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Exam 9: Firms in Perfectly Competitive Markets

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Question 41

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Which of the following is a characteristic of a firm in a perfectly competitive market?

A) The firm cannot make a profit in the short run because it is too small a part of the total market.
B) The firm can make a profit in the long run but not in the short run.
C) The firm can sell as much as it wants without having to lower its price.
D) The firm must lower its price in order to increase quantity demanded.

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Question 42

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Which of the following is the best example of a perfectly competitive firm?

A) a corn farmer in Illinois
B) a Taco Bell restaurant
C) the Ford Motor Company
D) the United Parcel Service (UPS)

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Question 43

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A perfectly competitive wheat farmer in a constant-cost industry produces 3,000 bushels of wheat at a total cost of $36,000.The prevailing market price is $15.What will happen to the market price of wheat in the long run?

Figure 9-1 -Refer to Figure 9-1.If the firm is producing 700 units,

If,as a perfectly competitive industry expands,it can supply larger quantities only at a higher long-run equilibrium price,it is

Assume that the personal computer industry is perfectly competitive.The fact that the price of personal computers over the last decade has fallen despite increases in demand signifies that the industry is a decreasing-cost industry.

Figure 9-10 -Refer to Figure 9-10.Total revenue at the profit-maximizing level of output is

If the market price is $40 in a perfectly competitive market,the marginal revenue from selling the fifth unit is

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

Figure 9-4 Figure 9-4 shows the cost and demand curves for a profit-maximizing firm in a perfectly competitive market. -Refer to Figure 9-4.If the market price is $30,the firm's profit-maximizing output level is

What is productive efficiency?

For a perfectly competitive firm,average revenue is equal to

Figure 9-5 Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 9-5.What is the minimum price the firm requires to produce output?

Figure 9-12 -Refer to Figure 9-12.Consider a typical firm in a perfectly competitive industry that makes short-run profits.Which of the diagrams in the figure shows the effect on the industry as it transitions to a long-run equilibrium?

Figure 9-2 -Refer to Figure 9-2.Suppose the firm is currently producing Q₂ units.What happens if it expands output to Q₃ units?

Firms in perfectly competitive industries are unable to control the prices of the products they sell and earn a profit in the long run.Which of the following is one reason for this?

Figure 9-5 Figure 9-5 shows cost and demand curves facing a typical firm in a constant-cost, perfectly competitive industry. -Refer to Figure 9-5.If the market price is $20,what is the firm's profit-maximizing output?

Figure 9-9 Figure 9-9 shows cost and demand curves facing a profit-maximizing, perfectly competitive firm. -Refer to Figure 9-9.At price P₄,the firm would

Consider the market for wheat which is a perfectly competitive market.Is the market demand curve the same as the demand curve facing an individual producer? If not,explain how and why they are different? Illustrate your answer graphically.

Competition has driven the economic profits in the video rental business to zero.Surya Bacha,who owns a video rental business,would be better off leaving the industry for another alternative.