Deck 12: Perfect Competition

Question 1

_____ is defined as the business environment in which a firm operates.

A) Market structure
B) The money market
C) The international market
D) Profit structure

Answer 1

A

Question 2

A market structure with a very large number of sellers of a standardized product is known as:

A) perfect competition.
B) monopolistic competition.
C) oligopoly.
D) monopoly.

Answer 2

A

Question 3

A market structure where many firms sell similar but differentiated products is known as:

A) perfect competition.
B) monopolistic competition.
C) oligopoly.
D) monopoly.

Answer 3

B

Question 4

A market structure where a few dominant firms are highly interdependent is known as:

A) perfect competition.
B) monopolistic competition.
C) oligopoly.
D) monopoly.

Question 5

A market structure where a single seller supplies a product that has no close substitutes is known as:

A) perfect competition.
B) monopolistic competition.
C) oligopoly.
D) monopoly.

Question 6

An example of _____ is a local electricity company.

A) perfect competition
B) monopolistic competition
C) an oligopoly
D) a monopoly

Question 7

Boeing and Airbus dominate the large jet airliner manufacturing business. This an example of _____ market structure.

A) a perfect competition
B) a monopolistic competition
C) an oligopoly
D) a monopoly

Question 8

An obstacle that makes it difficult to enter a market is known as:

A) competition.
B) marginal ability.
C) marginal entry.
D) barrier to entry.

Question 9

_____ barriers to entry enable new firms to enter a market easily if economic profits are being made.

A) Low
B) High
C) Marginal
D) Mixed

Question 10

_____ barriers to entry make it difficult for new firms to enter a market easily.

A) Low
B) High
C) Marginal
D) Mixed

Question 11

Which market structure has only one firm?

A) perfect competition
B) monopolistic competition
C) oligopoly
D) monopoly

Question 12

In _____, firms are highly interdependent.

A) perfect competition
B) monopolistic competition
C) an oligopoly
D) a monopoly

Question 13

In _____ market structure, firms sell differentiated products, but due to competitive pressures, firms are limited in their ability to set prices.

A) a perfect competition
B) a monopolistic competition
C) an oligopoly
D) a monopoly

Question 14

The fast-food industry most likely operates in _____ market structure.

A) a perfect competition
B) a monopolistic competition
C) an oligopoly
D) a monopoly

Question 15

ABC Corporation holds a patent on a drug that prevents frowning. This is an example of a _____ barrier to entry.

A) marginal
B) mixed
C) low
D) high

Question 16

In a market where the products are standardized, individual firms have _____ impact on price.

A) marginal
B) mixed
C) no
D) a lot of

Question 17

A firm that is unable to impact the market price is a price:

A) maker.
B) leader.
C) taker.
D) follower.

Question 18

(Figure: Firm-Specific Demand Curve) The figure represents the _____ market structure for an individual firm.

A) monopoly
B) oligopoly
C) monopolistic competition
D) perfect competition

Question 19

(Figure: Market Equilibrium) In the figure, what is the price taken by each wheat farmer for the perfectly competitive wheat market?

A) $25
B) $20
C) $15
D) $10

Question 20

An example of a commodity is:

A) a hamburger.
B) a sofa.
C) an automobile.
D) gold.

Question 21

An example of a commodity is:

A) beef.
B) a chair.
C) an automobile.
D) a table.

Question 22

In markets that are so extremely competitive that firms have no pricing power and profits are low, standardized products are known as:

A) differentiated.
B) teasers.
C) commodities.
D) oligopolies.

Question 23

In a market structure with low entry barriers, firms generally earn _____ economic profit in the long run.

A) high
B) medium
C) low
D) zero

Question 24

_____ is the additional revenue that a business receives from one additional unit of output.

A) Average revenue
B) Marginal revenue
C) Total sales
D) Total revenue

Question 25

In perfect competition, _____ equals price.

A) sales
B) marginal revenue
C) total sales
D) total revenue

Question 26

In perfect competition, marginal revenue equals:

A) sales.
B) price.
C) total sales.
D) total revenue.

Question 27

Marginal revenue equals price in the _____ market structure.

A) perfect competition
B) monopolistic competition
C) oligopoly
D) monopoly

Question 28

(Figure: Profit Maximization) In the figure, how many units should be sold to maximize profits?
$\begin{array}{|c|c|c|c|c|}\hline \text { Quantity } & \text { Price } & \begin{array}{c}\text { Total } \\\text { Revenue }\end{array} & \text { Total Cost } & \begin{array}{c}\text { Marginal } \\\text { Cost }\end{array} \\\hline 1 & \$ 9 & \$ 9 & \$ 12 & \$ 4 \\\hline 2 & 9 & 18 & 15 & 3 \\\hline 3 & 9 & 27 & 21 & 6 \\\hline 4 & 9 & 36 & 30 & 9 \\\hline 5 & 9 & 45 & 41 & 11 \\\hline\end{array}$

A) two
B) three
C) four
D) five

Question 29

(Figure: Profit Maximization) In the figure, marginal revenue for the fifth unit is:
$\begin{array}{|c|c|c|c|c|}\hline \text { Quantity } & \text { Price } & \begin{array}{c}\text { Total } \\\text { Revenue }\end{array} & \text { Total Cost } & \begin{array}{c}\text { Marginal } \\\text { Cost }\end{array} \\\hline 1 & \$ 9 & \$ 9 & \$ 12 & \$ 4 \\\hline 2 & 9 & 18 & 15 & 3 \\\hline 3 & 9 & 27 & 21 & 6 \\\hline 4 & 9 & 36 & 30 & 9 \\\hline 5 & 9 & 45 & 41 & 11 \\\hline\end{array}$

A) $4.
B) $9.
C) $11.
D) $45.

