WorksheetsSEMINAR11
Total questions: 52
Worksheet time: 26mins
In a perfectly competitive industry many firms produce very similar but slightly different products.
TRUE
FALSE
The wage rate a firm must pay rises, so its marginal costs rise. But its demand curve does not change. As a result, the firm ____ the amount it produces and ____ its price.
a. decreases; raises
b. increases; lowers
c. decreases; does not change
d. increases; raises
TABLE 11.1
Quantity Price (dollars)
100 5.00
101 5.00
Using Table 11.1, what is the marginal revenue from selling 101 units of output rather than 100?
a. $5
b. $500
c. $505
d. $0
The minimum efficient scale of a firm is the smallest level of output at which the long-run average total cost is at its minimum.
TRUE
FALSE
When will new firms want to enter an industry?
a. When MR = MC for the existing firms in the industry.
b. Any time the price of the good has risen
c. When the new firms can earn economic profits.
d. When there are external economies.
Efficient use of resource occurs when making someone better off must make someone else worse off.
TRUE
FALSE
Paul runs a shop that sells printers. Paul’s business is a perfect competitor and can sell each printer for a price of $500. The marginal cost of selling one printer a day is $300, the marginal cost of selling a second printer is $400, and the marginal cost of selling a third printer is $550. To maximize his profit, Paul should sell
a. one printer a day.
b. two printers a day.
c. three printers a day.
d. more than three printers a day.
A perfectly competitive firm’s supply curve is its ATC curve.
TRUE
FALSE
In the long-run equilibrium in a perfectly competitive market, the firms produce at the ____ possible average total cost and the price equals the ____ possible average total cost.
a. highest; highest
b. highest; lowest
c. lowest; highest
d. lowest; lowest
If P > ATC, a perfectly firm is incurring an economic loss.
TRUE
FALSE
For prices below the minimum average variable cost, a perfectly competitive firm’s supply curve is
a. horizontal at the market price.
b. vertical at zero output.
c. the same as its marginal cost curve.
d. the same as its average variable cost curve
If the price is below a perfectly competitive firm’s minimum ATC, to maximize its profit the firm immediately shuts down.
TRUE
FALSE
The term “external economies” refers to the
a. case in which the firm’s marginal cost curve slopes downward as more output is produced.
b. situation in which the firm’s average total cost curve shifts upward as more output is produced.
c. fact that a firm’s average total cost curve has a negative slope at low levels of output.
d. situation in which an increase in an industry’s output lowers the costs of the firms in the industry.
A perfectly competitive firm can earn an economic profit, a normal profit, or incur an economic loss in the short run.
TRUE
FALSE
In the short run, a perfectly competitive firm can
a. earn an economic profit.
b. earn a normal profit.
c. incur an economic loss.
d. All of the above answers are possible.
At the efficient quantity, the total producer surplus must equal the total consumer surplus.
TRUE
FALSE
Suppose that firms in a perfectly competitive industry are earning economic profits. Over time,
a. other firms enter the industry so that the price rises and economic profits fall.
b. some firms leave the industry so that both the price and economic profits rise.
c. other firms enter the industry so that both price and economic profits fall.
d. nothing happens because there are no incentives for change.
A perfectly competitive firm’s supply curve shows the quantities of output supplied at alternative prices as long as the firm earns an economic profit.
TRUE
FALSE
New technology in an industry means that
a. all firms in the industry permanently earn economic profits regardless of whether they adopt the technology.
b. firms that adopt the new technology permanently earn economic profits.
c. firms that do not adopt the new technology permanently earn economic profits.
d. firms that adopt the new technology temporarily earn economic profits.
In the long run, in a perfectly competitive market consumers pay the lowest possible price that allows the firms to earn a normal profit.
TRUE
FALSE
If demand for a good decreases permanently, in the short run the price
a. falls and each firm produces more output to make up for the lower price.
b. falls and, as long as the price remains above the firms’ average variable cost, each firm produces less output.
c. does not change, but some firms shut down because less is demanded.
d. does not change because each firm produces less output.
If a perfectly competitive firm is incurring an economic loss, it
a. always shuts down immediately.
b. continues to operate until either the price rises or its costs fall so that it no longer has an economic loss.
c. shuts down if P > AVC.
d. shuts down if P < AVC.
In a perfectly competitive industry with external diseconomies, a change in demand always results in a higher price.
TRUE
FALSE
Which of the following statements is true?
a. A competitive market cannot use its resources efficiently.
b. Resource use is efficient when marginal benefit exceeds marginal cost by as much as possible.
c. When the demand is the same as the marginal social benefit and the supply is the same as the marginal social cost, at its equilibrium a perfectly competitive market is efficient.
d. A perfectly competitive market cannot be efficient in the long run because the firms cannot earn an economic profit.
