CHAPTER 23 – MYLAB STUDY PLAN – Flashcards

Identify which statement is NOT characteristic of a perfectly competitive industry: A) One firm produces a large portion of the​ industry's total output. B) There are many firms in the industry. C) Their products are indistinguishable. D) Firms can easily exit and enter the industry.

Identify which statement is NOT characteristic of a perfectly competitive industry: A) There are many buyers and sellers in the industry. B) Consumers have equal information about the prices of​ firms' products. C) The products differ slightly in quality from firm to firm. D) Many diners compete in a city.

Identify which statement is NOT characteristic of a perfectly competitive industry: A) Many taxicabs compete in a city. B) The​ city's government requires all taxicabs to provide identical service. C) Taxicabs are virtually​ identical, and all drivers must wear a designated uniform. D) The government also limits the number of taxicab companies that can operate within the​ city's boundaries.

Which of the following is NOT one of the assumptions of a perfectly competitive​ market: A) Better information for producers than consumers. B) Homogeneous product. C) Free entry and exit. D) Large number of buyers and sellers.

The perfectly competitive firm is said to be a: A) price participant long dash— it decides the price together with other firms. B) price leader long dash— it changes its price and other firms follow. C) price taker long dash— it takes the price given by the market. D) price maker long dash— it sets market prices.

A perfectly competitive firm wants higher profits and has decided to raise the price of its product. As an economic consultant you would advise them to: A) do this since higher price increases total​ revenue, other things remaining equal. B) do not do this since competitors will match the increase in price and the firm will be no better off. C) not do this since they would lose all of their sales to competitors. D) do​ this, but also to lower ATC to make larger profits.

Firms in perfectly competitive industries will eventually have no customers if they set their prices above the competitive price: A) True B) False

All of the following are characteristics of perfect competition except: A) the products sold by the firms in the industry are differentiated. B) there are a large number of buyers and sellers. C) both buyers and sellers have access to all relevant information. D) firms can enter or leave the industry without serious impediments.

Suppose that a firm in a perfectly competitive industry finds that at its current output​ rate, marginal revenue exceeds the minimum average total cost of producing any feasible rate of output.​ Furthermore, the firm is producing an output rate at which marginal cost is less than the average total cost at that rate of output. Is the firm maximizing its economic​ profits: A) ​No, the marginal cost is less than the average​ cost, so the average cost must be declining at the output level where the firm is producing. B) ​Yes, marginal revenue exceeds the minimum average total cost of producing any feasible rate of output. C) It is impossible to draw a conclusion from the given information. D) ​No, the firm is producing where average total cost are a minimum. E) ​No, if the firm was maximizing its economic profits the marginal cost would not be less than the average total cost at that rate of output.

The demand curve for the perfectly competitive firm is: A) elastic at lower output​ levels, then unit​ elastic, and then inelastic at higher output levels. B) unit elastic. C) perfectly elastic. D) perfectly inelastic.

A perfectly competitive firm is charging ​$77 and selling 1475 units a month. The firm lowers its price by a nickel below the market price. Its profit: A) will not change. B) will decrease. C) will increase. D) will go to zero.

The demand curve for the perfect competitor is horizontal because: A) the firm is a price maker. B) demand is perfectly inelastic. C) the market dictates each​ firm's price. D) None of the above.

The demand curve for the perfectly competitive industry is: A) vertical. B) horizontal. C) indeterminate without more information. D) downward sloping.

For a perfectly competitive​ firm, price: A) equals marginal revenue only. B) equals average revenue only. C) equals both average revenue and marginal revenue. D) equals average​ revenue, marginal​ revenue, and average total costs.

The decision making process for the perfectly competitive firm boils down to: A) deciding what price to charge. B) deciding how much to produce. C) deciding when to change the price. D) deciding for whom to produce.

The campus barber faces stiff competition from the large number of shops that surround the campus​ area, and for all practical purposes the market is perfectly competitive. He charges ​$8 for a haircut and cuts hair for 20 people a day. His shop is open 3 days a week. Calculate his weekly total ​revenue:

The campus barber faces stiff competition from the large number of shops that surround the campus​ area, and for all practical purposes the market is perfectly competitive. He charges ​$8 for a haircut and cuts hair for 20 people a day. His shop is open 3 days a week. Calculate his average revenue per haircut:

The campus barber faces stiff competition from the large number of shops that surround the campus​ area, and for all practical purposes the market is perfectly competitive. He charges ​$8 for a haircut and cuts hair for 20 people a day. His shop is open 3 days a week. Calculate his marginal revenue per haircut:

Suppose that a perfectly competitive firm faces a market price of ​$5 per​ unit, and at this price the​ upward-sloping portion of the​ firm's marginal cost curve crosses its marginal revenue curve at an output level of 1 comma 1,500 units. If the firm produces 1 comma 1,500 ​units, its average variable costs equal ​$5.50 per​ unit, and its average fixed costs equal ​$0.50 per unit. What is the​ firm's profit-maximizing​ (or loss-minimizing) output​ level:

