Question 1

In the long run,perfectly competitive firms produce at the output level that has the minimum

Accepted Answer

In the long run, perfectly competitive firms aim to produce at the minimum average total cost (ATC) in order to maximize profits. This is because, in the long run, firms have the ability to adjust all inputs and can enter or exit the industry as they please. If a firm is not producing at the minimum ATC, it can adjust its inputs to produce at a lower cost and earn higher profits. Therefore, in the long run, perfectly competitive firms produce at the output level that has the minimum average total cost.

Question 2

To eliminate losses in a perfectly competitive market,firms exit the industry.This exit results in

Accepted Answer

When firms exit a perfectly competitive market, the number of producers decreases, causing a decrease in market supply. This decrease in supply can help eliminate losses and bring the market back to equilibrium. Therefore, the correct answer is B, a decrease in market supply.

Question 3

Keith is a perfectly competitive carnation grower.The market price is $2 per dozen carnations.Keith's average total cost to grow carnations is $2.50 per dozen.In the long run,Keith will

Accepted Answer

In a perfectly competitive industry, firms will continue to exit the industry until the remaining firms are earning zero economic profit. Since Keith's average total cost to grow carnations is $2.50 and the market price is only $2, he is earning a negative economic profit and will eventually exit the industry if the price and his costs do not change. Therefore, the best choice is C.

Question 4

A perfectly competitive market is in equilibrium and then demand decreases.The decrease in demand means the market price will ________ and eventually there will be ________.

Accepted Answer

When demand decreases in a perfectly competitive market, the market price falls because the same quantity of goods is chased by fewer buyers. This leads to lower revenues for firms, making the market less attractive. Consequently, some existing firms may find it unprofitable to continue operating and decide to exit the market.

Question 5

In the long run,existing firms exit a perfectly competitive market

Accepted Answer

In the long run, existing firms exit a perfectly competitive market only if they incur an economic loss. At a zero profit level, firms break even and continue to stay in the market. If firms earn a positive economic profit, new firms will enter the market, which will eventually drive down prices and reduce profits. However, if firms incur an economic loss, they will exit the market in the long run. Therefore, only option D is correct.

Question 6

Catfish farming is a perfectly competitive industry.Catfish farmers suffered tremendous economic losses in the late 2000s.As a result,

Accepted Answer

Since catfish farming is a perfectly competitive industry, economic losses would lead to decreased profits for all farmers. This would push some farmers to exit the market in search of more profitable opportunities. Therefore, the best choice is B, some catfish farmers exited the market.

Question 7

In the long run,a perfectly competitive firm makes

Accepted Answer

In the long run, entry and exit of firms cause the price to adjust to the minimum point on the average total cost curve, resulting in zero economic profit for perfectly competitive firms.

Question 8

If it does not shut down,a perfectly competitive firm produces where marginal cost is equal to the marginal revenue

Accepted Answer

In a perfectly competitive market, firms strive to maximize their profits, which occurs when marginal cost equals marginal revenue. This holds true in both the short run and the long run. Additionally, producing where price equals average variable cost or where price is greater than average total cost would not result in maximum profit for the firm.

Question 9

When new firms enter a perfectly competitive market,the market supply curve shifts ________ and the price ________.

Accepted Answer

When new firms enter a perfectly competitive market, the market supply curve shifts rightward, as the overall supply of the product in the market increases. This leads to a decrease in price, as more firms are now competing to sell their products. Therefore, the correct option is A - rightward, falls.

Question 10

If concerns about mad-cow disease impose economic losses on the perfectly competitive cattle ranchers,exit by the ranchers combined with no further changes in the demand for beef will force the price of beef to

Accepted Answer

When cattle ranchers exit the market due to concerns about mad-cow disease, the supply of beef decreases. With demand remaining constant and supply decreasing, the price of beef will increase according to basic principles of supply and demand.

Question 11

In the long run,a perfectly competitive firm will

Accepted Answer

In the long run, when all factors of production are variable, a perfectly competitive firm will adjust its inputs to minimize its costs and produce at the point where price equals marginal cost, resulting in zero economic profit. Any profits in the short run will attract new firms to the market, increasing supply and driving down price until all firms earn zero economic profit in the long run.

Question 12

In the long run,perfectly competitive firms will exit the market if the price is

Accepted Answer

If the price is less than average total cost, the firm is not covering all of its costs and is making a loss. In the long run, firms cannot continue to operate at a loss and will eventually exit the market. This is because they cannot sustain losses indefinitely and will not be able to attract the necessary investment to continue operating. Therefore, the best choice is C.

Question 13

In a perfectly competitive industry,
i.entry by new firms shifts the market supply curve rightward.
ii.exit by existing firms shifts the market supply curve leftward.
iii.at all times existing firms make only zero economic profit.

Accepted Answer

In a perfectly competitive industry, entry by new firms increases the number of firms operating in the market, thereby increasing the market supply, leading to a rightward shift in the market supply curve (choice i). On the other hand, when existing firms exit the industry, the number of firms operating in the market decreases, leading to a leftward shift in the market supply curve (choice ii). In the long run, in a perfectly competitive market, firms can only break even and earn zero economic profit, i.e., their revenue equals their costs (choice iii).

