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In perfect competition, the price of the product is determined where the market


A) elasticity of supply equals the market elasticity of demand.
B) supply curve and market demand curve intersect.
C) average variable cost equals the market average total cost.
D) fixed cost is zero.

E) B) and C)
F) A) and B)

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-In the short run, a perfectly competitive firm A) cannot shut down. B) must make zero economic profit. C) can make an economic profit, incur an economic loss, or make zero economic profit. D) will not incur an economic loss if it shuts down. -In the short run, a perfectly competitive firm


A) cannot shut down.
B) must make zero economic profit.
C) can make an economic profit, incur an economic loss, or make zero economic profit.
D) will not incur an economic loss if it shuts down.

E) A) and D)
F) A) and C)

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In perfect competition, the firm's marginal revenue curve


A) cuts its demand curve from below, going from left to right.
B) cuts its demand curve from above, going from left to right.
C) always lies below its demand curve.
D) is the same as its demand curve.

E) B) and C)
F) A) and D)

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Total economic profit is


A) total revenue minus total opportunity cost.
B) total revenue divided by total cost.
C) marginal revenue minus marginal cost.
D) marginal revenue divided by marginal cost.

E) A) and B)
F) None of the above

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-The table above shows some of the costs for a perfectly competitive firm. The firm will produce 9 units of output if the price per unit is A) $1750. B) $200. C) $300. D) $500. -The table above shows some of the costs for a perfectly competitive firm. The firm will produce 9 units of output if the price per unit is


A) $1750.
B) $200.
C) $300.
D) $500.

E) B) and C)
F) B) and D)

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Which of the following is TRUE regarding perfect competition? I. The firms are price takers. II) Marginal revenue equals the price of the product. III) Established firms have no advantage over new firms.


A) I and II
B) II and III
C) I, II and III
D) I only

E) B) and C)
F) None of the above

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A perfectly competitive firm maximizes its profit by


A) setting its price so that it exceeds the marginal revenue.
B) choosing to produce the quantity that sets MC equal to MR.
C) cutting wages.
D) manipulating demand.

E) C) and D)
F) A) and B)

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Can a perfectly competitive firm make an economic profit in the short run? Can it incur an economic loss?

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In the short run, a perfectly competitiv...

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In perfect competition, the product of a single firm


A) has many perfect substitutes produced by other firms.
B) has many perfect complements produced by other firms.
C) is sold under many differing brand names.
D) is sold to different customers at different prices.

E) All of the above
F) A) and B)

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If there is a permanent decrease in demand in a perfectly competitive market, then there is an initial ________ in price and existing firms ________.


A) rise; make an economic profit
B) rise; incur an economic loss
C) fall; make an economic profit
D) fall; incur an economic loss

E) A) and B)
F) C) and D)

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Initially, a perfectly competitive industry that has 1,000 firms is in long-run equilibrium. Then 100 firms in the industry adopt a new technology that reduces the average cost of producing the good. In the short run, the price ________, firms with the new technology make ________ economic profit, and firms with the old technology ________.


A) remains the same; zero; incur economic losses
B) falls; positive; incur economic losses
C) remains the same; positive; make normal profit
D) remains the same; positive; incur economic losses

E) All of the above
F) A) and B)

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In a perfectly competitive market, there are


A) many buyers and many sellers.
B) many buyers, but there might be only one or two sellers.
C) many sellers, but there might be only one or two buyers.
D) one firm that sets the price for the others to follow.

E) B) and C)
F) None of the above

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-In the above table, if the firm produces 2 units of output, it will A) make an economic profit of $9. B) make an economic profit of $60. C) incur an economic loss of $9. D) incur an economic loss of $60. -In the above table, if the firm produces 2 units of output, it will


A) make an economic profit of $9.
B) make an economic profit of $60.
C) incur an economic loss of $9.
D) incur an economic loss of $60.

E) C) and D)
F) A) and B)

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Hubert's Copy Services is in perfect competition. Hubert currently charges 10 cents per page, which is the going market price. He thinks that he can increase his profit by raising the price. Is it possible? Why or why not?

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If Hubert raises his price, his profit w...

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Which of the following is NOT an assumption of perfect competition?


A) many firms
B) many buyers
C) restrictions on entry into the market
D) each firm sells an identical product

E) A) and B)
F) All of the above

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-Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price of a tattoo is $12, the firm A) incurs an economic loss, but will not shut down. B) will not shut down in the short run, but will leave the industry in the long run. C) will shut down. D) is breaking even. -Archibald's Tattoos is a perfectly competitive firm. The firm's costs are shown in the table above. If the market price of a tattoo is $12, the firm


A) incurs an economic loss, but will not shut down.
B) will not shut down in the short run, but will leave the industry in the long run.
C) will shut down.
D) is breaking even.

E) All of the above
F) B) and D)

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When the market demand increases in a perfect competition, the long-run result is a larger number of firms, a higher price, and a permanent economic profit for the firms.

A) True
B) False

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An example of a perfectly competitive firm is


A) an oat farmer in the United States.
B) the local cable TV company.
C) a U.S. automobile producer.
D) a big city newspaper.

E) B) and D)
F) B) and C)

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Jane's Garage Cleaning is a perfectly competitive firm that currently cleans 40 garages a week. Jane's marginal cost is less than the price she charges. Jane can increase her profit if she


A) charges a higher price.
B) charges a lower price.
C) cleans fewer than 40 garages a week.
D) cleans more than 40 garages a week.

E) None of the above
F) C) and D)

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Consumer surplus ________.


A) equals total revenue minus marginal cost
B) is maximized when the market outcome is efficient
C) equals total revenue minus opportunity cost
D) plus producer surplus is maximized when resources are used efficiently

E) B) and D)
F) A) and B)

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