QB-CH12

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Economics

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May 6, 2024

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1 Chapter 12 Perfect Competition 12.1 What is Perfect Competition? 1) Perfect competition arises if the ________ efficient scale of a single producer is ________ relative to the demand for the good or service. A) minimum; small B) minimum; large C) maximum; small D) maximum; large 2) Perfect competition is an industry with A) a few firms producing identical goods. B) a few firms producing goods that differ somewhat in quality. C) many firms producing identical goods. D) many firms producing goods that differ somewhat. 3) In a perfectly competitive industry, there are A) many buyers and many sellers. B) many buyers, but there might be only one or two sellers. C) many sellers, but there might be only one or two buyers. D) one firm that sets the price for the others to follow. 4) In perfect competition, the product of a single firm A) has many perfect substitutes produced by other firms. B) has many perfect complements produced by other firms. C) is sold under many differing brand names. D) is sold to different customers at different prices. 5) In perfect competition, restrictions on entry into an industry A) apply to both capital and labor. B) apply to labor but not to capital. C) apply to capital but not to labor. D) do not exist. 6) In perfect competition, A) each firm can influence the price of the good. B) there are few buyers. C) there are significant restrictions on entry. D) all firms in the market sell their product at the same price. 7) The price elasticity of demand for any particular perfectly competitive firm's output is A) less than 1. B) 1. C) equal to zero. D) infinite. 8) The demand for wheat from farm A is perfectly elastic because wheat from farm A is A) a perfect complement for wheat from farm B. B) a normal good. C) a perfect substitute for wheat from farm B. D) an inferior good. 9) In perfect competition, the elasticity of demand for the product of a single firm is A) 0.

2 B) between 0 and 1. C) 1. D) infinite. 10) In perfect competition, the elasticity of demand for the product of a single firm is A) zero because the firm produces a unique product. B) zero because many other firms produce identical products. C) infinite because the firm produces a unique product. D) infinite because many other firms produce identical products. 11) In perfect competition, each individual firm faces ________ demand curve. A) an inelastic B) an upward sloping C) a perfectly elastic D) a downward sloping 12) In perfect competition, an individual firm A) faces unitary elasticity of demand. B) has a price elasticity of supply equal to one. C) faces a perfectly elastic demand. D) has perfectly elastic supply. 13) If Steve's Apple Orchard, Inc. is a perfectly competitive firm, the demand for Steve's apples has A) zero elasticity. B) unitary elasticity. C) elasticity equal to the price of apples. D) infinite elasticity. 14) In a perfectly competitive industry, the price elasticity of demand for the market demand is ________ and the price elasticity of demand for an individual firm's demand is ________. A) infinite; infinite B) less than infinite; infinite C) infinite; less than infinite D) less than infinite; less than infinite 15) The market for fish is perfectly competitive. So, the price elasticity of demand for fish from a single fishing boat A) is less than the elasticity of demand for fish overall. B) equals the elasticity of demand for fish overall. C) is greater than the elasticity of demand for fish overall. D) is sometimes greater than and sometimes less than the elasticity of demand for fish overall. 16) In perfect competition, the price of the product is determined where the industry A) elasticity of supply equals the industry elasticity of demand. B) supply curve and industry demand curve intersect. C) average variable cost equals the industry average total cost. D) fixed cost is zero. 17) Economists assume that a perfectly competitive firm's objective is to maximize its A) quantity sold. B) economic profit. C) revenue. D) output price. 18) Total economic profit is A) total revenue minus total opportunity cost.