Question 14

Suppose a perfectly competitive market is in short-run equilibrium.Firms that are incurring a ________ economic loss ________.

Accepted Answer

If firms in a perfectly competitive market are incurring a persistent economic loss, they will eventually exit the industry in the long run as they cannot sustain their losses indefinitely. This will cause a shift in the market supply curve leftward, reducing the quantity supplied and increasing the market price. Therefore, option D is the best choice.

Question 15

The cranberry market is perfectly competitive.Reports that consuming cranberries can lead to improved health result in a permanent increase in the demand for cranberries and an immediate upward jump in the price of cranberries.As time passes,the price of cranberries ________ and the initial firms' economic ________.

Accepted Answer

In a perfectly competitive market, an increase in demand leads to a temporary rise in price and profits, attracting new firms. Over time, the entry of these new firms increases supply, which reduces the price and eliminates the initial economic profits, restoring normal profit levels.

Question 16

When firms in a perfectly competitive market incur economic losses,exit by some firms means the market supply will

Accepted Answer

When firms incur economic losses in a perfectly competitive market, some firms will exit the market. This will result in a decrease in market supply because there are fewer firms producing and selling goods in the market. The decrease in supply will lead to an increase in the equilibrium price, which will eventually eliminate economic losses and restore the market to long-run equilibrium.

Question 17

The corn market is perfectly competitive,with thousands of corn farmers.In the 2000s,the price of corn soared so that new farmers entered the corn market.Initially,entry ________ the economic profit of the initial corn farmers and in the long run the initial corn farmers ________.

Accepted Answer

In a perfectly competitive market, the entry of new farmers increases supply, leading to a decrease in price. Initially, this reduces the economic profit of the initial corn farmers. In the long run, the market reaches an equilibrium where firms make zero economic profit, as any economic profit would attract more firms into the market, driving profits down to zero.

Question 18

In the long run,a perfectly competitive firm

Accepted Answer

In the long run, a perfectly competitive firm will produce at the efficient scale and price equal to marginal cost, resulting in zero economic profit. This is because in a perfectly competitive market, there are no barriers to entry, so if firms are earning economic profit, new firms will enter the market and drive down prices until profits are zero. Conversely, if firms are incurring losses, some firms will exit the market, reducing supply and driving up prices until profits are again zero. Therefore, in the long run, a perfectly competitive firm can only make zero economic profit.

Question 19

Suppose a perfectly competitive market is in a short-run equilibrium.If some firms exit the market,the profit of the remaining firms ________; if some firms enter the market,the profit of each existing firm ________.

Accepted Answer

When firms exit the market, the supply decreases, leading to higher prices and potentially higher profits for the remaining firms. Conversely, when new firms enter, the supply increases, leading to lower prices and decreased profits for existing firms.

Question 20

If firms in a perfectly competitive industry are earning an economic profit,then in the ________ firms will ________ the industry.

Accepted Answer

In a perfectly competitive market, if firms are earning an economic profit in the short run, it attracts new firms to enter the market in the long run. This increases supply, leading to a decrease in the price until economic profits are zero.

Quiz 15: Perfect Competition

In the long run,perfectly competitive firms produce at the output level that has the minimum

To eliminate losses in a perfectly competitive market,firms exit the industry.This exit results in

Keith is a perfectly competitive carnation grower.The market price is $2 per dozen carnations.Keith's average total cost to grow carnations is $2.50 per dozen.In the long run,Keith will

A perfectly competitive market is in equilibrium and then demand decreases.The decrease in demand means the market price will and eventually there will be .

In the long run,existing firms exit a perfectly competitive market

Catfish farming is a perfectly competitive industry.Catfish farmers suffered tremendous economic losses in the late 2000s.As a result,

In the long run,a perfectly competitive firm makes

If it does not shut down,a perfectly competitive firm produces where marginal cost is equal to the marginal revenue

When new firms enter a perfectly competitive market,the market supply curve shifts and the price .

If concerns about mad-cow disease impose economic losses on the perfectly competitive cattle ranchers,exit by the ranchers combined with no further changes in the demand for beef will force the price of beef to

In the long run,a perfectly competitive firm will

In the long run,perfectly competitive firms will exit the market if the price is

In a perfectly competitive industry, i.entry by new firms shifts the market supply curve rightward. ii.exit by existing firms shifts the market supply curve leftward. iii.at all times existing firms make only zero economic profit.

Suppose a perfectly competitive market is in short-run equilibrium.Firms that are incurring a economic loss .

The cranberry market is perfectly competitive.Reports that consuming cranberries can lead to improved health result in a permanent increase in the demand for cranberries and an immediate upward jump in the price of cranberries.As time passes,the price of cranberries and the initial firms' economic .

When firms in a perfectly competitive market incur economic losses,exit by some firms means the market supply will

The corn market is perfectly competitive,with thousands of corn farmers.In the 2000s,the price of corn soared so that new farmers entered the corn market.Initially,entry the economic profit of the initial corn farmers and in the long run the initial corn farmers .

In the long run,a perfectly competitive firm

Suppose a perfectly competitive market is in a short-run equilibrium.If some firms exit the market,the profit of the remaining firms ; if some firms enter the market,the profit of each existing firm .

If firms in a perfectly competitive industry are earning an economic profit,then in the firms will the industry.