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Test Canvas : TestBanks Chapter 12: Perfect Competition and the Supply Curve

Microeconom ics, 3e

Test Canvas: TestBanks Chapter 12: Perfect Competition and the

Supply Curve

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1. True/False: If a perfectly competitive firm reduc…

Question If a perfectly competitive firm reduces its output, the market price will increase.

2. True/False: Microsoft’s Windows operating system ...

Question Microsoft‘s Windows operating system is a standardized product, since everyone

who buys a particular version of the product gets exactly the same thing. This

means that Microsoft is a perfectly competitive firm.

3. True/False: If the Kansas corn market is perfectl...

Question If the Kansas corn market is perfectly competitive, it means there is easy entry into

this market.

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Points: 0

4. True/False: The market for new drugs is not usual…

Question The market for new drugs is not usually perfectly competitive, since the companies

manufacturing these drugs are usually granted patents, and this restricts entry into

the industry.

5. True/False: A perfectly competitive firm‘s demand...

Question A perfectly competitive firm’s demand curve is perfectly elastic at the market–

determined price.

6. True/False: In the short run, if a perfectly comp...

Question In the short run, if a perfectly competitive firm chooses to produce, then its profits

are maximized by producing the quantity of output where marginal cost equals

marginal revenue.

7. True/False: According to the optimal output rule,…

Question According to the optimal output rule, profits are maximized when firms produce

where the difference between marginal revenue and marginal cost is the largest.

8. True/False: Lawn-mowing service is a perfectly co…

Question Lawn-mowing service is a perfectly competitive industry. Alex‘s Lawn-Mowing

Service should shut down in the short run whenever his profits are negative.

9. True/False: In the short run, the fixed costs of ...

Question In the short run, the fixed costs of running a farm should play no role in determining

the level of production.

10. True/False: A perfectly competitive firm‘s supply...

Points: 0

Question A perfectly competitive firm’s supply curve is its marginal cost curve above the

average variable cost curve.

11. True/False: The short-run individual supply curve…

Question The short-run individual supply curve for a perfectly competitive firm is given by the

marginal cost curve above minimum average total cost.

12. True/False: Cindy‘s Nails operates in the perfect...

Question Cindy’s Nails operates in the perfectly competitive pedicure industry. The city is

considering requiring nail salons to be certified by a health inspector. The

certification will cost $1,000 annually and is thus a fixed cost. The certification will

affect Cindy‘s decision to operate, not the number of pedicures she chooses to

perform if she operates.

13. True/False: In the long run, firms will exit an i…

Question In the long run, firms will exit an industry if the market price is consistently less

than their break-even price.

14. True/False: The long-run industry supply curve is...

Question The long-run industry supply curve is usually more elastic than the short-run

industry supply curve, but if entering firms make intensive use of an input that is in

limited supply, then it is possible for the long-run curve to be less elastic than the

short-run curve.

15. True/False: Suppose the beef industry is perfectl...

Question Suppose the beef industry is perfectly competitive and the demand for beef rises.

As long as the demand does not subsequently fall, beef producers can expect to

earn economic profits in both the short run and the long run.

16. True/False: A market that is in long-run equilibr…

Points: 0

Question A market that is in long-run equilibrium must also be in short-run equilibrium.

17. True/False: The short-run industry supply curve i...

Question The short-run industry supply curve is more elastic than the long-run industry

supply curve.

Answer True

False

18. True/False: Lawn-mowing service is a perfectly co…

Question Lawn-mowing service is a perfectly competitive industry. Alex‘s Lawn Mowing

Service should close if Alex expects his long–run economic profits to equal zero.

19. True/False: In long-run equilibrium in a perfectl…

Question In long-run equilibrium in a perfectly competitive market, all firms will be operating

at their lowest possible average total cost.

20. True/False: In long-run equilibrium in a perfectl…

Question In long-run equilibrium in a perfectly competitive market, all firms will be operating

at the same level of marginal cost.

21. Multiple Choice: If a local California avocado stand o…

Question If a local California avocado stand operates in a perfectly competitive market, that

stand owner will be a:

Answer price-maker.

22. Multiple Choice: If all firms in an industry are price…

Points: 0

Question If all firms in an industry are price-takers, then:

Answer each firm can sell at the price it wants to charge, provided it is not too different

from the prices other firms are charging.

