Ch.9

Which of the following industries are characterized by extensive (although not perfect) competition? (Select all that apply.)

Clothing retailing Beauty salons Laundromats Farming

Apple's lead in the development of personal computers was _____ for other firms to follow.

easy

_____ profits in a competitive industry will attract new firms into the industry.

economic

Economists maintain that new firms are attracted into an industry due to:

economic profit

Firms will not enter an industry when marginal revenue, marginal cost, price and average total cost are equal because:

economic profit is zero for existing firms

The so-called "competitive dynamic" seen after Apple's introduction of its hot 21st century products (iPod in 2001 and iPad in 2010) was sparked by Apple's

enormous profits.

In perfectly competitive industries, firms can freely ______.

enter and exit the industry

In pure competition, productive efficiency is attained when price _____ minimum average total cost.

equals

The price at which the quantity of a good demanded in a given time period equals the quantity supplied is called the price

equilibrium price.

Firms will enter an industry when price is greater than average total cost because:

existing firms are earning economic profits

True or false: As profit margins in the computer market narrowed because of competition, quick-thinking entrepreneurs realized that future profits would have to come from price hikes or cost increases.

false

If a firm decides to build, buy, or lease plants and equipment in order to enter or exit an industry, this firm is making an

investment

Firms in competitive markets face ______.

low barriers to entry

The personal computer industry experienced a flood of entrants after Apple's early success thanks to

low entry barriers.

If price is _____than a firm's minimum average variable cost, then the firm will shut down production.

lower

The _______ _ mechanism is the use of market prices and sales to signal desired outputs (or resource allocations).

market

____ competition is considered to be rare in the real world.

perfecf

A market in which no buyer or seller has market power is known as

perfect competition.

In the short run, each firm in a competitive industry seeks the rate of output at which marginal cost equals _______.

price

A perfectly competitive firm should produce the amount of output where ______ equals _______.

price, marginal cost

As profit margins in the computer market narrowed because of competition, quick-thinking entrepreneurs realized that future profits would have to come from _____.

product improvements cost reductions

High ______ in an industry indicate that customers want a different mix of output.

profits

The competitive dynamic following Apple's introduction of its iPad was _____ that which followed the intro of its iPod.

similar to

Apple's early involvement in the evolution of personal computers was

simply as an assembler of existing components.

Which of the following best describes the long-run competitive equilibrium?

the point where total revenue just covers all costs, including implicit and explicit costs (normal profit prevails)

True or false: Once long-run equilibrium has been established, society is getting the most it can from its available (scarce) resources.

true

True or false: The market structure for many industries changes over time.

true

In perfect competition, a firm's total profit is equal to its profit per ____ multiplied by ____ sold.

unit;amount

A firm should shut down production if its average ______ cost is ______ price.

variable, greater than

Which of the following are conditions necessary to have perfect competition? Select all that apply.

very large number of firms or sellers identical product free entry and exit

From an economic standpoint, the long-run competitive equilibrium is when a firm makes ______ profit.

zero economic

Suppose that farmer Johnson is selling 8,000 bushels of barley at $4.50 per bushel. If his average total cost is $4.00, his economic profit is $

4000

Which of the following best describes perfect competition?

An industry involving a very large number of firms producing identical products and in which new firms can enter or exit the industry very easily.

True or false: The market structure for many industries does not change over time.

False

Which of the following constitutes an investment decision by Franco the pizza shop owner? (Select all that apply.)

He buys a new refrigerator. He decides to lease an additional oven.

In perfect competition, why is the zero-profit limit rarely, if ever, reached? Select all that apply.

New products are being continually introduced. Consumer demands change. More efficient production processes are discovered.

______ is relatively rare in the real world, although this market model is highly ______ to several industries.

Perfect competition; relevant

Which of the following is true for a perfectly competitive market?

There are no or low obstacles to entry or exist of firms.

Which of the following summarizes why it is possible for a firm to freely enter and exit a perfectly competitive market?

There are no significant legal, technological, financial, or other obstacles prohibiting firms from entry and exit.

True or false: In perfect competition, the competitive process creates strong pressures to pursue product and technological innovation.

True

If a firm decides to build, buy, or lease plants and equipment in order to enter or exit an industry, this firm is making ______.

an investment decision

Technological improvements are illustrated by a downward shift of the (select all that apply) ______.

average total cost curve marginal cost curve

The competitive dynamic following Apple's introduction of its MP3 player (iPod) and tablet computer (iPad) brought consumers

better products and lower prices.

A ______ market is a market in which no buyer or seller has market power.

competitive