Exam 2: Profit and Perfect Competition

Which conditions must be present for "perfect competition" to occur?

All of the above

If a firm can increase its sales only by lowering its price, then

All of the above are true

The term -------------- refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.

Price taker

It is said that in a perfectly competitive market, raising the price of a firm's product from the prevailing market price of $179.00 to $199.00,___________

could likely result in a notable loss of sales to competitors

Under perfect competition, any profit-maximizing producer faces a market price equal to its

marginal costs

In economic terms, a practical approach to maximizing profits requires an examination of how changes in production affect _____________and_____________

marginal revenue; marginal cost

I'maGoldMiner has benefited from a record rise in gold prices in the global commodities market. While the price of its output is highly influenced by market speculation, if it wants to increase production to take advantage of the current profit-maximizing opportunity, the company

must accept market price for its physical capital inputs.

Firms operating in a market situation that creates___________, sell their product in a market with other firms who produce identical or extremely similar products.

perfect competition

When firms set prices by adding a fixed percentage markup to marginal costs, they are likely

searching for the most advantageous prices to set on the basis of limited information.

To maximize net revenue, a price searcher should

set marginal revenue equal to marginal cost.

Net revenue is defined as

total revenue minus total cost

In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice?

what quantity to produce

The marginal cost to a grocer of selling avocados, which would have to be thrown away if they are not sold immediately, is approximately

zero

Zero economic profits would most likely exist in which market environment?

Perfect competition

xGovernment licensing of occupations or trades

is often controlled by firms in the licensed industry to prevent competition.

A unit of output whose production and sale adds less to cost than it generates in additional revenue is

A profitable unit to produce and sell

Suppose a Chinese restaurant routinely provides free fortune cookies to its customers. The economic way of thinking suggests the restaurant is

Attempting to increase its total profit

What best determines the price a price taker will charge?

Demand

Firms in a so-called perfectly competitive market would face a(n) ________ demand curve for their product.

Horizontal

A perfectly competitive industry is a

Hypothetical extreme

Who is likely to complain to state regulatory authorities about unlicensed movers defrauding customers?

Licensed movers

Which of the following clearly restricts the competitive market process?

None of the above

Idaho farmers can sell as large a quantity of their potato crop as they wish,

Provided each is willing to accept the prevailing market price

From the price-setter's point of view, the appropriate cost of a good is

The marginal cost

Strong form market efficiency suggests ____________

The market capitalizes on all private, public, and past market information

In a free market economy, firms operating in a perfectly competitive industry are said to have only one major choice to make. Which of the following correctly sets out that choice?

What quantity to produce

An ____________ is calculated by subtracting the firm's costs from its total revenues, ________________

accounting profit; excluding opportunity cost

A typical corn farmer won't use cost-plus-markup pricing because

he has no control over the market price of corn.

Economic profit can be derived from calculating total revenues minus all of the firm's costs,_____________

including its opportunity costs

What happens in a perfectly competitive industry when economic profit is greater than zero?

new firms may enter the industry and all of the above

A typical wheat farmer would never consider cost-plus-markup pricing because

the most profitable price he can ask for is the prevailing market price.