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Microeconomics - Chapter 7 (ISBN-10: 1429218290)

Microeconomics - Chapter 7 (ISBN-10: 1429218290)

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Published by Brooke Mitchelle
These answers are ALL correct.

ISBN-10: 1429218290
ISBN-13: 9781429218290
These answers are ALL correct.

ISBN-10: 1429218290
ISBN-13: 9781429218290

More info:

Published by: Brooke Mitchelle on Jun 11, 2011
Copyright:Attribution Non-commercial

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06/01/2014

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 Page 1
 Name: __________________________ Date: _____________ 1.
 
A perfectly competitive firm is a:A) price-taker.B) price-searcher.C) cost-maximizer.D) quantity-taker.2.
 
The market for breakfast cereal contains hundreds of similar products, such as Fruit Loops, Corn Flakes, and RiceKrispies, that are considered to be different products by different buyers. This situation violates the perfectcompetition assumption of:A) many buyers and sellers.B) a standardized product.C) complete information.D) ease of entry and exit.3.
 
An assumption of the model of perfect competition is:A) discrimination.B) difficult entry and exit.C) many buyers and sellers.D) limited information.Use the following to answer question 4:
 
Figure: Profit Maximizing
4.
 
(Figure: Profit Maximizing) The figure shows cost curves for a firm operating in a perfectly competitive market.The
MC 
curve is represented in the figure by ________.A) none of the curvesB) Curve
O
 C) Curve
 D) Curve
 N 
 
 
 Page 2
5.
 
In perfect competition:A) price and marginal cost are the same.B) price and marginal revenue are the same.C) price and total revenue are the same.D) total revenue and total variable cost are the same.6.
 
The best example of a sunk cost is:A) The college department head offers you a scholarship.B) A pharmaceutical firm cuts spending on research & development.C) Wild cat drillers rupture an oil well.D) You bake a lasagna for Valentine's Day but it burns, and then your loved one cancels due to work.7.
 
In the model of perfect competition:A) the consumer is at the mercy of powerful firms that can set prices wherever they prefer.B) individual firms can influence the price, but only slightly.C) no individual or firm has enough power to have any impact on price.D) the price is determined by how many years are left in the product's patent.8.
 
Perfect competition is characterized by:A) rivalry in advertising.B) fierce quality competition.C) the inability of any one firm to influence price.D) widely recognized brands.9.
 
When a perfectly competitive industry is in long-run equilibrium, its firms are:A) earning more than zero economic profits.B) combining their variable and fixed resources inefficiently.C) not in short-run equilibrium.D) allocating all their resources efficiently.10.
 
The lowest point on the perfectly competitive firm's short-run supply curve corresponds to the minimum point onthe
 ________ 
curve.A)
 ATC 
 B)
 AVC 
 C)
 AFC 
 D)
MC 
 11.
 
If price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectlycompetitive firm will:A) continue to produce at a loss.B) produce at a profit.C) shut down production.D) reduce its fixed costs.12.
 
For a perfectly competitive firm in the short run:A) if the firm produces a quantity at which
 P 
>
 ATC,
then the firm is profitable.B) if the firm produces a quantity at which
 P 
<
 ATC,
then the firm breaks even.C) if the firm produces a quantity at which
 P 
=
 ATC,
then the firm incurs a loss.D) if the firm produces a quantity at which
 P 
<
 ATC,
then the firm is profitable.
 
 Page 3
13.
 
A perfectly competitive firm will earn a profit and will continue producing the profit-maximizing quantity of outputin the short run if price is:A) greater than average fixed cost.B) less than marginal cost.C) more than average variable cost, but less than average total cost.D) greater than average total cost.14.
 
Many furniture stores run ìGoing out of Businessî sales but never go out of business. In order for the shut-downdecision to be the appropriate one, the price of furniture must be ________ than the ________ average variablecost.A) higher; maximumB) lower; minimumC) higher; minimumD) lower; maximum15.
 
If all firms in an industry are price-takers, then:A) each firm can take the price that it wants to charge and sell at this price, provided it is not too different fromthe prices other firms are charging.B) each firm takes the market price as given for its current output level, recognizing that the price will change if italters its output significantly.C) an individual firm cannot alter the market price even if it doubles its output.D) selling price is determined by the market and each firm must follow that price.16.
 
In the short run, if 
 P 
=
 ATC 
, a perfectly competitive firm:A) incurs a loss.B) earns profits.C) breaks even.D) shuts down.Use the following to answer question 17:
 
Figure: Marginal Revenue, Costs, and Profits
17.
 
(Figure: Marginal Revenue, Costs, and Profits) In the figure, if market price increases to $20, marginal revenue ________ and profit-maximizing output ________.A) increases; increasesB) increases; decreasesC) decreases; increasesD) decreases; decreases

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