WorksheetsPerfect Competition SSK
Total questions: 53
Worksheet time: 45mins
Total Revenue (minus) Explicit and Implicit cost =
Accounting Profit
Economic Profit
Economic Cost
Total Profit
Fixed Costs are only fixed in the
Long run
Short run
Period where there is neither a profit or a loss
none of the above
To find TC from ATC, you simply
Multiply by the cost
Divide by the quantity
Multiply by the quantity
Divide by the cost
MC crosses the ATC and AVC
where you draw it
at its lowest point
where MR=MC
None of the above
If Q is increasing but so is ATC then there must be ________.
Economies of Scale
Constant returns to scale
Diseconomies to scale
bad
If ATC is going down and Quantity is increasing then, there exist _________.
Economies of Scale
Diseconomies of Scale
Constant returns to scale
none
The lowest possible ATC point is the
Efficiency scale
Efficient scale
Profit Maximization condition
none
What is the profit maximizing condition?
MR = D
MR = MC
MC = D
D = Profits
Check all that apply: Which of the following are characteristics of a perfectly competitive market?
Many buyers/sellers
Identical Products
Price Makers
Low barriers of entry
The image above shows a firm making
Economic Profit
Economic loss
Breaking even
Shutting down
Should the following firm shutdown?
Yes
No
Not enough information present
Which of the following could attract new firm to join an industry?
Normal profits
Economic losses
Economic profits
Accounting profits
A perfect competitive firm charges a price that is ____________.
different to other firms
higher than other firms
lower than other firms
similar to other firms
A firm faces a perfectly elastic demand curve, if _____________.
MC = MR
MR = AR
AR = MC
ATC = AVC
For a competitive firm, marginal revenue equals the price of the good it sells.
True
False
Under perfect competition , selling cost has ______
a significant role to play
Insignificant role to play
either a or b
either a or b
Under perfect competition , price is determined at ______
Equilibrium price of the industry
Equilibrium price of the firm
when MC = MR
All of these
Under perfect competition , each firm is a
Price maker
Price taker
Neither a and b
Both a and b
Which of the following is not a characteristic for perfect competition?
No barriers to entry and exit
Large firms
Perfect Information
Homogenous product
In perfect competition, restrictions on entry into an industry
apply to labor but not to capital
do not exist
apply to both capital and labor
apply to capital but not to labor
Which of the following markets is closest to perfectly competitive?
airlines
wheat
cell phones
textbooks
Based on this graph, this firm will:
make positive short-run profits
incur losses in the short-run
shut-down in the short run
Firms are incurring short-run losses in a perfectly competitive firm. What will happen in the long-run?
New firms will enter and price will increase
New firms will enter and price will decrease
Firms will exit and price will increase
Firms will exit and price will decrease
The product sold in perfect competition is
Homogenous
have close substitutes
No close substitutes
Both homogenous and close substitutes
Which of the following is the best example of a perfectly competitive market?
diamonds
athletic shoes
soft drinks
farming
Which of the following market types has the fewest number of firms?
Perfect Competition
Monopoly
Monopolistic Competition
Oligopoly
A price-taking firm
cannot influence the price of the product it sells.
talks to rival firms to determine the best price for all of them to charge.
sets the product's price to whatever level the owner decides upon.
asks the government to set the price of its product.
A barrier to entry is
an open door.
the economic term for diseconomies of scale.
illegal in most markets.
anything that protects a firm from the arrival of new competitors.
If a firm sells its output on a market that is characterized by many sellers and buyers, a homogeneous product, unlimited long-run resource mobility, and perfect knowledge, then there is ________.
monopolist
oligopolist
perfect competition
monopolistic competition
If one perfectly competitive firm increases its level of output, market supply
will increase and market prices fall
will increase and market prices rise
and market price will both remain constant
will decrease and market prices rise
During the winter, theme parks in Orlando close earlier than in the summer. The reason the theme parks close early during the winter is because during that season the marginal revenue from staying open later is ________ the marginal cost.
greater than
less than
equal to
zero compared to
If firms in a perfectly competitive industry are earning an economic profit and new firms enter the industry, then
consumer surplus decreases.
the existing firms' economic profit decreases.
there must be external benefits to consumption of the good.
the new firms must incur an economic loss
The market demand curve for a perfectly competitive industry is
perfectly elastic
perfectly inelastic
downward sloping
upward sloping
The demand curve for an individual firm within a perfectly competitive industry is
perfectly elastic
perfectly inelastic
downwards sloping
upwards sloping
The profit equation is
(P x Q) - ATC
(P - ATC) x Q
ATC - (Q x P)
TR - ATC
If P < ATC, a firm should
shut down in the short run
stay open in the short run
stay open in the short run if P > AVC
shut down in the short run if P > AVC
in perfect competition, producers produce a standardized product. Standardized product means
there are no substitutes
there are no complementary products
goods produced are perfect substitutes for each other
products are standard in price and quantity
some examples of standardized products include
milk and eggs
shirts and jeans
computers and smart phones
couches and chairs
A perfectly competitive firm is in equilibrium under all of the following conditions except:
when it has no tendency to change its level of output
when it needs neither expansion nor contraction
when it earns maximum profits in by equating its marginal cost with its marginal revenue
when MC < MR
An industry is in equilibrium under all of the following conditions except:
when there is no tendency for the firms either to leave or enter the industry
when number of firm is constant
when each firm is in equilibrium
when number of firm is variable
Normal profit occurs when economic profit is ________.
positive
negative
zero
variable
All of the following about Sub-normal profit is correct EXCEPT:
= TR - TVC
where price < average cost
any profit less than normal profit
= TR - TFC
_________ profit is all the excess profit a firm makes above the minimum return necessary to keep a firm in business.
Supernormal
Normal
Basic
Subnormal
The firm's short‐run supply curve is ____________.
the portion of its marginal cost curve that lies below its average variable cost curve
the MC Curve
the portion of its marginal cost curve that lies above its average variable cost curve
the AC Curve
If firms in a perfectly competitive industry are earning an economic profit and new firms enter the industry, then
consumer surplus decreases.
the existing firms' economic profit decreases.
there must be external benefits to consumption of the good.
the new firms must incur an economic loss
