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A market with a large number of sellers
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might be a monopolistically competitive or a perfectly competitive market.
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What is the difference between perfect competition and monopolistic competition?
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In perfect competition, firms produce identical goods, while in monopolistic competition, firms produce slightly different goods.
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A perfectly competitive firm
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sells a product that has perfect substitutes.
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In which market structure do firms exist in very large numbers, each firm produces an identical product, and there is freedom of entry and exit?
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Only perfect competition
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The characteristics that describe a perfectly competitive industry include
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many firms selling an identical product.
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In part, perfect competition arises if
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ii only (each firm produces a good or service identical to those produced by its many competitors)
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In which of the following market types do all firms sell products so identical that buyers do not care from which firm they buy?
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Perfect competition
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Each firm in a perfectly competitive industry
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produces a good that is identical to that of other firms.
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A market in which many firms sell identical products
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only perfect competition.
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One requirement for an industry to be perfectly competitive is that in the industry there
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are many firms for whom the efficient scale of production is small.
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One requirement for an industry to be perfectly competitive is that
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there are no restrictions on entry into or exit from the market.
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Another requirement for an industry to be perfectly competitive is that
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established firms may have no advantage over new firms.
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A perfectly competitive market arises when
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the market demand is very large relative to the output of one seller.
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Perfect competition is characterized by all of the following EXCEPT
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considerable advertising by individual firms.
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Which of the following is the best example of a perfectly competitive market?
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farming
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Which of the following market types has the fewest number of firms?
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monopoly
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A monopoly occurs when
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one firm sells a good that has no close substitutes and a barrier blocks entry for other firms.
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In which market structure does one firm sell a good or service with no close substitutes and there is a barrier blocking the entry of new firms?
answer
only monopoly
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When one firm sells a good or service that has no close substitutes and a barrier blocks the entry of new firms, what type of market is this?
answer
only monopoly
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_____ a large number of firms competing by making similar but slightly different products.
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Monopolistic competition requires
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A market is classified as monopolistically competitive when
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many firms produce a slightly differentiated product.
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In which market structure is there a large number of firms producing slightly differentiated products?
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only monopolistic competition
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A market is classified as an oligopoly when
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a few firms compete.
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Which of the following market types has only a few competing firms?
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oligopoly
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In which market structure are there a small number of firms competing?
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only oligopoly
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A market is _____ when a small number of firms compete.
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an oligopoly
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The firm's over-riding objective is to
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maximize economic profit.
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Normal profit is
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the return to entrepreneurship.
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In a perfectly competitive market, the type of decision a firm has to make is different in the short run than in the long run. Which of the following is an example of a perfectly competitive firm's short-run decision?
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the profit-maximizing level of output
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To maximize its profit, in the short run a perfectly competitive firm decides
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what quantity of output to produce.
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A perfectly competitive firm can
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sell all of its output at the prevailing market price.
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In a perfectly competitive market, one farmer's barley is
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a perfect substitute for another farmer's barley.
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A firm in perfect competition is a price taker because
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many other firms produce identical products.
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The price charged by a perfectly competitive firm is
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the same as the market price.
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For a perfectly competitive firm, the piece of its good is equal to the firm's marginal revenue because
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individual perfectly competitive firms cannot influence the market price by changing their output.
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A large number of sellers all selling an identical product implies which of the following?
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the inability of any seller to change the price of the product
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A firm that is a price taker faces
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a perfectly elastic demand curve.
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We know that a perfectly competitive firm is a price taker because
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its demand curve is horizontal.
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Suppose Pat's Paints is a perfectly competitive firm. If Pat's Paints' marginal revenue equals $5 per can, and Pat decides to sell 100 cans of paint, Pat's total revenue equals
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$500
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If a firm in a perfectly competitive market faces an equilibrium price of $5, its marginal revenue
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will also be $5.
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The market demand curve in a perfectly competitive market is ____ and the demand curve for a perfectly competitive firm's output is ____.
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downward sloping; horizontal
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For a perfectly competitive palm tree nursery in South Carolina, the total revenue curve is
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upward sloping.
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Marginal revenue is
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the change in total revenue from a one-unit increase in the quantity sold.
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A firm's marginal revenue is
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the change in total revenue that results from a one-unit increase in the quantity sold.
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For a perfectly competitive firm, marginal revenue is
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equal to the price.
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In perfect competition, marginal revenue
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is equal to the market price.
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For a perfectly competitive firm, the market price of a good is
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Answers A and C are correct (a given which the firm cannot change; equal to the firm's marginal revenue)
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The marginal revenue curve for a perfectly competitive firm is
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horizontal.
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As a perfectly competitive firm produces more and more of a good, its economic profit
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first increases, then decreases.
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As a perfectly competitive firm's output increases, its total revenue ____ and its total cost ____.
answer
increases; increases
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In a perfectly competitive industry, when a firm is producing so that its total revenue equals its total cost, the firm is
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making zero economic profit.
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The market supply in the short run for the perfectly competitive industry is
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the sum of the supply schedules of all firms.
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If there are 1,000 identical rice farmers who are each willing to supply 200 bushels of rice at $2 per bushel, what price and quantity combination is a point on the market supply curve for rice?
answer
$2 and 200,000 bushels
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In the short run, a perfectly competitive firm _____ make an economic profit and _____ incur an economic loss.
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might; might
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In the short run, a perfectly competitive firm
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can possibly make an economic profit or possibly incur an economic loss.
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If a perfectly competitive firm finds that the price exceeds its ATC, then the firm
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is making an economic profit.
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A perfectly competitive firm is producing 50 units of output, which it sells at the market price of $23 per unit. The firm's average total cost is $20. What is the firm's total revenue?
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$1,150
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A perfectly competitive firm is producing 50 units of output and selling at the market price of $23. The firm's average total cost is $20. What is the firm's total cost?
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$1,000
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A perfectly competitive firm should shut down in the short-run if price falls below the minimum of
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average variable costs.
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When new firms enter the perfectly competitive Miami bagel market, the market
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supply curve shifts rightward.
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If new firms enter a perfectly competitive industry, the market supply
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increases.
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When firms in a perfectly competitive market are earning an economic profit, in the long run
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new firms will enter the market.
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If perfectly competitive lawn care firms are making an economic profit, then
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new firms will enter the industry.
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If perfectly competitive firms are making an economic profit, then
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new firms will enter the market.
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When firms in a perfectly competitive market incur economic losses, exit by some firms means the market supply will
answer
decrease.
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To eliminate losses in a perfectly competitive market, firms exit the industry. This exit results in
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a decrease in market supply.
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In the long run, existing firms exit a perfectly competitive market
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only if they incur an economic loss.
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In the long run, perfectly competitive firms will exit the market if the price is
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less than average total cost.
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In the long run, a perfectly competitive firm makes
answer
zero economic profit.
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In the long run, a perfectly competitive firm will
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make zero economic profit.
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In the long run, a perfectly competitive firm
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makes zero economic profit.
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Technology reduces the average cost of production, so in the long run
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i, ii, and iii. (perfectly competitive firms produce at a lower average cost, the market price of the good falls, firms with older plants either exit the market or adopt the new technology)
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In the long run, new firms enter a perfectly competitive market when
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economic profit is greater than zero.
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If perfectly competitive firms are making an economic profit, the economic profit
answer
attracts entry by more firms, which lowers the price.
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Firms exit a competitive market when they incur an economic loss. In the long run, this exit means that the economic losses of the surviving firms
answer
decrease until they equal zero.
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