23. Multiple Choice: The assumptions of perfect competitio...

Question The assumptions of perfect competition imply that:

24. Multiple Choice: Price-takers are individuals in a mar...

Question Price-takers are individuals in a market who:

25. Multiple Choice: Individuals in a market who must take…

Question Individuals in a market who must take the market price as given are:

Answer quantity-minimizers.

Points: 0

26. Multiple Choice: Perfect competition is characterized by:

Question Perfect competition is characterized by:

Answer rivalry in advertising.

27. Multiple Choice: When a firm cannot affect the market …

Question When a firm cannot affect the market price of the good that it sells, it is said to be

a:

28. Multiple Choice: The assumptions of perfect competitio...

Question The assumptions of perfect competition imply that:

Answer individuals in the market determine the market price.

29. Multiple Choice: In the model of perfect competition:

Question In the model of perfect competition:

Answer the consumer is at the mercy of powerful firms that can set prices wherever

they prefer.

Points: 0

30. Multiple Choice: Perfect competition is characterized by:

Question Perfect competition is characterized by:

Answer rivalry in advertising.

31. Multiple Choice: A perfectly competitive firm is a:

Question A perfectly competitive firm is a:

32. Multiple Choice: If a Florida strawberry wholesaler op...

Question If a Florida strawberry wholesaler operates in a perfectly competitive market, that

wholesaler will have a ________ share of the market, and consumers will consider

her strawberries to be ________. Therefore, ________ advertising will take place in

this market.

Answer large; standardized; no

Points: 0

33. Multiple Choice: One characteristic of a perfectly com…

Question One characteristic of a perfectly competitive market is that there are ________

sellers of the good or service.

Answer one or two

34. Multiple Choice: Which of the following is not a chara...

Question Which of the following is not a characteristic of a perfectly competitive industry?

Answer Firms seek to maximize profits.

35. Multiple Choice: In a perfectly competitive industry, ...

Question In a perfectly competitive industry, each firm:

Answer is a price-maker.

36. Multiple Choice: For the Colorado beef industry to be ...

Question For the Colorado beef industry to be classified as perfectly competitive, ranchers in

Colorado must have ________ on prices and beef must be a ________ product.

Points: 0

37. Multiple Choice: Which of the following is a necessary…

Question Which of the following is a necessary condition for perfect competition?

Answer A small number of firms control a large share of the total market.

38. Multiple Choice: All except one of the following are c...

Question All except one of the following are characteristics of perfect competition. Which is

the exception?

Answer All firms produce the same standardized product.

39. Multiple Choice: The perfectly competitive model assum…

Question The perfectly competitive model assumes all of the following except:

Answer a great number of buyers.

40. Multiple Choice: The market for breakfast cereal conta…

Question

Points: 0

The market for breakfast cereal contains hundreds of similar products, such as

Froot Loops, corn flakes, and Rice Krispies, that are considered to be different

products by different buyers. This situation violates the perfect competition

assumption of:

41. Multiple Choice: An assumption of the model of perfect...

Question An assumption of the model of perfect competition is:

42. Multiple Choice: The competitive model assumes all of ...

Question The competitive model assumes all of the following except:

43. Multiple Choice: ________ almost always take the marke…

Question ________ almost always take the market price as given, or are considered

________, but this is often not true of_________.

Points: 0

44. Multiple Choice: An assumption of the model of perfect...

Question An assumption of the model of perfect competition is:

45. Multiple Choice: People in the eastern part of Beirut ...

Question People in the eastern part of Beirut are prevented by border guards from traveling to

the western part of Beirut to shop for (or sell) food. This situation violates the

perfect competition assumption of:

46. Multiple Choice: When perfect competition prevails, wh...

Question When perfect competition prevails, which of the following characteristics of firms

are we likely to observe?