3 B) total revenue divided by total cost. C) marginal revenue minus marginal cost. D) marginal revenue divided by marginal cost. 19) The economic profit of a perfectly competitive firm A) is less than its total revenue. B) equals its total revenue. C) is greater than its total revenue. D) is less than its total revenue if its supply curve is inelastic and is greater than its total revenue if its supply curve is elastic. 20) In perfect competition, a firm that maximizes its economic profit will sell its good at a price that is A) below the market price. B) at the market price. C) above the market price. D) below the market price if its supply curve is inelastic and above the market price if its supply curve is elastic. 21) The above figure shows a firm's total revenue line. The firm must be in a market with A) perfect competition. B) monopolistic competition. C) monopoly. D) oligopoly. 22) For a perfectly competitive firm, curve A in the above figure is the firm's A) total fixed cost curve. B) average fixed cost curve. C) average variable cost curve. D) total revenue curve. 23) The figure above portrays a total revenue curve for a perfectly competitive firm. Curve A is straight because the firm A) is a price taker. B) faces constant returns to scale. C) wants to maximize its profits. D) has perfect information.

4 24) The figure above portrays a total revenue curve for a perfectly competitive firm. The firm's marginal revenue from selling a unit of output A) equals $0.50. B) equals $1.00. C) equals $2.00. D) cannot be determined. 25) The figure above portrays a total revenue curve for a perfectly competitive firm. The price of the product in this industry A) equals $0.50. B) equals $1.00. C) equals $2.00. D) cannot be determined. 26) In the above figure showing a perfectly competitive firm's total revenue line, the firm's marginal revenue A) falls as output increases. B) does not change as output increases. C) rises as output increases. D) cannot be determined. Quantit y sold Price 5 $15 6 $15 7 $15 27) In the above table, if the firm sells 5 units of output, its total revenue is A) $15. B) $30. C) $75. D) $90. 28) In the above table, if the quantity sold by the firm rises from 5 to 6, its marginal revenue is A) $15. B) $30. C) $75. D) $90. 29) In the above table, if the quantity sold by the firm rises from 6 to 7, its marginal revenue is A) $15. B) $30. C) $90. D) $105. 30) In perfect competition, the marginal revenue of an individual firm A) is zero. B) is positive but less than the price of the product. C) equals the price of the product. D) exceeds the price of the product. 31) In the case of a perfectly competitive firm, the A) price of the product falls when the quantity the firm sells doubles. B) change in the firm's total revenue equals the price of the product multiplied by the change in quantity sold. C) firm's marginal revenue exceeds the price of the product. D) firm's marginal revenue is less than average revenue.

5 32) For any perfectly competitive firm, marginal revenue is A) always greater than marginal cost. B) equal to price. C) always less than marginal cost. D) all of the above 33) In perfect competition, the firm's marginal revenue curve A) cuts its demand curve from below, going from left to right. B) cuts its demand curve from above, going from left to right. C) always lies below its demand curve. D) is the same as its demand curve. Quantit y (units) Price (dollars per unit) Total revenu e (dollars ) 9 10 90 10 10 100 11 10 110 34) Based on the table above, what is the marginal revenue of the tenth unit of output? A) $190 B) $100 C) $10 D) $9 35) In the above figure, if the milk industry is perfectly competitive, then the firm's marginal revenue curve is represented by A) curve F . B) curve G . C) curve H . D) curve I .

6 36) Which of the following characterizes a perfectly competitive industry? A) The industry demand curve is vertical. B) The demand for each individual firm's product is perfectly elastic. C) Each firm sets a different price. D) Each firm produces a product slightly different from that of its competitors. 37) The above figure shows the total revenue curve for Dizzy Discs. The demand curve for CD's sold by Dizzy Discs A) has negative slope. B) has positive slope. C) is horizontal. D) is vertical. 38) In perfect competition, ________. A) there are restrictions on entry into the industry B) firms in the industry have advantages over firms that plan to enter the industry C) only firms know their competitors' prices D) there are many firms that sell identical products 39) In perfect competition, each firm ________. A) can influence the price that it charges B) produces as much as it can C) is a price taker D) faces a perfectly inelastic demand for its product 40) Economic profit is ________. A) included in the firm's total opportunity cost B) equal to normal profit minus total opportunity cost C) equal to total revenue minus marginal cost D) equal to total revenue minus total opportunity cost 41) A competitive firm's total revenue minus its total opportunity cost equals its ________. A) marginal revenue B) economic profit C) opportunity cost D) normal profit

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