chapter 12a - 12.1 Perfectly Competitive Markets 7) Perfect...

12.1 Perfectly Competitive Markets
7) Perfect competition is characterized by all of the following except
A) heavy advertising by individual sellers.
B) homogeneous products.
C) sellers are price takers.
D) a horizontal demand curve for individual sellers.
Answer: A
8) A very large number of small sellers who sell identical products imply
C
10) The price of a seller's product in perfect competition is determined by
C
13) Suppose the equilibrium price in a perfectly competitive industry is $15 and a firm in the industry charges
$21. Which of the following will happen?
C
18) In perfect competition
A) the market demand curve and the individual's demand are identical.
B) the market demand curve is perfectly inelastic while demand for an individual seller's product is perfectly
elastic.
C) the market demand curve is perfectly elastic while demand for an individual seller's product is perfectly
inelastic.
D) the market demand curve is downward sloping while demand for an individual seller's product is perfectly
elastic.
Answer: D
12.2 How a Firm Maximizes Profit in a Perfectly Competitive Market
1) If the market price is $25, the average revenue of selling five units is
C
2) If the market price is $25 in a perfectly competitive market, the marginal revenue from selling the fifth unit is

C
Table 12-1
Quantity
Total Cost
(dollars)
Variable Cost
(dollars)
0 $1,000 $0
100 1,360 360
200 1,560 560
300 1,960 960
400 2,760 1,760
500 4,000 3,000
600 5,800 4,800
Table 12-1 shows the short-run cost data of a perfectly competitive firm that produces plastic camera cases.
Assume that output can only be increased in batches of 100 units.
4) Refer to Table 12-1. What is the fixed cost of production?
C
7) Refer to Table 12-1. If the market price of each camera case is $8 and the firm maximizes profit, what is the
amount of the firm's profit or loss?
A) $0 (it breaks even)
B) loss of $1,000
C) profit of $440
D) loss of $440
Answer: C