ECON 1000 Online - Chapter 6 - Ohio University

Refer to Figure 6.1 for a perfectly competitive firm. This firm earns zero economic profit at a price of: $8. $20. $30. $46.

$30

If the price of a whatsit is $10, then you should produce _____ to maximize your company's profits. 4 units. 3 units. 2 units. 1 unit.

3 units

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

Which of the following does not characterize a competitive market? Many firms Advertising by individual firms Low barriers to entry Zero economic profit in the long run

Advertising by individual firms

A rightward shift in market supply curve could be caused by: An improvement in technology. An increase in the market price. An increase in wages. The expectation that the market price will fall in the future.

An improvement in technology.

An industry in which a few large firms supply most or all of a product is known as: Perfect competition. A monopoly. Monopolistic competition. An oligopoly.

An oligopoly.

If a perfectly competitive firm wanted to maximize its total revenues, it would produce: The output where MC equals price. As much output as it is capable of producing. The output where the ATC curve is at a minimum. The output where the marginal cost curve is at a minimum.

As much output as it is capable of producing.

Which of the following is consistent with competitive long-run equilibrium? Economic profits are maximized. Average total costs of production are minimized. Price equals the maximum of average total cost. Marginal costs are minimized.

Average total costs of production are minimized.

In a competitive market, maximum efficiency is achieved because of: Competitive pressure on prices. Differentiated products. High barriers to entry. Significant market power.

Competitive pressure on prices.

Which of the following is the best example of a perfectly competitive market? The automobile industry. The soft drink industry. Dairy farming. Fast-food restaurants.

Dairy farming.

In making a production decision, a business owner: Decides whether to enter or exit the market. Makes a long-run decision about output and revenues. Decides whether to buy or lease new plant and equipment. Decides the short-run rate of output.

Decides the short-run rate of output.

Refer to Figure 6.2 for a perfectly competitive firm. If price is $4, the firm is: In long run equilibrium. Earning an economic loss. Maximizing efficiency. Earning an economic profit.

Earning an economic loss.

In a perfectly competitive industry, firms are likely to: Exit when there are economic profits because they know the profits will not last. Reduce the level of production when there are economic profits. Enter when there are economic profits. Enter when price is equal to the minimum average total cost.

Enter when there are economic profits.

Which of the following is not considered a barrier to entry? Control of essential factors of production Equilibrium pricing Import quotas Brand loyalty

Equilibrium pricing

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

If a firm can change market prices by altering its output then it: Has market power. Is a price taker. Faces a horizontal demand curve. Is a competitive firm.

Has market power.

From the NEWSWIRE article, "Catfish Farmers Feel Forced Out of Business", the expected economic profit from the catfish market: Is enough to attract entry. Is less than zero because firms are exiting the industry Is zero because there are significant barriers to entry. Is so high that even inefficient firms are attracted to the industry

Is less than zero because firms are exiting the industry

Market power: Is the same for all market structures. Means that a firm is a price taker, not a price setter. Is the ability to alter the market price of a good or service. Only exists for a monopoly.

Is the ability to alter the market price of a good or service.

The law of diminishing returns helps to explain why: Marginal cost increases, in the short run, as more output is produced. The demand curve for a competitive firm is perfectly elastic. The total cost curve diminishes as long as output increases. Marginal cost decreases as more output is produced.

Marginal cost increases, in the short run, as more output is produced.

An industry in which many firms produce similar products but each firm has significant brand loyalty is known as: Perfect competition. A monopoly. Monopolistic competition. An oligopoly.

Monopolistic competition.

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

If one perfectly competitive firm is the only one to raise its price above the market price, it will: Sell some output, but less than previously. Not sell any output. Sell more output than previously. Sell the same amount of output as previously.

Not sell any output.

Which of the following is an example of a monopoly? One large firm supplies the entire product to the market One firm supplies 60 percent of the product to the market and there are two other rival firms Many firms supply the same product essentially, but each has significant brand loyalty A few large firms supply the entire product to the market

One large firm supplies the entire product to the market

Equilibrium price refers to the: Price at which most producers are willing to sell their product. Price at which the quantity demanded of a good equals the quantity supplied. Price that equals marginal cost. Balance between what producers want to charge and what the government will allow.

Price at which the quantity demanded of a good equals the quantity supplied.

Economic profits disappear when: Price is greater than marginal costs. Price falls to the level of minimum average total cost. Price is greater than average variable cost. Firms exit an industry.

Price falls to the level of minimum average total cost.

If marginal cost equals price, then _____ is at a maximum. Total cost Profit Total revenue Marginal cost

Profit

When a new firm enters a market, it: Pushes the equilibrium price upward. Reduces the profits of existing firms. Shifts the market supply curve to the left. Shifts the market demand curve to the left.

Reduces the profits of existing firms.

In a perfectly competitive market, if the market price is less than ATC, and the market price equals the MC, then the firm should: Result in an increase in profits Result in a loss of income Result in a growth of the industry Result in more sellers entering the market

Result in a loss of income

The production decision is the: Selection of the short-run rate of output. Selection of the long-run rate of output. Choice of whether to enter or exit the industry. Choice of factory or plant size.

Selection of the short-run rate of output.

A perfectly competitive firm currently sells 30,000 cartons of eggs at $1.25 each. If the firm wants to sell one more carton of eggs, the firm: Should raise its price above $1.25. Cannot sell an additional carton at any price because there are other egg farmers in the market. Must sell the carton for less than $1.25. Should price the carton at $1.25.

Should price the carton at $1.25.

The market supply curve is calculated by: Summing the marginal cost curves of all firms. Averaging the individual supply curves. Summing the prices from individual supply curves. Averaging the individual marginal cost curves below ATC.

Summing the marginal cost curves of all firms.

Marginal cost is: The change in total costs because of a one-unit increase in output. Total cost divided by the rate of output. Total revenue minus total cost. The average profit divided by the quantity sold.

The change in total costs because of a one-unit increase in output.

Which of the following is not true for a competitive firm? The marginal cost curve is the short-run supply curve. The marginal cost curve is horizontal at the equilibrium price. The marginal cost curve shifts downward when productivity increases. The marginal cost curve shifts upward when wages increase.

The marginal cost curve is horizontal at the equilibrium price.

Which of the following is a determinant of market supply but will not influence the marginal cost curve of an individual firm? The price of factor inputs. The number of firms in the market. Improvements in technology. The person's desires.

The number of firms in the market.

Competition in markets results in: Economic losses in the long run. Guaranteed economic profit. The optimal mix of goods and services being produced. An undesirable allocation of resources.

The optimal mix of goods and services being produced.

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.

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

The term market structure refers to the amount of market power each firm in the industry has. method used to produce the industry's products. total sales of a particular industry. way in which firms in the industry are legally organized.

amount of market power each firm in the industry has.

For a firm operating in a perfectly competitive industry: an improvement in technology will reduce marginal cost. an improvement in technology will shift the firm and industry supply curve to the left. controlling the market price is easily achievable. Both A and B are true.

an improvement in technology will reduce marginal cost.

Market power refers to: the use of market prices and sales to signal desired outputs. the ability and willingness to sell specific quantities of a good. the ability of a firm to alter the market price of a good or service. None of the above.

the ability of a firm to alter the market price of a good or service.