Question 1

Figure 10-2
​ 
-In the short run, perfectly competitive firms can

Accepted Answer

A)  make an economic profit.
B)  take a loss.
C)  break even.
D)  All of the responses are correct.E) All of the above
F) A) and D)

Question 2

A firm that is earning zero economic profit should go out of business.

Accepted Answer

A) True 
 B)False

Question 3

The perfectly competitive firm's short-run shutdown rule is to shut down immediately if

Accepted Answer

A)  TR 
B)  TR 
C)  TR 
D)  TR  Q.E) C) and D)
F) None of the above

Question 4

Which of the following statements is not true in a perfectly competitive industry in long-run equilibrium?

Accepted Answer

A)  A profit-maximizing firm may produce any output level at which P 
B)  Every firm produces at an output level at which MC = LRAC.
C)  There is no entry or exit from the industry.
D)  No firm earns an economic profit.E) All of the above
F) A) and D)

Question 5

The strength of the competition faced by a company can profoundly affect its

Accepted Answer

A)  pricing.
B)  output decisions.
C)  input decisions.
D)  All of the responses are correct.E) A) and B)
F) C) and D)

Question 6

At a firm's profit-maximizing level of output, its price is $200 and its short-run average total cost is $225.The firm

Accepted Answer

A)  has a profit of $25 per unit of output.
B)  should shut down if its short-run average fixed cost is less than $25.
C)  has a loss of $100 per unit of output.
D)  should shut down if its short-run average variable cost exceeds $25.E) None of the above
F) B) and C)

Question 7

The process of adjustment to a new long-run equilibrium in a perfectly competitive industry is complete when

Accepted Answer

A)  no firms want to enter or exit the industry.
B)  every firm has adjusted its production process to make the most efficient use of its resources.
C)  investors in the industry receive the standard economy-wide rate of return on their investments.
D)  All of the responses are correct.E) A) and B)
F) C) and D)

Question 8

Perfectly competitive markets have absolutely no drawbacks.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements concerning equilibrium in the long run is not true?

Accepted Answer

A)  Most firms earn economic profits in the long run.
B)  The firm can vary its plant size in the long run.
C)  Economic profits are eliminated as new firms enter the industry in the long run.
D)  For firms in long-run equilibrium, P = MC = AC.E) All of the above
F) B) and C)

Question 10

Under perfect competition, a firm's

Accepted Answer

A)  demand curve and average revenue curve are identical, but the marginal revenue curve is different.
B)  demand curve is different, but the average revenue curve and the marginal revenue curve are identical.
C)  demand curve, average revenue curve and marginal revenue curve are identical.
D)  none of these are true.E) All of the above
F) A) and D)

Question 11

In perfect competition, an increase in fixed costs will eventually cause all except

Accepted Answer

A)  reduction in industry output.
B)  reduction in a firm's output.
C)  reduction in the number of firms.
D)  decrease in industry supply.E) B) and C)
F) C) and D)

Question 12

If the price falls below minimum SRAVC, the quantity supplied by the firm will be

Accepted Answer

A)  the quantity at minimum MC.
B)  zero.
C)  the quantity at the point where MC intersects AC.
D)  the quantity at minimum AC.E) A) and C)
F) B) and C)

Question 13

In the short run if TR < TC, a perfectly competitive firm will always shut down.

Accepted Answer

A) True 
 B)False

Question 14

Perfectly competitive markets are not the best at producing the goods that are desired by consumers.

Accepted Answer

A) True 
 B)False

Question 15

Figure 10-5
​ 
-In Figure 10-5, points which lie on the firm's short-run supply curve are

Accepted Answer

A)  A, B, C.
B)  C, D, H.
C)  F, E, G.
D)  A, C, H.E) A) and B)
F) A) and C)

Question 16

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 supply and demand.E) C) and D)
F) None of the above

Question 17

A perfectly competitive firm has a horizontal demand curve because it can sell as much as it wants at the market price.

Accepted Answer

A) True 
 B)False

Question 18

A market

Accepted Answer

A)  may be an organized exchange.
B)  refers to a set of sellers and buyers whose actions affect a commodity's price.
C)  is that area in which buyers and sellers compete to affect a product's price.
D)  All of the responses are correct.E) A) and C)
F) A) and B)

Question 19

In long-run equilibrium under perfect competition,

Accepted Answer

A)  the firm and the industry will have the same cost curves.
B)  only a very few firms will be earning economic profits.
C)  the demand curves facing individual firms will fall to the level of minimum AC.
D)  individual firms will tend to increase their outputs.E) A) and B)
F) None of the above

Question 20

The short-run supply curve of the perfectly competitive firm is the firm's

Accepted Answer

A)  MC curve.
B)  AVC curve.
C)  MC curve above the minimum point on the AVC curve.
D)  MC curve above the minimum point on the ATC curve.E) C) and D)
F) A) and B)

Exam 10: The Firm and the Industry Under Perfect Competition

A perfectly competitive firm has a horizontal demand curve because it can sell as much as it wants at the market price.

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

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In perfect competition, an increase in fixed costs will eventually cause all except

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The process of adjustment to a new long-run equilibrium in a perfectly competitive industry is complete when

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If the price falls below minimum SRAVC, the quantity supplied by the firm will be

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At a firm's profit-maximizing level of output, its price is $200 and its short-run average total cost is $225.The firm

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Perfectly competitive markets have absolutely no drawbacks.

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Figure 10-5 ​ -In Figure 10-5, points which lie on the firm's short-run supply curve are

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Which of the following statements concerning equilibrium in the long run is not true?

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The perfectly competitive firm's short-run shutdown rule is to shut down immediately if

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Perfectly competitive markets are not the best at producing the goods that are desired by consumers.

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Which of the following statements is not true in a perfectly competitive industry in long-run equilibrium?

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In long-run equilibrium under perfect competition,

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In the short run if TR < TC, a perfectly competitive firm will always shut down.

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The short-run supply curve of the perfectly competitive firm is the firm's

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The strength of the competition faced by a company can profoundly affect its

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A market

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A firm that is earning zero economic profit should go out of business.

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Under perfect competition, a firm's

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Figure 10-2 ​ -In the short run, perfectly competitive firms can

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Figure 10-5 -In Figure 10-5, points which lie on the firm's short-run supply curve are

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Figure 10-2 -In the short run, perfectly competitive firms can

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