ECN212.

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1 of 30

All of the following are characteristics of perfect competition except

	homogenous products.
	each firm is a price taker.
	product differentiation.
	a lack of barriers.

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2 of 30

Being a price taker essentially means that

	a firm can influence the market price.
	a firm cannot influence the market price.
	the firm cannot legally set its price above the market price.
	the firm cannot legally set its price below the market price.

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3 of 30

Malfeasance at Enron, a Houston-based energy firm, led to overstatement of revenues by almost $92 billion. As Enron closed its operations, U.S. energy prices remained stable. This may have been evidence that

	Enron could charge whatever price it wanted to for energy.
	there was a lack of any competition, so Enron was the winner.
	there is a competitive market in energy distribution in the United States.
	the accounting profession needs to review its policies quickly.

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4 of 30

Which of the following is closest to a perfectly competitive market?

	The pizza market
	The market for breakfast cereal
	The market for corn
	The market for automobiles

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5 of 30

For a firm in a perfectly competitive industry, the demand curve for its own product is

	horizontal.
	vertical.
	upward sloping.
	downward sloping.

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Which of the following statements is correct?

	The demand curve of the perfectly competitive industry is elastic, as are the demand curves that face the individual firms.
	The market demand curve of perfect competition is inelastic because the individual consumers are buying a homogeneous product.
	The market demand curve of the perfectly competitive industry is downward sloping, while the demand curve of an individual firm is horizontal with a height that is equal to the product price.
	The market demand curve of the perfectly competitive industry is downward sloping, so the demand curves of the individual firms are also downward sloping.

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7 of 30

For a firm in a perfectly competitive market, average revenue equals

	average cost.
	the change in total revenue.
	the market price.
	price divided by quantity.

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8 of 30

The total revenue of a perfectly competitive firm is calculated by

	multiplying average revenue by price.
	dividing price by quantity.
	multiplying price by quantity.
	multiplying quantity by average total cost.

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9 of 30

When a firm operates at an output rate at which total revenue equals total costs, it is called

	its shutdown point.
	its breakeven point.
	a short-run profit.
	a loss.

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10 of 30

The equation TR/Q is used to compute

	total cost.
	average revenue.
	demand.
	marginal revenue.

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11 of 30

Refer to the above figure. Profits for this firm are positive

	only for all points less than B.
	only at points B and C.
	for points between B and C.
	for all points less than B and greater than C.

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12 of 30

Which is always true at a firm's profit-maximizing rate of production?

	Total Revenue = Total Costs
	The total revenue curve lies below the total cost curve.
	Marginal Revenue > Marginal Cost
	Marginal Revenue = Marginal Cost

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13 of 30

When demand is perfectly elastic, marginal revenue is

	zero.
	equal to price.
	declining.
	increasing.

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14 of 30

The change in total revenues that result from a change in output of one unit is

	average revenue.
	marginal revenue.
	quantity revenue.
	price revenue.

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What is always true about the short-run equilibrium position for a firm in perfect competition?

	MR = MC = P = ATC = AR
	TR = TC
	MR = MC = P = AR
	MC = ATC

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16 of 30

Profit per unit is the difference between

	average revenue and average total cost.
	marginal revenue and marginal cost.
	total revenue and total cost.
	average revenue and marginal cost.

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17 of 30

When a firm earns zero economic profits,

	it cannot continue to produce.
	it has not covered its opportunity costs.
	it has a positive accounting profit.
	it has average revenue that is less than average cost.

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18 of 30

A perfectly competitive firm's short-run break-even output occurs

	at the minimum point of its average variable cost curve.
	at the minimum point of its average total cost curve.
	at the minimum point of its marginal cost curve.
	at the intersection of its total cost curve and its marginal revenue curve.

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19 of 30

According to the above figure, if the firm earns zero economic profits, what quantity is the firm selling, and at what price?

	Q = 200; P = $4
	Q = 1,000; P = $5
	Q = 800; P = $4
	Q = 1,200; P = $7

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20 of 30

Economic profits at the short-run break-even point are

	positive.
	negative.
	equal to zero.
	indeterminate since they also depend upon the size of the fixed costs.

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21 of 30

Accounting profits at a firm's break-even point are

	positive.
	negative.
	zero.
	indeterminate since you need to know what demand is.

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22 of 30

In the above figure, assuming that Firm 1 and Firm 2 are the sole producers in the industry, the industry quantity supplied at price P1 is equal to

	Q1 + Q2.
	Q1 + Q3.
	Q2 + Q4.
	Q4 - Q2.

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23 of 30

A perfectly competitive industry's market price is found by

	finding the point on the market demand curve where the largest number of units will be purchased.
	locating the intersection of the market demand and market supply curves.
	the horizontal summation of all the industry firms' individual supply curves.
	identifying the price at which each firm realizes its largest economic profit.

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24 of 30

Market signals

	are ways of conveying information.
	do not involve economic profits.
	are best ignored by investors.
	do not involve economic losses.

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25 of 30

In the long run, when a perfectly competitive firm experiences negative economic profits,

	firms exit the industry, the market supply curve shifts rightward, and the market price falls.
	firms enter the industry, the market supply curve shifts rightward, and the market price falls.
	firms exit the industry, the market supply curve shifts leftward, and the market price rises.
	firms enter the industry, the market supply curve shifts rightward, and the market price rises.

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26 of 30

A law that restricts plant closings will

	make the economy more efficient by slowing down the movement of resources to a more optimal rate.
	make the economy more efficient by reducing poor decisions on the part of entrepreneurs.
	prevent resources from flowing to their highest-valued uses.
	allow profits and losses to provide a signaling function.

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27 of 30

In the long run, the price for a perfectly competitive firm

	will be determined by the firm's supply and demand curves.
	will allow for positive economic profits.
	will equal marginal cost where marginal cost is at a minimum.
	will equal the minimum average total cost.

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28 of 30

Competitive pricing is efficient because

	the price that consumers pay reflects the opportunity cost to society for producing the good.
	firms make positive economic profits in long-run equilibrium.
	average revenue equals average cost.
	firms produce above the minimum efficient scale.

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29 of 30

A market failure is a situation in which:

	resources are being efficiently allocated, but some companies are forced to shut down.
	the market equilibrium leads to either too many or too few resources going toward production of the good or service.
	the government must take actions to correct the failures of the market in a particular industry.
	there is no free entry or exit into an industry.

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30 of 30

If markets are perfectly competitive, the production of goods

	will use the least costly combination of resources.
	will occur at an average total cost value that is above the minimum.
	will require government intervention.
	will always lead to business failures.