Question 1

The "Tablet Brigade" In the News article indicates that the success of the iPad

Accepted Answer

A)   Attracted new firms with identical products.
B)   Created new entrants into the tablet market.
C)   Caused exit of firms from the tablet market.
D)   Caused the quality of products to fall.

Question 2

A firm should shut down production when

Accepted Answer

A)   P 
B)   P > minimum AVC.
C)   P = minimum ATC.
D)   P = MC.

Question 3

When a firm is earning positive economic profits, this is an indication that the firm

Accepted Answer

A)   Should leave this market in the long run.
B)   Is using its resources in the best possible way.
C)   Is using its resources in one of a number of ways that would yield positive economic profits.
D)   Is producing at the minimum ATC.

Question 4

Marginal cost pricing in competitive markets results in all but which one of the following?

Accepted Answer

A)   An efficient mix of goods and services being produced.
B)   Output being produced where price equals the opportunity cost of the last unit being produced.
C)   The information necessary for consumers to make rational choices between alternative goods and services.
D)   Maximization of consumer utility.

Question 5

Perfectly competitive firms cannot individually affect market price because

Accepted Answer

A)   There is an infinite demand for their goods.
B)   Demand is perfectly inelastic for their goods.
C)   There are many firms, none of which has a significant share of total output.
D)   The government exercises control over the market power of competitive firms.

Question 6

Other things being equal, as more firms enter a market, the market supply curve

Accepted Answer

A)   Becomes more inelastic.
B)   Shifts to the left.
C)   Shifts to the right.
D)   Intersects the demand curve at a higher price.

Question 7

Profit per unit is equal to

Accepted Answer

A)   Price divided by average total cost.
B)   Price minus average total cost.
C)   Total revenue minus total cost.
D)   Total revenue minus variable cost divided by quantity.

Question 8

A perfectly competitive market results in efficiency because

Accepted Answer

A)   Price is driven down to minimum ATC.
B)   Price rises high enough to equal marginal cost.
C)   Zero economic profit is achieved.
D)   MC < P.

Question 9

Explain how the market supply curve is derived in a perfectly competitive market. Identify five factors that would cause the market supply curve to shift.

Accepted Answer

The market supply curve is the sum of th...

Question 10

Refer to Figure 23.5 for a perfectly competitive firm. If more efficient production techniques were developed in this market, which of the following changes would we expect to occur, ceteris paribus?

Accepted Answer

A)   The ATC, MC, and market price would all decrease.
B)   The ATC alone would decrease.
C)   The ATC, MC, and market price would all increase.
D)   The ATC alone would increase.

Question 11

High profits in a particular industry indicate that

Accepted Answer

A)   Consumers want less of that industry's goods.
B)   Consumers are satisfied with the level of production of that industry's goods.
C)   Consumers want more of that industry's goods.
D)   Producers are satisfied with the level of production of that industry's goods.

Question 12

Suppose a perfectly competitive firm is experiencing zero economic profits. In an effort to increase profits, the firm decides to initiate an advertising campaign for its product. The most likely short-run result of this campaign, ceteris paribus, would be

Accepted Answer

A)   Economic losses for the firm.
B)   The ability to sell more at the existing market price.
C)   The ability to sell more at a lower price.
D)   The ability to sell more at a higher price.

Question 13

The price signal the consumer gets in a competitive market

Accepted Answer

A)   In no way reflects opportunity cost.
B)   Is an accurate reflection of opportunity cost.
C)   Is not reliable for making choices about the allocation of resources.
D)   Is the result of the selfishness of individuals.

Question 14

Barriers to entry are obstacles that make it difficult or impossible for would-be producers to enter a particular market.

Accepted Answer

A) True 
 B)False

Question 15

A competitive market creates strong pressure for technological innovation that

Accepted Answer

A)   Allows the firm to raise the price of its product.
B)   Provides the firm with more market power.
C)   Shifts the firm's demand curve to the right.
D)   Shifts the supply curve to the right.

Question 16

As in other industries, the market structure of the computer industry has evolved over time. It began as a monopoly and then became perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 17

The exit of firms from a market, ceteris paribus,

Accepted Answer

A)   Shifts the market supply curve to the right.
B)   Has no effect on the economic losses of remaining firms in the market.
C)   Increases the equilibrium price in the market.
D)   Shifts the market demand curve to the left.

Question 18

In a perfectly competitive industry, economic profit

Accepted Answer

A)   Can persist in the long run because of barriers to entry.
B)   Can persist in the long run because of homogeneous products.
C)   Will always be negative in the long run because of ease of entry.
D)   Will approach zero in the long run as more firms enter the market.

Question 19

Perfectly competitive firms are heavy advertisers because they produce differentiated products.

Accepted Answer

A) True 
 B)False

Question 20

Because a perfectly competitive firm has no market power, its marginal cost curve is flat (i.e., horizontal).

Accepted Answer

A) True 
 B)False

Exam 9: Aggregate Demand

A competitive market creates strong pressure for technological innovation that

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Refer to Figure 23.5 for a perfectly competitive firm. If more efficient production techniques were developed in this market, which of the following changes would we expect to occur, ceteris paribus?

Correct AnswerverifiedShow Answer

Marginal cost pricing in competitive markets results in all but which one of the following?

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Suppose a perfectly competitive firm is experiencing zero economic profits. In an effort to increase profits, the firm decides to initiate an advertising campaign for its product. The most likely short-run result of this campaign, ceteris paribus, would be

Correct AnswerverifiedShow Answer

The "Tablet Brigade" In the News article indicates that the success of the iPad

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Barriers to entry are obstacles that make it difficult or impossible for would-be producers to enter a particular market.

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Perfectly competitive firms cannot individually affect market price because

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Because a perfectly competitive firm has no market power, its marginal cost curve is flat (i.e., horizontal).

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Other things being equal, as more firms enter a market, the market supply curve

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A firm should shut down production when

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When a firm is earning positive economic profits, this is an indication that the firm

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In a perfectly competitive industry, economic profit

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Perfectly competitive firms are heavy advertisers because they produce differentiated products.

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The price signal the consumer gets in a competitive market

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The exit of firms from a market, ceteris paribus,

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A perfectly competitive market results in efficiency because

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Explain how the market supply curve is derived in a perfectly competitive market. Identify five factors that would cause the market supply curve to shift.

Correct AnswerverifiedThe market supply curve is the sum of th...View AnswerShow Answer

Profit per unit is equal to

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High profits in a particular industry indicate that

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As in other industries, the market structure of the computer industry has evolved over time. It began as a monopoly and then became perfectly competitive.

Correct AnswerverifiedShow Answer

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The market supply curve is the sum of th...
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