Question 30

(Figure: Profit Maximization) In the figure, the profit from selling three units is:
$\begin{array}{|c|c|c|c|c|}\hline \text { Quantity } & \text { Price } & \begin{array}{c}\text { Total } \\\text { Revenue }\end{array} & \text { Total Cost } & \begin{array}{c}\text { Marginal } \\\text { Cost }\end{array} \\\hline 1 & \$ 9 & \$ 9 & \$ 12 & \$ 4 \\\hline 2 & 9 & 18 & 15 & 3 \\\hline 3 & 9 & 27 & 21 & 6 \\\hline 4 & 9 & 36 & 30 & 9 \\\hline 5 & 9 & 45 & 41 & 11 \\\hline\end{array}$

A) $27.
B) $21.
C) $9.
D) $6.

Question 31

The profit-maximizing level of output for all firms is where:

A) MR = MC.
B) MC = TR.
C) TR = TC.
D) TC = MR.

Question 32

(Figure: Maximum Profit in Perfect Competition) In the figure, the curve represented by A is the _____ curve.

A) total cost
B) marginal cost
C) marginal revenue
D) average total cost

Question 33

(Figure: Maximum Profit in Perfect Competition) In the figure, the curve represented by C is the _____ curve.

A) total cost
B) marginal cost
C) marginal revenue
D) average total cost

Question 34

(Figure: Maximum Profit in Perfect Competition 0) In the figure, at what quantity does marginal cost equal price?

A) less than six
B) six
C) between six and nine
D) nine

Question 35

(Figure: Maximum Profit in Perfect Competition 0) In the figure, what is average total cost at the profit-maximizing quantity?

A) less than $7
B) $7
C) $8
D) more than $8

Question 36

(Figure: Maximum Profit in Perfect Competition 0) In the figure, what is the firm's profit at the profit-maximizing quantity?

A) $144
B) $81
C) $72
D) $54

Question 37

(Figure: Maximum Profit in Perfect Competition 0) In the figure, each additional unit sale generates _____ of marginal revenue.

A) $7
B) $9
C) $16
D) $81

Question 38

(Figure: Maximum Profit in Perfect Competition 3) In the figure, profit is maximized at point:

A) A.
B) B.
C) C.
D) D.

Question 39

Profit equals _____ minus total costs.

A) marginal revenue
B) total revenue
C) marginal sales
D) total profit

Question 40

_____ occurs when economic profit equals zero.

A) Profit maximization
B) Revenue loss
C) Revenue maximization
D) The breakeven point

Question 41

When price falls below the breakeven point, _____ occurs.

A) profit maximization
B) economic loss
C) economic gain
D) accounting gain

Question 42

A firm's decision to shut down in the short run is based on its ability to cover _____ costs.

A) fixed
B) variable
C) total
D) marginal

Question 43

(Figure: Business Decision to Shut Down 0) In the figure, the economic loss is:

A) $30.
B) $36.
C) $21.
D) $8.

Question 44

(Figure: Business Decision to Shut Down 0) In the figure, this firm should:

A) shut down in the long run.
B) remain open in the long run.
C) shut down in the short run.
D) remain open in the short run.

Question 45

(Figure: Business Decision to Shut Down 2) In the figure, this firm should:

A) remain open in the short run and maximize profits.
B) remain open in the long run.
C) shut down in the short run.
D) remain open in the short run and minimize losses.

Question 46

(Figure: Business Decision to Shut Down 2) ​
In the figure, this firm is experiencing an economic profit of:

A) $21.
B) -$27.
C) $27.
D) -$21.

Question 47

In the long run, when average total cost is greater than price, a firm should:

A) enter a new market.
B) remain in the market.
C) leave the market.
D) expand internationally.

Question 48

In the long run, if Britta's average total cost to produce cookies is $4 and she is able to sell them for $3, she should:

A) enter a new market.
B) remain in the market.
C) leave the market.
D) expand internationally.

Question 49

In the long run, if Britta's average total cost to produce cookies is $4 and she is able to sell them for $4, she should:

A) enter a new market.
B) remain in the market.
C) leave the market.
D) expand internationally.

Question 50

In the long run, if Britta's average total cost to produce cookies is $4 and she is able to sell them for $5, she should:

A) enter a new market.
B) remain in the market.
C) leave the market.
D) expand internationally.

Question 51

To determine profitability, a firm looks to the _____ curve.

