.
D)  have the market price dictated to them by government.

Question 17

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 18

Figure 12-2 
-Refer to Figure 12-2.Why is the total revenue curve a ray from the origin?

Accepted Answer

A)  because revenue increases at an increasing rate
B)  because revenue increases at a decreasing rate
C)  because the firm can sell its product at a constant price
D)  because the firm must lower its price to sell more

Question 19

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.The prevailing market price is $48.Assuming that this firm continues to produce in the long run,what happens to output level in the long run?

Accepted Answer

A)  The firm's output falls.
B)  The firm's output increases.
C)  The firm produces the same output level.
D)  There is insufficient information to answer the question.

Question 20

Figure 12-11 
-Refer to Figure 12-11.If this is a constant-cost industry,what is the market price in the long-run equilibrium?

Accepted Answer

A)  $5
B)  $14
C)  $15
D)  $20

Exam 12: Firms in Perfectly Competitive Markets

The delivery of first-class mail by the U.S.Postal Service is an example of

Correct Answer
verified

What characteristic of a competitive market has made the "long run pretty short" in the market for iPhone applications?

Correct Answer
verified

Figure 12-9 shows cost and demand curves facing a profit-maximizing,perfectly competitive firm. -Refer to Figure 12-9.At price P4,the firm would

Correct Answer
verified

A very large number of small sellers who sell identical products imply

Correct Answer
verified

A perfectly competitive firm has to charge the same price as every other firm in the market.Therefore,the firm

Correct Answer
verified

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.The prevailing market price is $48.Assuming that this firm continues to produce in the long run,what happens to output level in the long run?

Correct Answer
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Figure 12-2 -Refer to Figure 12-2.Why is the total revenue curve a ray from the origin?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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A firm's total profit can be calculated as all of the following except

Correct Answer
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Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. -Refer to Figure 12-4.If the market price is $30 and if the firm is producing output,what is the amount of its total variable cost?

Correct Answer
verified

Both individual buyers and sellers in perfect competition

Correct Answer
verified

Figure 12-9 shows cost and demand curves facing a profit-maximizing,perfectly competitive firm. -Refer to Figure 12-9.At price P1,the firm would produce

Correct Answer
verified

If productive efficiency characterizes a market

Correct Answer
verified

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 Answer
verified

A perfectly competitive wheat farmer in a constant-cost industry produces 1,000 bushels of wheat at a total cost of $50,000.The prevailing market price is $48.What will happen to the market price of wheat in the long run?

Correct Answer
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Firms that are price takers

Correct Answer
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Correct Answer
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Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

Correct Answer
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Figure 12-11 -Refer to Figure 12-11.If this is a constant-cost industry,what is the market price in the long-run equilibrium?

Correct Answer
verified

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Correct Answer
verified

Exam 12: Firms in Perfectly Competitive Markets

The delivery of first-class mail by the U.S.Postal Service is an example of

Correct AnswerverifiedShow Answer

What characteristic of a competitive market has made the "long run pretty short" in the market for iPhone applications?

Correct AnswerverifiedShow Answer

Figure 12-9 shows cost and demand curves facing a profit-maximizing,perfectly competitive firm. -Refer to Figure 12-9.At price P4,the firm would

Correct AnswerverifiedShow Answer

A very large number of small sellers who sell identical products imply

Correct AnswerverifiedShow Answer

A perfectly competitive firm has to charge the same price as every other firm in the market.Therefore,the firm

Correct AnswerverifiedShow Answer

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000.The prevailing market price is $48.Assuming that this firm continues to produce in the long run,what happens to output level in the long run?

Correct AnswerverifiedShow Answer

Figure 12-2 -Refer to Figure 12-2.Why is the total revenue curve a ray from the origin?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

A firm's total profit can be calculated as all of the following except

Correct AnswerverifiedShow Answer

Figure 12-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. -Refer to Figure 12-4.If the market price is $30 and if the firm is producing output,what is the amount of its total variable cost?

Correct AnswerverifiedShow Answer

Both individual buyers and sellers in perfect competition

Correct AnswerverifiedShow Answer

Figure 12-9 shows cost and demand curves facing a profit-maximizing,perfectly competitive firm. -Refer to Figure 12-9.At price P1,the firm would produce

Correct AnswerverifiedShow Answer

If productive efficiency characterizes a market

Correct AnswerverifiedShow Answer

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

A perfectly competitive wheat farmer in a constant-cost industry produces 1,000 bushels of wheat at a total cost of $50,000.The prevailing market price is $48.What will happen to the market price of wheat in the long run?

Correct AnswerverifiedShow Answer

Firms that are price takers

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following offers the best reason why restaurants are not considered to be perfectly competitive firms?

Correct AnswerverifiedShow Answer

Figure 12-11 -Refer to Figure 12-11.If this is a constant-cost industry,what is the market price in the long-run equilibrium?

Correct AnswerverifiedShow Answer

A perfectly competitive firm breaks even at a price equal to its minimum average total cost.

Correct AnswerverifiedShow Answer

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