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Exam 11: Perfect Competition and the Supply Curve

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Question 1

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People in the eastern part of Beirut are prevented by border guards from traveling to the western part of Beirut to shop for or sell food. This situation violates the perfect competition assumption of:

A) price-setting behavior.
B) a small number of buyers and sellers.
C) differentiated goods.
D) ease of entry and exit.

E) All of the above
F) A) and B)

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Question 2

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If the Kansas corn market is perfectly competitive, it means there is easy entry into this market.

A) True
B) False

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Question 3

Multiple Choice

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For the Colorado beef industry to be classified as perfectly competitive, ranchers in Colorado must have _____ on prices and beef must be a _____ product.

Use the following to answer questions: Figure: Prices, Cost Curves, and Profits -(Figure: Prices, Cost Curves, and Profits) Look at the figure Prices, Cost Curves, and Profits. If the price is P₁ and the firm decides to produce at output Q₁, then the firm earns:

Use the following to answer questions: -(Table: Variable Costs for Lawns) Look at the table Variable Costs for Lawns. During the summer, Alex runs a lawn-mowing service, and lawn-mowing is a perfectly competitive industry. Assume that costs are constant in each interval; that is, the variable cost of mowing 1 through 10 lawns is $100. His only fixed cost is $1,000 for the mower. His variable costs include fuel, his time, and mower parts. If the price for mowing a lawn is $70, how much is Alex's total cost at the profit-maximizing output?

Use the following to answer questions: Figure: Costs and Profits for Tomato Producers -(Figure: Costs and Profits for Tomato Producers) Look at the figure Costs and Profits for Tomato Producers. The market for tomatoes is perfectly competitive. The market price of a bushel of tomatoes is $18. If the market price increases to $20, the farmer's marginal revenue _____ and the profit-maximizing output _____.

If a perfectly competitive firm increases production from 10 units to 11 units and the market price is $20 per unit, total revenue for 11 units is:

Use the following to answer questions: -(Table: Soybean Cost) Look at the table Soybean Cost. What is the break-even price for this farmer?

Perfectly competitive firms will:

Use the following to answer questions: -(Table: Soybean Cost) Look at the table Soybean Cost. What is the shut-down price for this farmer?

In a perfectly competitive market:

Hank operates a perfectly competitive firm in the long run. For several periods the market price has been $20, and his break-even price is $22. Given the chance to change his fixed costs, Hank should:

When perfect competition prevails, which of the following characteristics of firms are we likely to observe?

In long-run equilibrium in a perfectly competitive market, all firms will be operating at the same level of marginal cost.

In a perfectly competitive industry, the market demand curve is usually:

Use the following to answer questions: Figure: A Perfectly Competitive Firm in the Short Run -(Figure: A Perfectly Competitive Firm in the Short Run) Look at the figure A Perfectly Competitive Firm in the Short Run. If the market price is G, the firm's total economic profit at its most profitable level of output is:

Use the following to answer question 125: Figure: Revenues, Costs, and Profits for Tomato Producers -(Figure: Revenues, Costs, and Profits for Tomato Producers) Look at the figure Revenues, Costs, and Profits for Tomato Producers. The market for tomatoes is perfectly competitive. The market price of a bushel of tomatoes is $18. At the profit-maximizing quantity of output in the figure, the farmer's total revenue is _____, total cost is _____, and profit is _____.

Use the following to answer questions: -(Table: Variable Costs for Lots) Look at the table Variable Costs for Lots. During the winter, Alexa runs a snow-clearing service in a perfectly competitive industry. Assume that costs are constant in each interval; that is, the variable cost of clearing anywhere from 1 through 10 lots is $200. Her only fixed cost is $1,000 for a snowplow. Her variable costs include fuel, her time, and hot coffee. If the price to clear a lot is $30, what is Alexa's profit per unit at the optimal output?

Suppose that some firms in a perfectly competitive industry are earning positive economic profits. In the long run, the:

The horizontal sum of individual firms' MC curves is the: