econ test 2 ch. 7 pt. 1
Perfect competition is the term used to describe:
an industry in which numerous price-taking firms produce identical products
A competitive firm facing a perfectly elastic demand curve can:
sell all of its output at the market price.
Marginal revenue is:
the addition to total revenue from selling one more unit of output.
A perfectly competitive firm faces a demand curve that is:
horizontal and perfectly elastic
A perfectly competitive firm faces a demand curve that is:
horizontal and perfectly elastic.
In the perfectly competitive model, all firms are assumed to be producing
identical products.
The horizontal demand curve facing an individual firm in a perfectly competitive market:
is a reflection of the firm's small size relative to the total market.
In a perfectly competitive industry, influence over price is exerted by:
the forces of supply and demand.
Which of the following is true about perfect competition?
All of the above are true about perfect competition.
Which of the following is false of perfectly competitive firms?
Because perfectly competitive firms are price takers, each firm's demand curve remains unchanged even when the market price changes.
Which of the following is true?
The objective of the firm is to maximize profits, by producing the amount that maximizes the difference between its total revenues and total cost.
The demand curve facing a perfectly competitive firm is:
perfectly elastic.
A perfectly competitive firm is a:
price taker
The perfectly competitive model assumes that:
firms can enter and exit the industry with relative ease.
If the market price was $9.50, how many units should the perfectly competitive firm depicted below produce in order to maximize profits?
12
Assuming a price was $2.00, how many units should this perfectly competitive firm produce and sell in order to maximize profits?
26
Assume you know the following short run information for a perfectly competitive firm: Based on the information above, which of the following is true?
The profit from producing 12 units of output will be the same as for producing 6 units of output.
Which of the following is characteristic of a perfectly competitive market?
There is free entry into and exit from the market.
A profit-maximizing firm in a perfectly competitive market will always produce a quantity of output that:
maximizes the amount by which total revenue exceeds total cost.
Which of the following is a characteristic of perfect competition?
none of the above
Perfectly competitive markets are characterized by
none of the above.
Perfectly competitive markets are characterized by:
none of the above.
If a price-taking firm selling in a competitive market raises the price of its product above the market-clearing price, it will:
not be able to sell any output.
Which market structure is characterized by many sellers, easy entry, and homogeneous products?
perfect competition
Which of the following most closely resembles a perfectly competitive market?
the wheat market
A firm that is a price taker:
will lose all sales if it prices its product in excess of the market equilibrium price.
Perfect competition is the term used to describe:
an industry in which numerous price-taking firms produce identical products.
A perfectly competitive firm has no influence over price because:
its output is insignificant relative to the market as a whole.
Which of the following is most likely to be a price taker?
a Kansas wheat farmer
Which one of the following is not a characteristic of a perfectly competitive market?
Firms advertise in order to distinguish their products and increase market share
Which one of the following is not a characteristic of a perfectly competitive market?
Firms advertise in order to distinguish their products and increase market share.
A firm sells grapefruit in a perfectly competitive market at a price of $1.50 per pound. The firm's mar-ginal revenue:
equals $1.50.
Which of the following is true of perfectly competitive firms?
For a perfectly competitive firm, as long as the price derived from expanded output exceeds the margin-al cost of that output, the expansion of output creates additional economic profits.
Which of the following is a characteristic of a perfectly competitive market?
Homogeneous products.
In the short run, a perfectly competitive firm will maximize profit by producing where:
MC = MR.
Why can't a firm in a perfectly competitive industry charge a price above the market-clearing price?
Numerous competitors produce the same product and charge the market price.
Marginal revenue for a perfectly competitive firm equals:
average revenue at all levels of output.
If a perfectly competitive firm's marginal revenue was less than its marginal cost,
it would contract its output but not raise its price in order to increase its profits.
