WorksheetsPerfectly Competitive Markets
Total questions: 20
Worksheet time: 10mins
Question content area
Part 1
A price taker is
a consumer who accepts different prices from different firms.
a perfectly competitive firm
a firm that cannot influence the market price.
Which of the following is a key assumption of a perfectly competitive market?
It is difficult for new sellers to enter the market.
Commodities have few sellers.
Each seller has a very small share of the market.
Firms can influence market price
Which of the following costs may provide barriers to entry in a market?
High research and development expenditures
License fees
Sunk costs associated with specialized facilities
All of the above are correct
If managers do not choose to maximize profit but pursue some other goal such as revenue maximization or growth,
they are less likely to be replaced by stockholders
they are more likely to become takeover targets of profit-maximizing firms.
they are less likely to be replaced by the board of directors.
Owners and managers
must be the same people
may be different people with different goals, but in the long run, firms that do best are those in which the managers pursue the goals of the owners
may be different people with different goals, and in the long run, firms that do best are those in which the managers are allowed to pursue their own independent goals.
may be different people with the same goals.
Question content area
Part 1
The textbook for your class was not produced in a perfectly competitive industry because
upper-division microeconomics texts are not all alike
there are so few firms in the industry that market shares are not small, and firms' decisions have an impact on market price.
it is not costless to enter or exit the textbook industry.
of all of the above reasons
The "perfect information" assumption of perfect competition includes all of the following except one. Which one?
Firms know their costs, prices, and technology.
Consumers know the prices available
Consumers can anticipate price changes
Consumers know their preferences.
An association of businesses that are jointly owned and operated by members for mutual benefit is a
condominium
cooperative.
joint tenancy.
corporation
Revenue is equal to
price times quantity minus marginal cost.
price times quantity.
expenditure on production of outpu
price times quantity minus total cost
A firm maximizes profit by operating at the level of output where
marginal revenue exceeds marginal cost by the greatest amount
average revenue equals average cost.
marginal revenue equals marginal cost.
average revenue equals average cost
When the TR and TC curves have the same slope,
they intersect each other.
profit is zero.
they are closest to each other.
they are the furthest from each other
Marginal profit is equal to
marginal revenue divided by marginal cost
marginal revenue plus marginal cos
marginal revenue minus marginal cost
marginal revenue times marginal cost.
At the profit-maximizing level of output, marginal profit
is increasing
may be positive, negative, or zero
is positive.
is zero
The demand curve facing a perfectly competitive firm is
perfectly vertical
perfectly horizontal.
the same as the market demand curve
The perfectly competitive firm's marginal revenue curve is
horizontal.
vertical.
upward sloping.
Marginal profit is negative when
profit is negative
marginal revenue is negative
output exceeds the profit-maximizing level.
In the short run, a perfectly competitive firm earning positive economic profit is
at the minimum of its ATC.
on the upward-sloping portion of its ATC.
on the downward-sloping portion of its ATC
above its ATC
In the short run, a perfectly competitive firm earning negative economic profit is
above its ATC curve.
on the downward-sloping portion of its ATC curve
at the minimum of its ATC curve.
Producer surplus in a perfectly competitive industry is
the difference between revenue and variable cost.
the difference between revenue and total cost.
the same thing as revenue
the difference between revenue and fixed cost
A firm's producer surplus equals its economic profit when
fixed costs are zero
marginal costs equal marginal revenue
total revenues equal total variable costs.
average fixed costs are minimized.