Suppose that a perfectly competitive firm faces a market price of ​$5 per​ unit, and at this price the​ upward-sloping portion of the​ firm's marginal cost curve crosses its marginal revenue curve at an output level of 1 comma 1,500 units. If the firm produces 1 comma 1,500 ​units, its average variable costs equal ​$5.50 per​ unit, and its average fixed costs equal ​$0.50 per unit. What is the amount of its economic profits​ (or losses) at this output​ level:

Profits are maximized for the perfectly competitive firm when the firm produces the quantity where: A) MC​ = MR. B) total revenue exceeds total cost by the greatest amount. C) P​ = MC. D) All of the above.

The perfect competitor should produce the quantity where: A) total revenues are maximized. B) total costs are minimized. C) profits are maximized. D) All of the above.

The perfect competitor should produce the quantity where: A) marginal cost is minimized. B) marginal revenue equals marginal cost. C) marginal cost is zero. D) marginal revenue is maximized.

A perfectly competitive firm is a price taker. It has ________ control over price and consequently has to take price as a​ given, but it can sell ________ that it wants at the going market price:

The demand curve for a perfect competitor is perfectly elastic at the going market price. The demand curve is also the perfect​ competitor's ________ revenue curve because ________ revenue is defined as the change in total revenue due to a​ one-unit change in output:

If a perfectly competitive firm sells the product for a​ profit-maximizing price of​ $4.76 and has average total cost per unit of​ $5.16, in the short run: A) this firm must hope the market price rises soon or exit the industry. B) this firm should shut down if​ $4.76 is less than minimum AVC. C) this firm is losing money. D) All of the above.

A firm will continue to operate in the short​ run, even at an economic​ loss, as long as: A) P is greater than minimum AVC. B) ATC​ > P. C) MR​ = MC. D) MC​ = P.

The lowest profit a firm should ever make in the short run is: A) zero economic profits. B) the losses associated with the fixed costs of the firm. C) zero accounting profits. D) a normal return.

The​ short-run break-even price for the perfectly competitive firm occurs where price equals: A) AFC. B) ATC. C) MR. D) AVC

The supply curve of the perfectly competitive firm in the short run is equal to: A) the marginal cost curve above minimum AVC. B) the AVC curve above minimum AVC. C) the ATC curve above minimum AVC. D) None of the above.

Zero economic profits means: A) the firm is covering all of its opportunity costs and will stay in business. B) a firm will go out of business in the long run. C) the firm needs to increase its advertising expenditures. D) the firm needs to lower its price.

If a firm is making zero economic profits it should: A) shut down. B) raise price. C) continue operating. D) None of the above.

The ATC curve measures the​ ________ and the price measures the​ ________: A) loss per​ unit; profit per unit B) cost per​ unit; revenue per unit C) total​ cost; total revenue D) profit per​ unit; total profit

Accounting profits are the same as economic profits: A) True B) False

The​ short-run break-even price is the price at which: A) a​ firm's total revenues equal its total costs. B) marginal cost and average total cost both equal the price. C) ​short-run economic profits are zero. D) All of the above.

A perfectly competitive​ firm's short-run supply curve is: A) its marginal cost curve at and above the intersection with the AVC curve. B) the same as its ATC curve. C) a combination of the ATC and AVC curves. D) nonexistent.

The industry supply curve is the vertical summation of all​ firms' average total cost curves: A) True B) False

Anything that affects the marginal cost curves of the firms in a perfectly competitive industry will influence the industry supply curve: A) True B) False

When the perfect competitor earns less than normal profits in the long​ run, the firm will: A) set a new price. B) exit the industry. C) decrease production. D) increase production.

In a competitive​ market, positive economic profits act to: A) attract new entrants into the industry. B) signal resource owners elsewhere not to invest their capital in this industry. C) prevent reinvestment on the part of firms within the industry. D) drive potential competitors away from the industry.

In a perfectly competitive​ market, if P​ > ATC in the short​ run, there is apt to be : A) an inward shift in the industry supply curve. B) entry of new firms into the market. C) an upward pressure on price. D) an accounting loss for existing firms.

In a perfectly competitive​ market, if P​ = ATC in the long​ run, the firm will: A) suffer losses. B) leave the industry. C) make economic profits. D) None of the above.

The market clearing price in a perfectly competitive industry is found at the intersection of the​ industry's demand curve and​ short-run supply curve: A) True B) False

If, at the​ profit-maximizing level of​ output, average costs are less than average​ revenue, a perfectly competitive firm will be​ ________ and we would expect supply to eventually shift​ ________: A) making economic​ profits; outward B) incurring economic​ losses; inward C) incurring economic​ losses; outward D) making economic​ profits; inward