Of the following, which is a perfect competitor?
a. AT&T, one of the three major providers of long distance telephone service in the United States.
b. The company that provides your local cable TV service.
c. A tomato grower living in Florida
d. DeBeers, the provider of more than 80 percent of the rough diamonds in the world.
The market demand curve in a perfectly competitive industry is horizontal
TRUE
FALSE
New technology raises firms’ costs and so causes all firms to incur an economic loss in the short run
TRUE
FALSE
Which of the following is necessarily true when a perfectly competitive firm is in short-run equilibrium?
a. MR = MC.
b. P = minimum LRAC.
c. P = ATC.
d. All of the above are true at short-run equilibrium.
A perfectly competitive firm is definitely suffering an economic loss when
a. MR < MC.
b. P > ATC.
c. P < ATC. .
d. P > AVC
A perfectly competitive firm can charge whatever price it wants for its goods.
TRUE
FALSE
In a market with no external economies nor external diseconomies, following a decrease in demand, the price falls more in the ____ and the quantity decreases more in the ____.
a. short run; short run
b. short run; long run
c. long run; short run
d. long run; long run
In the long run, a perfectly competitive firm can a. earn an economic profit. b. earn a normal profit. c. incur an economic loss. d. All of the above are possible.
a. earn an economic profit.
b. earn a normal profit.
c. incur an economic loss.
d. All of the above are possible.
Which of the following is necessary for a perfectly competitive industry to be efficient?
a. The presence of external economies.
b. Firms are economically efficient.
c. The consumer surplus is greater than the producer surplus.
d. All of the above answers are necessary for an industry to be efficient.
Firms exit an industry whenever they cannot earn an economic profit.
TRUE
FALSE
The short-run industry supply curve is
a. the sum of the quantities supplied by all the firms.
b. undefined because the number of firms is constant in the short run.
c. vertical at the total level of output being produced by all firms.
d. horizontal at the current market price.
A perfectly competitive firm can earn an economic profit, a normal profit, or incur an economic loss in the long run.
TRUE
FALSE
Which of the following is true when a perfectly competitive firm is in long-run equilibrium?
a. MR = MC.
b. P = minimum LRAC.
c. P = ATC.
d. All of the above conditions are true.
If there are external diseconomies in an industry, after a permanent increase in demand, in the long run the price
a. is higher than initially.
b. is the same as initially.
c. is lower than initially.
d. might be higher or lower, depending on whether the firms are earning economic profits
If it does not shut down, to maximize its profit a perfectly competitive firm produces the level of output that sets MR = MC.
TRUE
FALSE
Resource use is efficient when
a. the goods and services produced are those that are most highly valued.
b. it is impossible to make someone better off without making someone else worse off.
c. production is such that marginal social benefit equals marginal social cost.
d. All of the above answers are correct.
In the short run, which of the following is FALSE?
a. Perfectly competitive firms can possibly earn an economic profit.
b. The number of firms is fixed.
c. To maximize its profit, a perfectly competitive firm produces enough output so that MR = MC.
d. Perfectly competitive firms always produce at the minimum ATC.
For a perfectly competitive firm, MR always equals
a. ATC.
b. P.
c. AVC.
d. none of the above because MR is not always equal to the same thing
Which of the following is NOT a characteristic of a perfectly competitive industry?
a. A downward-sloping market demand curve.
b. A perfectly elastic demand for each firm.
c. Each firm decides its quantity of output.
d. Each firm produces a good slightly different from that of its competitors.
A firm making zero economic profit makes no profit at all.
TRUE
FALSE
If firms in an industry are incurring an economic loss, then as some exit, the price ____ and the surviving firms’ economic losses ____.
a. rises; do not change
b. rises; become smaller
c. falls; become larger
d. falls; become smaller
.In the long run, a perfectly competitive firm produces at the minimum LRAC.
TRUE
FALSE
In Figure 11.6, the firm is producing q. Producing q
a. cannot be the long-run equilibrium because the firm is not maximizing its profit.
b. cannot be the long-run equilibrium because the firm is earning an economic profit.
c. cannot be the long-run equilibrium because the firm is incurring an economic loss.
d. is the long-run equilibrium.
In the long run, a permanent increase in demand results in firms earning an economic profit.
TRUE
FALSE
In a perfectly competitive industry, no single firm can significantly affect the price of the good.
TRUE
FALSE
The firm illustrated in Figure 11.5 will produce how much output?
a. 1 unit
b. 3 units
c. 4 units
d. 5 units
The firm illustrated in Figure 11.5 is
a. earning an economic profit.
b. earning a normal profit. c. incurring an economic loss. d. in long-run equilibrium.
c. incurring an economic loss.
d. in long-run equilibrium.
In the short run, a permanent increase in demand results in firms earning an economic profit.
TRUE
FALSE
