Deck 12: The Competitive Firm

Question 1

In a competitive industry, the demand facing an individual firm is:

A) perfectly elastic
B) inelastic
C) relatively elastic
D) perfectly inelastic

Answer 1

A

Question 2

A homogeneous product is:

A) milk
B) one in which consumers cannot determine the producer
C) one in which consumers buy due to advertising
D) one in which consumers cannot buy due to government labeling laws

Answer 2

B

Question 3

A competitive industry has the following characteristics except:

A) homogeneous product
B) perfect information
C) price maker
D) numerous firms

Answer 3

C

Question 4

Market power is a characteristic of:

A) competitive firms
B) monopoly
C) cattle ranchers
D) wheat farmers

Question 5

If the price of oil increases then:

A) the equilibrium price and quantity of food will increase
B) The equilibrium price of food will decrease, and the equilibrium quantity of food will increase
C) the equilibrium price and quantity of food will decrease
D) the equilibbiurm price of food will increase, and the equilibrium quantity of food will decrease

Question 6

Biotechnology will result in:

A) higher prices for Kansas producers
B) lower prices for agricultural goods
C) an increase in the price of soybeans
D) lower quantities of food products

Question 7

Competitive markets are:

A) cut-throat
B) illegal in some states
C) efficient
D) bad for consumers

Question 8

Perfect competition has:

A) few sellers
B) many sellers
C) numerous sellers
D) one seller

Question 9

Monopolistic competition is a market structure of:

A) grapes
B) eggs
C) wine
D) wheat

Question 10

Numerous sellers means that:

A) the price is fixed, and does not change
B) the conditions of perfect competition are not met
C) all firms are small relative to the market
D) all firms have market power

Question 11

Market power allows a firm to:

A) increase production
B) keep other firms out of the market
C) enhance the demand for a good
D) adjust the price of a good

Question 12

A firm with market power:

A) adjusts the price by forcing consumers to buy more of the good
B) adjusts the price by lobbying the government
C) adjusts the price by working with other firms
D) adjusts the price of a good by changing the quantity

Question 13

A competitive firm has all of the following characgteristics except:

A) perfect information
B) freedom of entry and exit
C) homogeneous product
D) ability to set price of the product

Question 14

When economic profits are negative in the long run, firms will:

A) enter the industry
B) exit the industry
C) remain and try to do better
D) lower production costs

Question 15

A homogeneous product is:

A) golf balls
B) golf courses
C) gold
D) Gold's gym

Question 16

Oligopoly is characterized by:

A) many firms
B) numerous firms
C) few firms
D) at least 12 firms

Question 17

A good example of an oligopoly is:

A) wheat
B) grocery stores
C) electricity
D) cars

Question 18

A homogeneous product is:

A) homogenized milk
B) one that the consumer can not tell who the producer is
C) one that the producer can not tell who the consumer is
D) none of the other answers

Question 19

A price taker's best strategy is to:

A) take a high price
B) take a low price
C) lower production costs
D) advertise and market the product

Question 20

A successful advertising campaign must be for a:

A) competitive firm
B) price taker
C) price maker
D) firm facing an elastic demand

Question 21

A price taker has:

A) little market power
B) no market power
C) market power
D) any level of market power it chooses

Question 22

A price maker has:

A) little market power
B) no market power
C) market power
D) any level of market power it chooses

Question 23

Perfect information is:

A) knowing everything (omniscience)
B) knowing prices and technology
C) knowing all of the industry secrets
D) knowing all of the information in the Wall Street Journal

Question 24

Since it costs a great deal to purchase a farm:

A) agriculture has a barrier to entry
B) it is expensive, but this is not considered a legal or economic barrier to entry
C) you must take out a loan to do it
D) we do not see new people getting into farming

Question 25

The demand facing a perfectly competitive firm is:

A) elastic
B) perfectly elastic
C) perfectly inelastic
D) inelastic

Question 26

The market demand for a competitive industry is:

A) horizontal
B) upward sloping
C) downward sloping
D) vertical

Question 27

The individual firm demand for a competitive industry is:

A) horizontal
B) upward sloping
C) downward sloping
D) vertical

Question 28

The market demand for apricots is derived by:

A) vertical summation of marginal cost curves
B) horizontal summation of marginal cost curves
C) horizontal summation of individual firm demand curves
D) horizontal summation of individual consumer demand curves