A) total revenue
B) total cost
C) average total revenue
D) average total costs

Question 52

To determine whether to exit or enter an industry in the long run, a firm looks to the _____ curve at the profit-maximizing quantity.

A) total revenue
B) total cost
C) average total revenue
D) average total costs

Question 53

In deciding how much to produce, a firm looks to the _____ cost curve.

A) marginal
B) average total
C) average fixed
D) total

Question 54

The upward-sloping portion of the marginal cost curve that lies above the average variable cost curve is a firm's:

A) equilibrium point.
B) breakeven point.
C) supply curve.
D) demand curve.

Question 55

Nicole's cupcake shop is making an economic profit. As a result, she can expect:

A) input costs to rise.
B) input costs to fall.
C) market supply to decrease.
D) competition to increase.

Question 56

When supply increases, the short-run supply curve will:

A) shift to the left.
B) shift to the right.
C) remain static.
D) find equilibrium.

Question 57

(Figure: Industry Adjustments to Economic Profits) In the figure, when price is equal to $15, short-run economic profit is:

A) zero.
B) $28.
C) $32.
D) $120.

Question 58

(Figure: Industry Adjustments to Economic Profits) ​
In the figure, when price is equal to $10, short-run economic profit:

A) is positive.
B) is zero.
C) is negative (a loss).
D) cannot be determined.

Question 59

(Figure: Industry Adjustments to Economic Profits) In the figure, short-run economic profit is:

A) zero.
B) $32.
C) $88.
D) $120.

Question 60

(Figure: Industry Adjustments to Economic Profits 2) In the figure, this firm is experiencing a short-run economic _____ when the price is $10.

A) gain of $70
B) gain of $80
C) loss of $35
D) loss of $40

Question 61

(Figure: Industry Adjustments to Economic Profits 2) In the figure, short-run economic profit is:

A) -$35.
B) -$70.
C) $35.
D) $40.

Question 62

(Figure: Industry Adjustments to Economic Profits 2) In the figure, short-run economic profit is _____ when the price is $15.

A) zero
B) $40
C) $105
D) $120

Question 63

(Figure: Industry Adjustments to Economic Profits 2) In the figure, when price is equal to $10, short-run economic profit:

A) is positive.
B) is zero.
C) is negative (a loss).
D) cannot be determined.

Question 64

In the long run, firms will _____ the market when the market price is below average total cost.

A) enter
B) remain in
C) leave
D) expand internationally

Question 65

_____ occurs when businesses in a competitive industry have zero economic profit.

A) Economic loss
B) Decreasing cost
C) Long-run equilibrium
D) Market saturation

Question 66

_____ cost industry is one where the entry of new firms does not change average total cost.

A) A constant
B) An increasing
C) An exponential
D) A decreasing

Question 67

In _____ cost industry, the long-run supply curve is flat.

A) a constant
B) an increasing
C) an exponential
D) a decreasing

Question 68

In _____ cost industry, the entry of new firms increases average total costs.

A) a constant
B) an increasing
C) an exponential
D) a decreasing

Question 69

In _____ cost industry, the supply curve is upward sloping.

A) a constant
B) an increasing
C) an exponential
D) a decreasing

Question 70

In _____ cost industry, the entry of new firms lowers average total cost.

A) a constant
B) an increasing
C) an exponential
D) a decreasing

Question 71

In _____ cost industry, the long-run supply curve is downward sloping.

A) a constant
B) an increasing
C) an exponential
D) a decreasing

Question 72

In a decreasing cost industry, price often decreases over time due to _____ of scale.

A) economies
B) diseconomies
C) constant economies
D) equilibrium economies

Question 73

Which of the following is NOT an example of a constant cost industry?

A) tech inputs such as microchips.
B) fast-food restaurants.
C) agricultural products such as cucumbers.
D) bagged ice.

Question 74

An example of an increasing cost industry is:

A) tech inputs such as microchips.
B) fast-food restaurants.
C) agricultural products such as cucumbers.
D) commodities such as gold.

Question 75

An example of a decreasing cost industry is:

A) tech inputs such as microchips.
B) fast-food restaurants.
C) agricultural products such as cucumbers.
D) commodities such as gold.

Question 76

In a constant cost industry, as prices rise due to an increase in demand, initially profits generally:

A) remain constant.
B) decrease.
C) increase.
D) decrease first and then increase.

Question 77

In an increasing cost industry, as prices rise due to an increase in demand, profits generally will _____ initially.

A) remain constant
B) decrease
C) increase
D) decrease first and then increase

Question 78

In a decreasing cost industry, as prices rise due to an increase in demand, profits initially:

A) remain constant.
B) decrease.
C) increase.
D) decrease first and then increase.

Question 79

In a decreasing cost industry, as firms leave the industry, average total cost generally:

A) remains constant.
B) decreases.
C) increases.
D) increases first and then decreases.

Question 80

In a decreasing cost industry, as firms leave, the industry average total cost generally _____, and output:

A) decreases; decreases.
B) increases; decreases.
C) decreases; increases.
D) increases; increases.