Question 1

If a firm decides to make the investment decision to expand its capacity, then it must have discovered that

Accepted Answer

A)  P = ATC.
B)  P > AVC.
C)  P > ATC.
D)  P = AVC.

Question 2

When firms in a competitive market are experiencing zero economic profits, this is an indication that

Accepted Answer

A)  They should be producing a different product.
B)  There is currently no better way to use society's scarce resources.
C)  They will eventually go bankrupt.
D)  Accounting losses are being experienced by these firms.

Question 3

Refer to Figure 23.2 for a perfectly competitive firm.This firm will maximize profits by producing the level of output that corresponds to point

Accepted Answer

A)  A.
B)  B.
C)  C.
D)  D.

Question 4

Refer to Figure 23.5 for a perfectly competitive firm.This firm will maximize profits by producing the level of output that corresponds to point

Accepted Answer

A)  A.
B)  B.
C)  C.
D)  D

Question 5

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

Accepted Answer

A)  A small number of firms.
B)  Exit of small firms when profits are high for large firms.
C)  Zero economic profit in the long run.
D)  Marginal revenue lower than price for each firm.

Question 6

If economic profits are earned in a competitive market, then over time

Accepted Answer

A)  Additional firms will enter the market.
B)  The market supply curve will shift to the left.
C)  Equilibrium price will rise as more firms enter.
D)  Normal profit will fall to zero as more firms enter.

Question 7

In a perfectly competitive market economy, business failures can benefit society by causing

Accepted Answer

A)  A reallocation of resources to better uses.
B)  An increase in market power for the remaining firms.
C)  A decline in market prices as remaining firms attempt to increase sales and stay in business.
D)  An increase in the number of jobs for bankruptcy lawyers and accountants.

Question 8

In Figure 23.3, diagram "a" presents the cost curves that are relevant to a firm's production decision, and diagram "b" shows the market demand and supply curves for the market.Use both diagrams to answer the following question: In Figure 23.3, the price at which a firm makes zero economic profits is

Accepted Answer

A)  p1.
B)  p2.
C)  p3.
D)  p4.

Question 9

Perfectly competitive firms always earn economic profits in the short run.

Accepted Answer

A) True 
 B)False

Question 10

In which of the following cases would entry and exit cease?

Accepted Answer

A)  P > short-run ATC.
B)  P = long-run ATC.
C)  P > long-run ATC.
D)  P < long-run ATC.

Question 11

Refer to Figure 23.2 for a perfectly competitive firm.If this firm produces the level of output corresponding to point C in the short run, it will earn

Accepted Answer

A)  Zero profit.
B)  The maximum profit possible.
C)  A profit, although not the maximum profit possible.
D)  A loss.

Question 12

Suppose a perfectly competitive firm is experiencing zero economic profits.In an effort to increase profits, the firm decides to initiate an advertising campaign for its product.The most likely short-run result of this campaign, ceteris paribus, would be

Accepted Answer

A)  Economic losses for the firm.
B)  The ability to sell more at the existing market price.
C)  The ability to sell more at a lower price.
D)  The ability to sell more at a higher price.

Question 13

Which of the following characterizes a firm that is in long-run perfectly competitive equilibrium where profits are maximized?

Accepted Answer

A)  Price equals minimum ATC.
B)  Positive economic profit.
C)  Price equals marginal cost.
D)  Price exceeds marginal cost.

Question 14

In a competitive market where firms are earning economic profits, which of the following should be expected as the industry moves to long-run equilibrium, ceteris paribus?

Accepted Answer

A)  A higher price and fewer firms.
B)  A higher price and more firms.
C)  A lower price and fewer firms.
D)  A lower price and more firms.

Question 15

When an athletic shoe company is producing a level of output at which price is greater than MC, from society's standpoint the company is producing too

Accepted Answer

A)  Much because society is giving up more to produce additional shoes than the shoes are worth.
B)  Much because society would be willing to give up more alternative goods in order to get additional shoes.
C)  Little because society is giving up more to produce additional shoes than the shoes are worth.
D)  Little because society would be willing to give up more alternative goods in order to get additional shoes.High profits in a particular industry indicate that consumers want a different mix of output (more of that particular industry's goods) .

Question 16

Profit per unit is equal to

Accepted Answer

A)  Price divided by average total cost.
B)  Price minus average total cost.
C)  Total revenue minus total cost.
D)  Total revenue minus variable cost divided by quantity.

Question 17

If long-run economic losses are being experienced in a competitive market,

Accepted Answer

A)  More firms will enter the market.
B)  The market supply curve will shift to the right.
C)  Equilibrium price will rise as firms exit.
D)  Normal profit will fall to zero as firms enter.