Question 29

The market supply for apricots is derived by:

A) vertical summation of marginal cost curves
B) horizontal summation of marginal cost curves
C) horizontal summation of individual firm demand curves
D) horizontal summation of individual consumer demand curves

Question 30

Over time, the demand for a good:

A) becomes more price inelastic
B) becomes more price elastic
C) becomes more income elastic
D) becomes more income inelastic

Question 31

If a competitive firm charged a price higher than the market price:

A) it would earn more revenues
B) it would earn less revenues
C) it depends on the elasticity of demand
D) it would earn greater economic profits, but not accounting profits

Question 32

If a competitive firm charged a price lower than the market price:

A) it would earn more revenues
B) it would earn less revenues
C) it depends on the elasticity of demand
D) it would earn greater economic profits, but not accounting profits

Question 33

For a perfectly competitive firm:

A) P = AR
B) P = MR
C) both A and B
D) neither A nor B

Question 34

The profit-maximizing conditions for a competitive firm are:

A) MR = MC and MC cut MR from above
B) MR = MC and MC cut MR from below
C) MR = AVC and MC cut MR from above
D) MR = AVC and MC cut MR from below

Question 35

Efficiency results in:

A) consumers paying the cost of production
B) firms producing goods at the lowest cost
C) zero economic profits
D) all of the other answers

Question 36

Efficiency occurs in:

A) perfectly competitive industries
B) monopolistic competitive industries
C) all industries
D) oligopolies

Question 37

Efficiency occurs through:

A) hiring the right people
B) free movement of resources into and out of industries
C) good investments
D) new technology

Question 38

Society as a whole benefits from:

A) positive economic profits
B) negative economic profits
C) zero economic profits
D) negative economic profits and positive accounting profits

Question 39

An increase in demand will result in:

A) higher economic profits, entry, zero economic profits
B) zero economic profits, entry, higher economic profits
C) entry, zero economic profits, higher economic profits
D) entry, higher economic profits, zero economic profits

Question 40

A decrease in demand will result in:

A) more firms in the industry
B) less firms in the industry
C) equal number of firms, just less output
D) not enough information to answer

Question 41

A competitive firm should always:

A) lower revenues
B) lower prices
C) lower production costs
D) lower technology

Question 42

Competitive firms:

A) have the best advertising during the super bowl
B) have small, but effective marketing campaigns
C) could usefully focus their resources on technology, not marketing
D) hire marketing teams

Question 43

When a new technology is developed:

A) no one benefits
B) the more conservative firms that wait to adopt benefit
C) the early adopters receive the benefits
D) all competitive firms benefit

Question 44

The biggest winner from technology is:

A) consumers
B) producers
C) government
D) media and press

Question 45

Which industry meets all four characteristics of competition?

A) agribusiness firms
B) agricultural firms
C) all real world industries
D) no real world industries

Question 46

A competitive firm:

A) must win customers over from other firms
B) must grow demand for its product through marketing
C) must keep costs down
D) must try to steal information from competitors

Question 47

A price maker:

A) is perfectly competitive
B) is perfectly monopolistic
C) must take price as fixed and given
D) none of the other answers

Question 48

Competition:

A) is wasteful to society
B) is efficienct for society
C) causes inequality among firms
D) causes inequality among consumers

Question 49

Competitive industries:

A) require government intervention
B) compete all profits away until firms must exit
C) results in shut factories and unemployment
D) keep society growing by being efficient

Question 50

An agricultural commodity producer is most likely a:

A) competitive firm
B) price taker
C) price maker
D) A and B only

Question 51

Define and explain, "market structure."

Question 52

Explain the impact of the number of firms in an industry on market outcomes and performance.

Question 53

Give an example of a perfectly competitive firm, and explain why it meets the definition of perfect competition.

Question 54

Define and explain the terms, "price maker" and "price taker." Give an example of each type of firm.

Question 55

Are there any monopolies in the real world? Give an example and explain why or why not.

Question 56

What is an oligopoly? What the characteristics of oligopoly, and provide an example.

Question 57

What is "freedom to enter and exit" an industry? Which firms have this ability, and which firms do not?

Question 58

Why are competitive industries considered, "efficient?"

Question 59

Describe a good business strategy for a competitive firm.

Question 60

Who are the major beneficiaries of technological change?