Question 1

How did the introduction of "the box" affect the cost curves of companies that trported their products by boat?

Accepted Answer

The answer of How did the introduction of "the box"...

Question 2

What feature of shipping containers resulted in reduced costs?

Accepted Answer

The answer of What feature of shipping containers resulted in...

Question 3

An article stated that trucking firms that did not adjust to "the box" went out of business. As these firms went out of business, what does economic theory suggest would happen to the price that the firms that did adjust could charge?

Accepted Answer

The answer of An article stated that trucking firms that...

Question 4

Which product is least likely to be produced in a perfectly competitive market?

Accepted Answer

Airline jet fuel is least likely to be produced in a perfectly competitive market because its production requires significant capital investment, is highly regulated, and is dominated by a few large firms, unlike the other options which are agricultural products typically produced by many small firms in competitive markets.

Question 5

Each of these factors plays an important role in determining market structure EXCEPT the

Accepted Answer

The extent of foreign ownership does not directly determine the market structure. Market structure is primarily influenced by factors such as barriers to entry, the ability to set prices, and the number of firms in the industry, which affect competition and market dynamics.

Question 6

A firm in a perfectly competitive industry would exhibit which characteristic?
I. An ability to produce as much output as the firm desires at the market price
II. No economic profits in the short run but possible economic profits in the long run

Accepted Answer

Firms in perfectly competitive markets can sell as much as they want at the market price due to the price-taking behavior, but they can only earn normal profits in the long run due to free entry and exit in the market.

Question 7

The deciding factor that determines whether a firm is operating in the short run versus the long run is whether the

Accepted Answer

The distinction between the short run and the long run in economics is based on the flexibility of factors of production. In the short run, at least one factor of production (often capital, such as plant size) is fixed, while in the long run, all factors of production, including plant size, can be varied. This makes choice C the correct answer, as it directly addresses the ability to change all factors, including plant size, which defines the transition from short run to long run operations.

Question 8

Which market structure does NOT exhibit a downward-sloping demand curve for the firm?

Accepted Answer

In perfect competition, each firm faces a perfectly elastic demand curve because the products are homogeneous, and consumers can easily switch to other suppliers at no additional cost. This means the demand curve is horizontal, not downward-sloping, as firms are price takers and can sell any quantity at the market price.

Question 9

Which sequence of market structures ranks the barriers to entry from the fewest to the most?

Accepted Answer

The correct sequence from the fewest barriers to entry to the most is: perfect competition, where there are virtually no barriers to entry and a large number of firms; oligopoly, where there are some barriers to entry and a few dominant firms; and monopoly, where the barriers to entry are the highest, often due to control over a key resource or government regulation, resulting in a single firm dominating the market.

Question 10

In which market structure is it possible to earn short-run economic profits?

Accepted Answer

In perfect competition, firms can earn short-run economic profits if their average total cost is below the market price. Monopolies can earn economic profits in the short run due to lack of competition. Monopolistic competition allows for short-run economic profits through product differentiation and market power.

Question 11

If Glass Inc. produces 80 windowpanes per day at the market price of $60 in a perfectly competitive market, what would happen to price if Glass Inc. increases production to 120 windowpanes, all else equal?

Accepted Answer

In a perfectly competitive market, individual firms are price takers, meaning they can sell as much as they want at the market price. Therefore, if Glass Inc. increases production, the price would remain the same because the price is determined by the overall market supply and demand, not the output of a single firm.

Question 12

If the market equilibrium price of pineapples (a perfectly competitive product) is $5, the demand curve for an individual pineapple farmer is

Accepted Answer

In a perfectly competitive market, individual firms are price takers, meaning they have no power to influence the market price of their product. Therefore, the demand curve for an individual farmer's product is perfectly elastic (horizontal) at the market equilibrium price, which in this case is $5. This reflects the farmer's ability to sell any quantity of pineapples at the market price but inability to sell any at a higher price.

Question 13

Suzana owns a farm that grows mangos in a perfectly competitive market. If she decides to double the quantity of mangos she sells, how would that affect the market price for mangos?

Accepted Answer

In a perfectly competitive market, individual producers are price takers, meaning they have no control over the market price. Doubling the quantity of mangos Suzana sells would not affect the market price because her production is too small relative to the total market to influence price.

