SCAN0814_000 - Chapter Thirteen. Name: Date: 1. One...

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Unformatted text preview: Chapter Thirteen. Name: Date: 1. One characteristic of a perfectly competitive market is that there are sellers of the good or selvice. A.) one or two B) a few C) usually less than 10 D) hundreds or thousands of 2. If a local California avocado stand operates in a perfectly competitive market, that stand owner will be a: A) price-maker. 13) price~taker. C) price-discriminator. D) price-maximizer. 3. All except one of the following are characteristics of perfect competition. Which is the exception? A) All firms produce the same standardized product. B) There are many producers and each has only a small market share. C) There are many producers; one firm has a 25% market share, and all the remaining firms have a market share of less than 2% each. D) There are no obstacles to entry into or exit from the industry. 4. Which of the following is not a characteristic of a perfectly competitive industry? A) Finns seek to maximize profits. B) Profits may be positive in the short run. C) There are many firms. D) There are differentiated products. 5. In perfect competition, each firm: A) is a price-maker. B) produces about half of the total industry output. C) produces a differentiated product. D) produces a standardized product. 6. The demand curve for a perfectly competitive firm is: A) perfectly inelastic. B) perfectly elastic. C) downward-sloping. D) relatively, but not perfectly elastic. 7. The assumptions of perfect competition imply that: A) individuals in the market accept the market price as given. B) individuals can influence the market price. C) the price will be a fair price. D) the price will be low. Chapter Thirteen Page 1 8. 10. ll. 12. 13. 14. Price-takers are individuals in a market who: A) select a price from a wide range of alternatives. B) seiect the lowest price available in a competitive market. C) select the average of prices available in a competitive market. D) have no ability to affect the price of a good in a market. . The market for breakfast cereal contains hundreds of similar products, such as Fruit Loops, Corn Flakes, and Rice Krispies, that are considered to be different products by different buyers. This situation violates the perfect competition assumption of: A) many buyers and sellers. B) a standardized product. C) complete information. D) ease of entry and exit. Suppose life is discovered on Mars and that it turns out to be quite sophisticated. In fact, perfect competition prevails everywhere on the planet. Which of the following characteristics of Martian firms are we likely to observe? A) None of them ever experiences diminishing marginal returns. B) They all try to operate where price equals average variable cost. C) They all try to operate where price equals total cost. D) They are all price-takers. An assumption of the model of perfect competition is: A) identical goods. B) difficult entry and exit. C) few buyers and sellers. D) cooperation and interdependence between sellers. Marginal revenue: A) is the slope of the average revenue curve. B) equals the market price in perfect competition. C) is the change in quantity divided by the change in total revenue. D) is the price divided by the change in quantity. Marginal revenue is a film's: A) ratio of profit to quantity. B) ratio of average revenue to quantity. C) price per unit times the number of units sold. D) increase in total revenue when it sells an additional unit of output. If a perfectly competitive firm sells 30 units of output at a price of $10 per unit, its marginal revenue is: A) $10. B) more than $10. C) less than $10. D) $300. Chapter Thirteen Page 2 15. 16. 17. 18. 19. 20. 21. Which of the following is true? A) if price falls below average total cost, the firm wili shut down in the short run. B) Price and marginal revenue are the same in perfect competition. C) Economic profit per unit is found by subtracting .4 VC from price. D) Economic profit is always positive in the short run. If it produces, a perfectly competitive firm will maximize profits at which: A) marginal revenue equals marginal cost. B) marginal revenue equals price. C) price equals average total cost. D) price exceeds marginal cost. Zoe's Bakery determines that P < ATC and P > A V C. Zoe should: A) continue to Operate even though she is experiencing an economic loss. B) continue to operate as she is making an economic profit. C) shut down immediately as she is experiencing an economic loss. D) raise the price until. she has maximized her profits. A perfectly competitive firm is definitely earning an economic profit when: A) MR > MC. B) P > AT C. C) P > MC. D) P > A VC. Suppose Sarah's pottery studio is currently charging the market price that is just higher than her minimum average total cost. This means that Sarah: A) is breaking even. I B) should shut down immediately. C) is earning a smali economic profit. D) is incurring a small economic loss. A perfectly competitive firm operating in the shorter producing 100 units of output has ATC = $6 and AFC = $2. The market price is $3 and is equal to MC. In order to maximize profits (or minimize losses), this firm should: A) increase output. B) reduce output, but continue to produce a positive amount of output. C) shutdown. D) do nothing; the firm is already maximizing profits. During the summer, Alex runs a lawn-mowing service, and lawn—mowing is a perfectly competitive industry. in the short run, Alex will shut down his lawn—mowing service rather than continue with it if: A) the total revenues can't cover the total fixed costs. B) the total revenues can't cover the total variable costs. C) the totai revenues can't cover the total cost. D) the price exceeds the average total cost. Chapter Thirteen Page 3 22. 23. 24. 26. 27. 28. The short-run supply curve for a perfectly competitive firm is its: A) demand curve above its marginal revenue curve. B) marginal revenue curve to the right of its marginal cost culve. C) marginal cost curve above its average variable cost curve. D) average total cost curve below its marginal cost cu1ve. A perfectly competitive firm maximizes profit by producing the quantity at which: A) T R = T C. B) MR = MC. C) gap—are) = 0. D) P >=AVC. If a perfectly competitive firm is producing a quantity that generates MC = MR, then profit: A) is maximized. B) can be increased by increasing production. C) can be increased by decreasing production. D) can be increased by decreasing the price. . For a perfectly competitive firm in the short run: A) B) C) D) if the firm produces a quantity at which P > A T C, then the firm is profitable. if the firm produces a quantity at which P < AT C, then the firm breaks even. if the firm produces a quantity at which P = AT C, then the firm incurs a loss. if the firm produces a quantity at which P < AT C, then the firm is profitable. A perfectly competitive firm will incur an economic loss but will continue producing output in the short run if price is: A) less than marginal cost. B) greater than average fixed cost and less than average variable cost. C) greater than average total cost. D) greater than average variable cost but less than average total cost. Economic profits in a perfectly competitive industry induce induce . A) exit; entry B) entry; entry C) entry; exit D) exit; exit , and losses When a perfectly competitive film is in long-run equilibrium, the firm is producing at: A) maximum average total cost. B) maximum average variable cost. C) minimum marginal cost. D) minimum long—run average total cost. Chapter Thirteen Page 4 ...
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This note was uploaded on 02/03/2012 for the course ECONOMICS 202 taught by Professor Black during the Spring '08 term at Boise State.

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SCAN0814_000 - Chapter Thirteen. Name: Date: 1. One...

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