Ch.9 Practice
Refer to Figure 23.1 for a perfectly competitive firm. This firm should shut down in the short run if the market price is below
$5.
Refer to Figure 23.2 for a perfectly competitive firm. This firm will maximize profits by producing the level of output that corresponds to point
C.
Refer to Figure 23.2 for a perfectly competitive firm. Given the current market price of $100, we expect to see
Entry into this industry.
Which of the following is an investment decision in a competitive market?
Entry or exit.
If long-run economic losses are being experienced in a competitive market,
Equilibrium price will rise as firms exit.
In Figure 23.3, diagram "a" presents the cost curves that are relevant to a firm's production decision, and diagram "b" shows the market demand and supply curves for the market. Use both diagrams to answer the following question: In Figure 23.3, at a price of p1 in the long run
Firms will enter the market.
Which of the following is not a barrier to entry?
Homogeneous Products.
Which of the following is true about a competitive market supply curve?
It is the sum of the marginal cost curves of all firms.
The behavior expected in a competitive market includes
Marginal cost pricing.
Refer to Figure 23.5 for a perfectly competitive firm. Given the current market price of $200, we expect to see
No change in the number of firms in the industry and no change in the market price.
In which of the following cases would entry and exit cease?
P = long-run ATC.
In which of the following cases would a firm enter a market?
P > long-run ATC.
A perfectly competitive market results in efficiency because
Price is driven down to minimum ATC.
Marginal cost pricing means that a firm
Produces up to the output where P = MC for a given market price.
The entry of firms into a market
Reduces the profits of existing firms in the market.
Which of the following is a determinant of market supply but not the supply curve of an individual firm?
The number of firms in the market.
Which of the following is characteristic of a perfectly competitive market?
Zero economic profit in the long run.
Refer to Figure 23.5 for a perfectly competitive firm. If this firm produces the level of output corresponding to point B in the short run, it will earn
Zero economic profit.
