Question 1

Which of the following is a production decision?

Accepted Answer

A)  Whether to enter or exit an industry.
B)  Whether to increase or decrease plant capacity.
C)  Whether to increase or decrease output.
D)  Whether to share information with a competitor.

Question 2

In a perfectly competitive market, when price is equal to the

Accepted Answer

A)  Minimum short-run average total cost, it has reached the shutdown point.
B)  Minimum average variable cost, economic profit is zero.
C)  Marginal cost, accounting profit is maximized.
D)  Minimum average total cost, economic profit is zero.

Question 3

If the price of ricotta cheese, an ingredient in lasagna, increases, then

Accepted Answer

A)  The market supply curve for lasagna will shift to the right.
B)  The market supply curve for lasagna will shift to the left.
C)  There will be a movement up along the market supply curve for lasagna.
D)  There will be a movement down along the market supply curve for lasagna.If the cost of producing lasagna increases, the supply of lasagna will decrease.

Question 4

A profit-maximizing producer seeks to

Accepted Answer

A)  Maximize profit per unit.
B)  Minimize marginal cost.
C)  Minimize average total costs.
D)  Maximize total profit.

Question 5

Competitive market pressures were a driving force in the spectacular growth of the computer industry.

Accepted Answer

A) True 
 B)False

Question 6

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

Accepted Answer

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

Question 7

When economic profits exist in the market for a particular product, this is a signal to producers that

Accepted Answer

A)  Consumers would like more scarce resources devoted to the production of this product.
B)  The market is oversupplied with this product.
C)  The best mix of goods and services is being produced with society's scarce resources.
D)  Price is at the minimum of the ATC curve.

Question 8

Refer to Figure 23.5 for a perfectly competitive firm.Given the current market price of $200, we expect to see

Accepted Answer

A)  Firms exit from the industry, driving up the market price.
B)  Firms exit from the industry, driving down the market price.
C)  No change in the number of firms in the industry and no change in the market price.
D)  Firms enter the industry, driving down the market price.

Question 9

Refer to Figure 23.5 for a perfectly competitive firm.If more efficient production techniques were developed in this market, which of the following changes would we expect to occur, ceteris paribus?

Accepted Answer

A)  The ATC, MC, and market price would all decrease.
B)  The ATC alone would decrease.
C)  The ATC, MC, and market price would all increase.
D)  The ATC alone would increase.

Question 10

Economic losses mean that firms will exit from a market in the short run.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not a characteristic of a perfectly competitive market?

Accepted Answer

A)  Zero economic profit in the long run.
B)  Perfect information.
C)  Homogeneous products.
D)  High barriers.

Question 12

Bib's Soccer Ball Company produces 800 soccer balls per week.If the firm used marginal cost pricing to determine soccer ball output, it would produce 600 soccer balls.Consumers do not receive the most desirable quantity of soccer balls from Bib's because

Accepted Answer

A)  Economic losses are occurring.
B)  The firm must be earning higher than normal economic profits.
C)  The cost of producing the additional 200 soccer balls is greater than the amount that consumers are willing to pay for the additional soccer balls.
D)  The cost of producing the additional 200 soccer balls is less than the amount that consumers are willing to pay for the additional soccer balls.

Question 13

Refer to Figure 23.5 for a perfectly competitive firm.If this firm produces the level of output corresponding to point B in the short run, it will earn

Accepted Answer

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

Question 14

If catfish farmers expect catfish prices to fall in the future, then right now

Accepted Answer

A)  There will be a movement down along the market supply curve for catfish.
B)  There will be a movement up along the market supply curve for catfish.
C)  The market supply curve for catfish will shift to the left.
D)  The market supply curve for catfish will shift to the right.

Question 15

The entry of firms into a market

Accepted Answer

A)  Increases the equilibrium price.
B)  Reduces the profits of existing firms in the market.
C)  Shifts the market supply curve to the left.
D)  Shifts the market demand curve to the left.

Question 16

A competitive market creates strong pressure for technological innovation that

Accepted Answer

A)  Allows the firm to raise the price of its product.
B)  Provides the firm with more market power.
C)  Shifts the firm's demand curve to the right.
D)  Shifts the supply curve to the right.

Question 17

As in other industries, the market structure of the computer industry has evolved over time.It began as a monopoly and then became perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 18

In a perfectly competitive industry, economic profit:

Accepted Answer

A)  Can persist in the long run because of barriers to entry.
B)  Can persist in the long run because of homogeneous products.
C)  Will approach zero in the long run as prices are driven to zero.
D)  Will approach zero in the long run as prices are driven to the level of average production costs.

Question 19

For a perfectly competitive market, long-run equilibrium is characterized by all of the following but which one?

Accepted Answer

A)  P = MR.
B)  P = MC.
C)  P = minimum ATC.
D)  P = maximum ATC.

Question 20

Examples of barriers to entry include

Accepted Answer

A)  Price taking.
B)  Patents.
C)  Standardized products.
D)  Economic profits.

Exam 9: Competitive Markets

If the price of ricotta cheese, an ingredient in lasagna, increases, then

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A competitive market creates strong pressure for technological innovation that

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Examples of barriers to entry include

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Which of the following is a production decision?

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Which of the following is not a characteristic of a perfectly competitive market?

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Refer to Figure 23.5 for a perfectly competitive firm.Given the current market price of $200, we expect to see

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If catfish farmers expect catfish prices to fall in the future, then right now

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In a perfectly competitive industry, economic profit:

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When economic profits exist in the market for a particular product, this is a signal to producers that

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For a perfectly competitive market, long-run equilibrium is characterized by all of the following but which one?

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

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In a perfectly competitive market, when price is equal to the

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Economic losses mean that firms will exit from a market in the short run.

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Refer to Figure 23.5 for a perfectly competitive firm.If this firm produces the level of output corresponding to point B in the short run, it will earn

Correct AnswerverifiedShow Answer

A profit-maximizing producer seeks to

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Bib's Soccer Ball Company produces 800 soccer balls per week.If the firm used marginal cost pricing to determine soccer ball output, it would produce 600 soccer balls.Consumers do not receive the most desirable quantity of soccer balls from Bib's because

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As in other industries, the market structure of the computer industry has evolved over time.It began as a monopoly and then became perfectly competitive.

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The entry of firms into a market

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Competitive market pressures were a driving force in the spectacular growth of the computer industry.

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Refer to Figure 23.5 for a perfectly competitive firm.If more efficient production techniques were developed in this market, which of the following changes would we expect to occur, ceteris paribus?

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