Question 14

The market price of pomegranates is $2, and JoAnne sells 25 pomegranates at the local farmer's market. The total revenue is _____ and the marginal revenue is _____.

Accepted Answer

Total revenue is calculated by multiplying the price per unit by the number of units sold, which is $2 * 25 = $50. Marginal revenue is the additional revenue from selling one more unit, which remains $2 in this case since the price per pomegranate is constant.

Question 15

Melanie grows long-stem roses in her garden and sells them at the local flower market at the perfectly competitive market price of $3. If Melanie decides to increase the number of roses she grows, what will happen to the market price and Melanie's marginal revenue?

Accepted Answer

In a perfectly competitive market, individual producers cannot influence the market price by altering their output. Therefore, the market price remains constant, and the marginal revenue for each additional unit sold also remains constant at the market price.

Question 16

According to this graph of a perfectly competitive firm, what is the profit-maximizing price and quantity?

Accepted Answer

The answer of According to this graph of a perfectly...

Question 17

According to this graph of a perfectly competitive firm, what is the firm's total profit?

Accepted Answer

The answer of According to this graph of a perfectly...

Question 18

In the following diagram of a firm in a perfectly competitive market, what is the quantity that maximizes the firm's profit?

Accepted Answer

The answer of In the following diagram of a firm...

Question 19

In the following diagram of a firm in a perfectly competitive market, if the firm maximizes profit, how much profit does it earn?

Accepted Answer

The answer of In the following diagram of a firm...

Question 20

If the market price is $60, a firm's minimum average total cost is $70, and minimum average variable cost is $50, what should the firm do in this perfectly competitive market?

Accepted Answer

In the short run, if the market price covers the average variable cost but not the average total cost, the firm should continue producing to minimize losses. Here, the price ($60) is above the average variable cost ($50) but below the average total cost ($70), so the firm should continue producing in the short run to cover its variable costs and contribute to fixed costs, thereby minimizing losses.

Quiz 8: Perfect Competition

How did the introduction of "the box" affect the cost curves of companies that trported their products by boat?

What feature of shipping containers resulted in reduced costs?

An article stated that trucking firms that did not adjust to "the box" went out of business. As these firms went out of business, what does economic theory suggest would happen to the price that the firms that did adjust could charge?

Which product is least likely to be produced in a perfectly competitive market?

Each of these factors plays an important role in determining market structure EXCEPT the

A firm in a perfectly competitive industry would exhibit which characteristic? I. An ability to produce as much output as the firm desires at the market price II. No economic profits in the short run but possible economic profits in the long run

The deciding factor that determines whether a firm is operating in the short run versus the long run is whether the

Which market structure does NOT exhibit a downward-sloping demand curve for the firm?

Which sequence of market structures ranks the barriers to entry from the fewest to the most?

In which market structure is it possible to earn short-run economic profits?

If Glass Inc. produces 80 windowpanes per day at the market price of $60 in a perfectly competitive market, what would happen to price if Glass Inc. increases production to 120 windowpanes, all else equal?

If the market equilibrium price of pineapples (a perfectly competitive product) is $5, the demand curve for an individual pineapple farmer is

Suzana owns a farm that grows mangos in a perfectly competitive market. If she decides to double the quantity of mangos she sells, how would that affect the market price for mangos?

The market price of pomegranates is $2, and JoAnne sells 25 pomegranates at the local farmer's market. The total revenue is _ and the marginal revenue is _.

Melanie grows long-stem roses in her garden and sells them at the local flower market at the perfectly competitive market price of $3. If Melanie decides to increase the number of roses she grows, what will happen to the market price and Melanie's marginal revenue?

According to this graph of a perfectly competitive firm, what is the profit-maximizing price and quantity?

According to this graph of a perfectly competitive firm, what is the firm's total profit?

In the following diagram of a firm in a perfectly competitive market, what is the quantity that maximizes the firm's profit?

In the following diagram of a firm in a perfectly competitive market, if the firm maximizes profit, how much profit does it earn?

If the market price is $60, a firm's minimum average total cost is $70, and minimum average variable cost is $50, what should the firm do in this perfectly competitive market?