Question 18

If two products are homogeneous, then they

Accepted Answer

A)  Are identical.
B)  Differ from each other.
C)  Must be used together.
D)  Are similar to each other.

Question 19

Most product markets are perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 20

Which of the following is true about a competitive market supply curve?

Accepted Answer

A)  It is horizontal.
B)  It is downward-sloping to the right.
C)  It is the sum of the marginal cost curves of all firms.
D)  It is vertical.

Exam 9: Competitive Markets

Profit per unit is equal to

Correct Answer
verified

Suppose a perfectly competitive firm is experiencing zero economic profits.In an effort to increase profits, the firm decides to initiate an advertising campaign for its product.The most likely short-run result of this campaign, ceteris paribus, would be

Correct Answer
verified

Correct Answer
verified

In a competitive market where firms are earning economic profits, which of the following should be expected as the industry moves to long-run equilibrium, ceteris paribus?

Correct Answer
verified

Perfectly competitive firms always earn economic profits in the short run.

Correct Answer
verified

Refer to Figure 23.2 for a perfectly competitive firm.If this firm produces the level of output corresponding to point C in the short run, it will earn

Correct Answer
verified

When firms in a competitive market are experiencing zero economic profits, this is an indication that

Correct Answer
verified

If economic profits are earned in a competitive market, then over time

Correct Answer
verified

Most product markets are perfectly competitive.

Correct Answer
verified

In a perfectly competitive market economy, business failures can benefit society by causing

Correct Answer
verified

Which of the following characterizes a firm that is in long-run perfectly competitive equilibrium where profits are maximized?

Correct Answer
verified

If a firm decides to make the investment decision to expand its capacity, then it must have discovered that

Correct Answer
verified

Refer to Figure 23.5 for a perfectly competitive firm.This firm will maximize profits by producing the level of output that corresponds to point

Correct Answer
verified

If two products are homogeneous, then they

Correct Answer
verified

Refer to Figure 23.2 for a perfectly competitive firm.This firm will maximize profits by producing the level of output that corresponds to point

Correct Answer
verified

In which of the following cases would entry and exit cease?

Correct Answer
verified

Which of the following is true about a competitive market supply curve?

Correct Answer
verified

If long-run economic losses are being experienced in a competitive market,

Correct Answer
verified

When an athletic shoe company is producing a level of output at which price is greater than MC, from society's standpoint the company is producing too

Correct Answer
verified

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

Correct Answer
verified

Exam 9: Competitive Markets

Profit per unit is equal to

Correct AnswerverifiedShow Answer

Suppose a perfectly competitive firm is experiencing zero economic profits.In an effort to increase profits, the firm decides to initiate an advertising campaign for its product.The most likely short-run result of this campaign, ceteris paribus, would be

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In a competitive market where firms are earning economic profits, which of the following should be expected as the industry moves to long-run equilibrium, ceteris paribus?

Correct AnswerverifiedShow Answer

Perfectly competitive firms always earn economic profits in the short run.

Correct AnswerverifiedShow Answer

Refer to Figure 23.2 for a perfectly competitive firm.If this firm produces the level of output corresponding to point C in the short run, it will earn

Correct AnswerverifiedShow Answer

When firms in a competitive market are experiencing zero economic profits, this is an indication that

Correct AnswerverifiedShow Answer

If economic profits are earned in a competitive market, then over time

Correct AnswerverifiedShow Answer

Most product markets are perfectly competitive.

Correct AnswerverifiedShow Answer

In a perfectly competitive market economy, business failures can benefit society by causing

Correct AnswerverifiedShow Answer

Which of the following characterizes a firm that is in long-run perfectly competitive equilibrium where profits are maximized?

Correct AnswerverifiedShow Answer

If a firm decides to make the investment decision to expand its capacity, then it must have discovered that

Correct AnswerverifiedShow Answer

Refer to Figure 23.5 for a perfectly competitive firm.This firm will maximize profits by producing the level of output that corresponds to point

Correct AnswerverifiedShow Answer

If two products are homogeneous, then they

Correct AnswerverifiedShow Answer

Refer to Figure 23.2 for a perfectly competitive firm.This firm will maximize profits by producing the level of output that corresponds to point

Correct AnswerverifiedShow Answer

In which of the following cases would entry and exit cease?

Correct AnswerverifiedShow Answer

Which of the following is true about a competitive market supply curve?

Correct AnswerverifiedShow Answer

If long-run economic losses are being experienced in a competitive market,

Correct AnswerverifiedShow Answer

When an athletic shoe company is producing a level of output at which price is greater than MC, from society's standpoint the company is producing too

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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