Question 1

Assume a consumer has a horizontal demand curve for a product. His consumer surplus from buying the product

Accepted Answer

A)  is maximized.
B)  can't be calculated.
C)  equals zero.
D)  Need more information.

Question 2

Which is an important aspect of the perfectly competitive market that leads to long run equilibrium?

Accepted Answer

A)  perfect information
B)  freedom of entry and exit
C)  price taking behavior
D)  homogeneous products

Question 3

In a perfectly competitive market

Accepted Answer

A)  buyers are price-takers.
B)  buyers view products from different firms as differentiated.
C)  individual buyers have horizontal demand curves.
D)  firms' demand curves are vertical.

Question 4

Mary purchased a stuffed animal toy for $5. After a few weeks, someone offered her $100 for the toy. Mary refused. One can conclude that Mary's consumer surplus from the toy is

Accepted Answer

A)  less than $5.
B)  at least $95.
C)  at least $100.
D)  $105.

Question 5

Like the short run

Accepted Answer

A)  the long run supply curve is the sum of the individual firms' supply curves.
B)  the maximum number of firms in the market is fixed.
C)  firms operate only if they make a positive profit.
D)  All of the above.

Question 6

Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. If the long-run supply curve is horizontal, then

Accepted Answer

A)  some firms will enjoy long-run profits because they operate at minimum average cost.
B)  the long-run price will be $0.20 per pound.
C)  each consumer will purchase $100 worth of potatoes.
D)  the long-run price will be set just above $0.20 per pound.

Question 7

In the long run, profits will equal zero in a competitive market because of

Accepted Answer

A)  constant returns to scale.
B)  identical products being produced by all firms.
C)  the availability of information.
D)  free entry and exit.

Question 8

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone) . If the price were zero, consumer surplus equals

Accepted Answer

A)  $301.00.
B)  $924.50.
C)  $1,225.50.
D)  $1,250.00.

Question 9

If a firm happened to be the only seller of a particular product, it might behave as a price taker as long as

Accepted Answer

A)  buyers have full information about the firm's price.
B)  the transaction costs of doing business with this firm are low.
C)  there are many buyers.
D)  there is free entry and exit.

Question 10

If the market price is above a firm's average cost at the quantity produced

Accepted Answer

A)  the firm operates and makes a profit.
B)  the firm operates and make zero economic profit.
C)  the market price of the firm's inputs will rise.
D)  total profit is maximized.

Question 11

If a market produces a level of output that exceeds the competitive equilibrium output, then

Accepted Answer

A)  social welfare will be higher.
B)  producer surplus will be higher.
C)  marginal cost will exceed price.
D)  All of the above.

Question 12

-The above figure shows the cost curves for a typical firm in a market and three possible market supply curves. If there are 100 identical firms, the market supply curve is best represented by

Accepted Answer

A)  curve A.
B)  curve B.
C)  curve C.
D)  either curve A or B, but definitely not C.

Question 13

Which of the following are NOT characteristics of a competitive market?

Accepted Answer

A)  There is freedom of entry and exit.
B)  There are zero transaction costs.
C)  There are only one or two sellers.
D)  Buyers and sellers have complete information.

Question 14

When is the profit a firm earns equal to the producer surplus? Explain.

Accepted Answer

Profit equals producer surplus when the ...

Question 15

Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. The demand for potatoes is Q = 10,000/p. If the long-run supply curve is horizontal, then how many pounds of potatoes will be consumed in total?

Accepted Answer

A)  0
B)  500
C)  10,000
D)  50,000

Question 16

If all conditions for a perfectly competitive market are met

Accepted Answer

A)  firms face sunk cost when entering the market.
B)  firms' demand curves are horizontal.
C)  the market demand curve is horizontal.
D)  the firms' demand curves are downward-sloping.

Question 17

The competitive firm's supply curve is equal to

Accepted Answer

A)  its marginal cost curve.
B)  the portion of its marginal cost curve that lies above AC.
C)  the portion of its marginal cost curve that lies above AVC.
D)  the portion of its marginal cost curve that lies above AFC.

Question 18

If a market produces a level of output below the competitive equilibrium, then

Accepted Answer

A)  social welfare is not maximized.
B)  consumer surplus might still be maximized.
C)  the actual price will be below the equilibrium price.
D)  social welfare might still be enhanced if a price ceiling keeps price below the competitive price.

Question 19

If consumers view the output of any firm in a market to be identical to the output of any other firm in the market, the demand curve for the output of any given firm

Accepted Answer

A)  will be identical to the market demand curve.
B)  will be horizontal.
C)  will be vertical.
D)  cannot be determined from the information given.

Question 20

Deadweight loss occurs when

Accepted Answer

A)  producer surplus is greater than consumer surplus.
B)  the maximum level of total welfare is not achieved.
C)  consumer surplus is reduced.
D)  an inferior good is consumed.

Exam 8: Competitive Firms and Markets

Assume a consumer has a horizontal demand curve for a product. His consumer surplus from buying the product

Correct AnswerverifiedShow Answer

If consumers view the output of any firm in a market to be identical to the output of any other firm in the market, the demand curve for the output of any given firm

Correct AnswerverifiedShow Answer

Which of the following are NOT characteristics of a competitive market?

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-The above figure shows the cost curves for a typical firm in a market and three possible market supply curves. If there are 100 identical firms, the market supply curve is best represented by

Correct AnswerverifiedShow Answer

If all conditions for a perfectly competitive market are met

Correct AnswerverifiedShow Answer

Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. If the long-run supply curve is horizontal, then

Correct AnswerverifiedShow Answer

If a market produces a level of output that exceeds the competitive equilibrium output, then

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In the long run, profits will equal zero in a competitive market because of

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If a firm happened to be the only seller of a particular product, it might behave as a price taker as long as

Correct AnswerverifiedShow Answer

Like the short run

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When is the profit a firm earns equal to the producer surplus? Explain.

Correct AnswerverifiedProfit equals producer surplus when the ...View AnswerShow Answer

Deadweight loss occurs when

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If a market produces a level of output below the competitive equilibrium, then

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If the market price is above a firm's average cost at the quantity produced

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In a perfectly competitive market

Correct AnswerverifiedShow Answer

-The above figure shows the market demand curve for mobile telecommunications (time spent on a mobile phone) . If the price were zero, consumer surplus equals

Correct AnswerverifiedShow Answer

Mary purchased a stuffed animal toy for $5. After a few weeks, someone offered her $100 for the toy. Mary refused. One can conclude that Mary's consumer surplus from the toy is

Correct AnswerverifiedShow Answer

The competitive firm's supply curve is equal to

Correct AnswerverifiedShow Answer

Which is an important aspect of the perfectly competitive market that leads to long run equilibrium?

Correct AnswerverifiedShow Answer

Suppose that for each firm in the competitive market for potatoes, long-run average cost is minimized at $0.20 per pound when 500 pounds are grown. The demand for potatoes is Q = 10,000/p. If the long-run supply curve is horizontal, then how many pounds of potatoes will be consumed in total?

Correct AnswerverifiedShow Answer

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Profit equals producer surplus when the ...
View Answer

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