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.
