ECON 6

Which of the following is characteristic of perfectly competitive markets? Differentiated products A large number of firms Price below marginal cost Significant barriers to entry

A large number of firms

In a competitive market where firms are earning economic profits, which of the following is likely as the industry moves toward long-run equilibrium? A lower price and fewer firms. A higher price and fewer firms. A lower price and more firms. A higher price and more firms.

A lower price and more firms.

Competitive firms cannot individually affect market price because: There is an infinite demand for their goods. The market demand curve is flat or horizontal. Their individual production is insignificant relative to the production of the industry. The government exercises control over the market power of competitive firms.

Their individual production is insignificant relative to the production of the industry.

Ceteris paribus, if the cost of insecticide decreases for tomato farmers, in order to maximize profits tomato farmers should: Increase price. Produce the same level of output since price has not changed. Increase output. Decrease output.

Increase output.

For a competitive firm, the marginal cost curve: Is the short-run supply curve. Shifts to the right when new firms enter the market. Shifts upward when wages decrease. Is the short-run demand curve.

Is the short-run supply curve.

A perfectly competitive firm is a price taker because: It has no control over the market price of its product. It has market power. Market demand is downward sloping. Its products are differentiated.

It has no control over the market price of its product.

A producer tries to maximize profits by operating at an output where: MC equals price. Price minus ATC is greatest. MR is greater then MC. the profit per unit is greatest.

MC equals price.

The goal of most business firms is to: Maximize total revenue. Maximize total profit. Maximize both total revenue and total profit at the same time. Produce as much output as possible.

Maximize total profit.

In long-run competitive market equilibrium, price equals _______ and economic profit is _______. Minimum average variable cost; greater than zero Minimum average total cost; zero Maximum marginal cost; zero Minimum fixed cost; greater than zero

Minimum average total cost; zero

Which list has market structures in the correct order from the most to the least market power? Perfect competition, oligopoly, monopolistic competition, monopoly Monopoly, monopolistic competition, oligopoly, perfect competition Monopoly, oligopoly, monopolistic competition, perfect competition Oligopoly, perfect competition, monopolistic competition, monopoly

Monopoly, oligopoly, monopolistic competition, perfect competition

Which of the following is consistent with a competitive market? A small number of firms Exit of small firms when profits are high for large firms Zero economic profit in the long run Marginal revenue lower than price for each firm

Zero economic profit in the long run

A perfectly competitive firm: Can sell all of its output at the prevailing price. Has some market power. Can sell some output at a price above the market price. Can sell more output only if it reduces its price.

Can sell all of its output at the prevailing price.

If price equals ATC and equals MC then: Producers will want to increase output. New firms will enter the market. Economic profits would be zero. The firm would be operating at a loss.

Economic profits would be zero.

A profit-maximizing competitive firm wants to _____ the rate of output when price _____ marginal cost. Expand; exceeds Reduce; exceeds Expand; is less than Reduce; equals

Expand; exceeds

In a perfectly competitive market: A single firm may dominate the supply side of the market. A single consumer can impact the market price. No seller has market power. The buyers with the most money have the most market power.

No seller has market power.

In a long-run competitive market equilibrium: Price equals the minimum of average total cost. Price equals the maximum of average total cost. Marginal cost equals the maximum of total revenue. Marginal cost equals the minimum of total revenue.

Price equals the minimum of average total cost.

An individual competitive firm: Has a large advertising budget. Produces a small portion of output relative to the market. Can alter the market price of the good(s) it produces. Can raise its price to increase profit.

Produces a small portion of output relative to the market.