Points: 0

47. Multiple Choice: In perfect competition:

Question In perfect competition:

48. Multiple Choice: A firm‘s total output times the price…

Question A firm’s total output times the price at which it sells that output is:

49. Multiple Choice: Total revenue is a firm‘s:

Question Total revenue is a firm’s:

50. Multiple Choice: If a perfectly competitive firm incre...

Question If a perfectly competitive firm increases production from 10 units to 11 units and the

market price is $20 per unit, total revenue for 11 units is:

Points: 0

51. Multiple Choice: If a perfectly competitive firm incre...

Question If a perfectly competitive firm increases production from 10 units to 11 units and the

market price is $20 per unit, total revenue for 10 units is:

52. Multiple Choice: The difference between total revenue ...

Question The difference between total revenue and total cost is:

53. Multiple Choice: In a perfectly competitive industry, ...

Question In a perfectly competitive industry, the market demand curve is usually:

54. Multiple Choice: The demand curve for a perfectly comp...

Question The demand curve for a perfectly competitive firm is:

Points: 0

55. Multiple Choice: Marginal revenue:

Question Marginal revenue:

56. Multiple Choice: The marginal revenue received by a fi...

Question The marginal revenue received by a firm in a perfectly competitive market:

57. Multiple Choice: If a perfectly competitive gardening ...

Question If a perfectly competitive gardening shop sells 30 evergreen bushes at a price of

$10 per bush, its marginal revenue is:

58. Multiple Choice: Marginal revenue is a firm‘s:

Points: 0

Question Marginal revenue is a firm’s:

59. Multiple Choice: Perfectly competitive firms will:

Question Perfectly competitive firms will:

60. Multiple Choice: For a perfectly competitive firm, mar...

Question For a perfectly competitive firm, marginal revenue:

61. Multiple Choice: If it produces, a perfectly competiti...

Question If it produces, a perfectly competitive firm will maximize profits when the:

Points: 0

62. Multiple Choice: The equilibrium price of a guidebook …

Question The equilibrium price of a guidebook is $35 in the perfectly competitive guidebook

industry. Our firm produces 10,000 guidebooks for an average total cost of $38,

marginal cost of $30, and average variable cost of $30. Our firm should:

63. Multiple Choice: Zoe‘s Bakery operates in a perfectly ...

Question Zoe‘s Bakery operates in a perfectly competitive industry. The variable costs at

Zoe’s Bakery increase, so all of the cost curves (with the exception of fixed cost)

shift leftward. The demand for Zoe‘s pastries does not change, nor does the firm

shut down. To maximize profits after the variable cost increase, Zoe‘s Bakery will

________ its price and ________ its level of production.

64. Multiple Choice: The slope of the total revenue curve is:

Question The slope of the total revenue curve is:

Points: 0

65. Multiple Choice: The slope of the total cost curve is:

Question The slope of the total cost curve is:

66. Multiple Choice: For a firm producing at any level of …

Question For a firm producing at any level of output lower than the most profitable one, an

increase in output adds:

67. Multiple Choice: For a firm producing at any level of …

Question For a firm producing at any level of output greater than the most profitable one, a

reduction in output decreases:

68. Multiple Choice: A perfectly competitive firm maximize…

Question A perfectly competitive firm maximizes profit by producing the quantity at which:

Points: 0

69. Multiple Choice: The price received by a firm in a per...

Question The price received by a firm in a perfectly competitive market:

70. Multiple Choice: The marginal revenue received by a fi...

Question The marginal revenue received by a firm in a perfectly competitive market:

71. Multiple Choice: For a firm in a perfectly competitive…

Question For a firm in a perfectly competitive market:

72. Multiple Choice: If a perfectly competitive firm sells…

Question If a perfectly competitive firm sells 10 units of output at a price of $30 per unit, its

marginal revenue is:

Points: 0

73. Multiple Choice: Price in a perfectly competitive indu…

Question Price in a perfectly competitive industry:

74. Multiple Choice: Marginal revenue is a firm‘s:

Question Marginal revenue is a firm’s:

75. Multiple Choice: If a firm in perfect competition sell…

Question If a firm in perfect competition sells 10 units of output at a market price of $5 per

unit, its marginal revenue is:

76. Multiple Choice: If a perfectly competitive firm sells…

Points: 0

Question If a perfectly competitive firm sells 300 units of output at a market price of $1 per

unit, its marginal revenue is:

77. Multiple Choice: In perfect competition:

Question In perfect competition:

78. Multiple Choice: The profit-maximizing level of output…

Question The profit-maximizing level of output for a perfectly competitive firm in the short run

occurs where:

79. Multiple Choice: If a perfectly competitive firm is pr…

Question If a perfectly competitive firm is producing a quantity where MC > MR, then profit:

Points: 0