Market Structure Test Review

All of the following are characteristics of a perfectly competitive market EXCEPT

• numerous sellers.

• standardized product.

• limited entry and exit.

• no long-run economic profits.

The sum of all individual supply curves in a market is the

• normal supply curve.

• industry supply curve.

• inelastic supply curve.

• long-run supply curve.

If a perfectly competitive firm is making an abnormal profit in the short run, it is certain that

• new firms will enter the market until no firms make an abnormal profit.

• its profits in the long run will be higher than in the short run.

• the industry is no longer a perfectly competitive industry.

• the firm will be sued under antitrust laws.

Which of the following markets most closely resembles perfect competition?

• Fast food restaurants

• Automobiles

• Agriculture

• Computers

A price-taking firm

• colludes with its competitors to decide upon a price.

• has the ability to raise or lower its price in order to increase profits.

• will often set its price below the market equilibrium price.

• cannot affect the market price of its product.

The demand curve faced by an individual firm under perfect competition is

• perfectly elastic (flat).

• mostly elastic.

• mostly inelastic.

• perfectly inelastic (straight up and down).

The Law of Diminishing Returns to an Input states that as the number of a particular input increases,

• total product will eventually diminish to zero.

• each additional unit will result in an identical addition to total product.

• each additional unit will eventually result in a smaller marginal product.

• each additional unit will eventually result in a larger marginal product.

The costs incurred by a firm when no output is being produced are called

• fixed costs.

• average costs.

• marginal costs.

• variable costs.

If a firm is producing 20 bushels of tomatoes at a variable cost of $100, its average variable cost is

• $0.20

• $4.

• $5.

• $20.

Suppose a firm produces 100 watermelons for a total cost of $50. When it increases its output to 110

watermelons, its total cost increases to $60. The marginal cost for this change in production is

• $1.

• $2.

• $10.

• $60.