Perfect Competition Ch 7 Quiz

A  always earns a profit.

B  never earns a profit.

C  earns a profit only if the firm has no fixed costs.

D  may earn a profit or a loss.

A  average revenue equals variable costs.

B  marginal revenue equals marginal costs.

C  total revenue exceeds variable costs.

D  total revenue exceeds total costs.

A  maker.

B  taker.

C  giver.

D  leader.

A  most effective policy action would be a subsidy to firms for the reduction of emissions.

B  appropriate course of action for government is to increase R&D outlays to develop technology to remove the emissions from the environment.

C  most effective policy action would be a tax on polluting firms.

D  appropriate course of action for government is to do nothing.

A  purchasing machinery.

B  contract for labor services.

C  All of these are correct.

D  lease agreement on real estate.

A  always falls.

B  falls only if existing firms are earning no economic profit.

C  falls only if the new firm is more efficient than existing firms.

D  falls only if existing firms gang up on the entrant.

A  Consumers pay little attention to brand names.

B  Firms advertise to increase their market share.

C  Profits are low.

D  Firms pay no attention to their competitors’ output levels.

A  a few large firms

B  each individual firm having some control over the market price

C  firms producing specialized products in order to attract consumers

D  a large number of small firms

A  free entry and exit.

B  firms facing horizontal demand curves.

C  few sellers.

D  homogeneous products.

A  until all loss making firms leaves the industry.

B  until the long average cost curve rises above the demand curve.

C  until each firm can earn acceptable level of economic profit.

D  until price becomes tangent to the long run average cost curve.

A  marginal cost curve.

B  total economic profit curve.

C  long-run average cost curve.

D  marginal revenue curve.