question

Perfect competition is characterized by

answer

The inability of any one firm to influence price

question

An industry that contains a firm that is the only producer of a good or service for which there are no close substitutes and for which entry by potential rivals is prohibitively difficult is

answer

A monopoly

question

Which of the following is true in a perfectly competitive market?

answer

One unit of a good or service cannot be differentiated from any other on any basis

question

The assumptions of perfect competition imply that

answer

Individuals in the market accept the market price as given

question

The perfectly competitive model assumes all of the following EXCEPT

answer

That firms attempt to maximize their total revenue

question

If a perfectly competitive firm decreases production from 11 units to 10 units and the market price is $20 per unit, total revenue for 10 units is

answer

$200

question

If a perfectly competitive firm sells 10 units of output at $30 per unit, its marginal revenue is

answer

$30

question

If a perfectly competitive firm is producing a quantity where P > MC, then the firm can increase profit by

answer

Increasing production

question

A perfectly competitive firm will earn a profit and will continue producing the profit-maximizing quantity of output in the short run if the price is

answer

Greater than average total cost

question

If the price is consistently below average total cost, then in the short run a perfectly competitive firm should

answer

There is not enough information given to answer this question

question

If the price is greater than the average variable cost and less than the average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will

answer

produce at an economic loss

question

In the short run, if P < AVC at the quantity where MR = MC, a perfectly competitive firm produces _____ and takes an economic _____.

answer

no output; loss

question

(Figure: Total Cost for Tomato Producers) Look at the figure Total Cost for Tomato Producers. The market for tomatoes is perfectly competitive. The market price of a bushel of tomatoes is $14. The farmer's total cost at the profit-maximizing number of bushels is:

answer

$56.00

question

(Figure: The Profit-Maximizing Firm in the Short Run) Look at the figure The Profit-Maximizing Firm. O is the _____ curve.

answer

AVC

question

(Figure: A Perfectly Competitive Firm in the Short Run) Look at the figure A Perfectly Competitive Firm in the Short Run. The minimum price that the firm must receive to produce in the short run is:

answer

P

question

If firms are taking economic losses in the short run, firms will leave the industry, industry output will _____, and economic losses will _____ in the long run

answer

Fall;Fall

question

Which of the following is MOST likely to cause firms to exit a perfectly competitive industry?

answer

Consumer income falls

question

Suppose that some firms in a perfectly competitive industry are earning positive economic profits. In the long run, the

answer

Number of firms in the industry will increase

question

A perfectly competitive industry is said to be efficient because the

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Average total cost of production of the industry's output is minimized

question

When perfect competition prevails, which of the following characteristics of firms are we likely to observe?

answer

They are all price takers

question

In a perfectly competitive industry:

answer

all firms are price-taking producers

question

Suppose Sarah's pottery studio is charging the market price, which is just higher than her minimum average total cost. This means that Sarah

answer

Is earning a small economic profit

question

A perfectly competitive industry is in a state of long-run equilibrium. Which of the following must be true?

answer

P = MR = MC = ATC

question

If a firm produces a quantity at which total revenue exceeds total cost, then

answer

economic profit is positive

question

One characteristic of a perfectly competitive market is that there are ________ sellers of the good or service

answer

Many

question

If the price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will

answer

Produce at a profit

question

The short-run supply curve for a perfectly competitive firm is

answer

the marginal cost curve above the shut-down price

question

In perfect competition

answer

Price and marginal revenue are the same

question

The price received by a firm in a perfectly competitive market

answer

Is equal to the market price

question

Perfect competition is a model of the market that assumes all of the following except:

answer

firms face downward-sloping demand curves

question

In the short run, a perfectly competitive firm produces output and earns zero economic profit if:

answer

P=ATC

question

For a perfectly competitive firm, marginal revenue:

answer

is equal to price

question

A perfectly competitive firm's marginal cost curve above the average variable cost curve is its

answer

Short run supply curve

question

Lilly is the price-taking owner of an apple orchard. The price of apples is high enough that Lilly is earning positive economic profits. In the long run, Lilly should expect

answer

Lower apple prices due to the entry of new firms

question

Assume that in the short run a perfectly competitive firm does not produce output and has economic losses. This would occur if

answer

P0

question

Bob runs a pedicure business in a perfectly competitive industry. He knows that he will break even if the price of pedicures is $15 but that he will have to shut down if the price is $11. If the market demand in the industry is P = 30 - (0.2) Q and the market supply is P = (0.2) Q, then in the short run, Bob will

answer

Produce, since he is at his break even level

question

A perfectly competitive firm will produce

answer

with a loss in the short run if its price is greater than AVC but less than ATC.

question

Perfectly competitive firms will

answer

increase output up to the point that the marginal benefit of an additional unit of output is equal to the marginal cost

question

A decrease in production costs for firms in a perfectly competitive market will cause a(n)

answer

economic profit for firms in the short run

question

If a perfectly competitive firm can sell a bushel of soybeans for $25 and it has an average variable cost of $26 per bushel and the marginal cost is $26 per bushel, the firm should

answer

cut output to zero

question

In perfect competition

answer

A firm's total revenue is found by multiplying the market price by the firm's quantity of output

question

In a perfectly competitive market

answer

Both producers and consumers are price takers

question

A firm's shut-down point is the minimum value of

answer

Average variable cost

question

If some firms in a perfectly competitive industry are earning positive economic profits, then in the long run, the

answer

Industry supply curve will shift to the right

question

When a perfectly competitive industry is in long-run equilibrium, its firms

answer

Allocate all of their resources efficiently

question

The slope of the total revenue curve is

answer

Constant under perfect competition

question

The slope of the total revenue curve is

answer

Constant under perfect competition

question

The slope of the total revenue curve is

answer

Constant under perfect competition

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