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Perfect Competition15

CLICKER QUESTIONS

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Question 1Question 1

Question 2Question 2

Question 3Question 3

Question 4Question 4

Question 5Question 5

Question 7Question 7

Question 8Question 8

Question 6Question 6 Question 9Question 9

Question 10Question 10

Checkpoint 15.1 Checkpoint 15.2 Checkpoint 15.3

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CHECKPOINT 15.1

A. many other firms produce the same product

B. only one firm produces the product

C. many firms produce a slightly differentiated product

D. a few firms compete

E. there are no barriers to entry

Question 1A perfectly competitive firm is a price taker because _____.

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CHECKPOINT 15.1

A. total revenue equals total cost

B. marginal revenue is equal to marginal cost

C. total revenue is equal to marginal revenue

D. total cost is at its minimum

E. total revenue is at its maximum

Question 2A perfectly competitive firm maximizes its profit by producing at the output at which _______.

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CHECKPOINT 15.1

A. 0

B. between 1 and 49

C. 50

D. 60

E. 61 or more

Question 3The figure shows cost curves for a perfectly competitive dry cleaner. If the price of dry cleaning a shirt is $10 per shirt, the firm will dry clean ____ shirts an hour.

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CHECKPOINT 15.1

A. immediately shut down

B. continue to produce if the price exceeds the average fixed cost

C. continue to produce if the price exceeds the average variable cost

D. shut down if the price exceeds the average fixed cost

E. shut down if the price is less than the average fixed cost

Question 4If the market price is below the perfectly competitive firm’s average total cost, the firm will _________.

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CHECKPOINT 15.2

A. equal to marginal cost

B. equal to average total cost

C. greater than average total cost

D. greater than marginal cost

E. greater than average variable cost

Question 5A perfectly competitive firm makes a positive economic profit in the short run if the market price of the good produced is _____ of producing it.

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CHECKPOINT 15.2

A. $5,000

B. $25,000

C. $45,000

D. $75,000

E. $50,000

Question 6Juan’s Software Service Company is a perfectly competitive firm. Juan’s total fixed cost is $25,000, its average variable cost for 1,000 service calls is $45, and its marginal revenue is $75. Juan’s makes 1,000 service calls a month. Juan’s makes an economic profit of ______ a month.

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CHECKPOINT 15.2

A. is maximizing its profit

B. will increase its profit if it produces a larger output

C. will increase its profit if it raises its price to $12 a unit

D. will increase its profit if it produces a smaller output

E. is making zero economic profit

Question 7A perfectly competitive firm is producing the output at which marginal cost is $12 a unit and its average total cost is $8 a unit. If the market price is $10 a unit, the firm ________.

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CHECKPOINT 15.3

A. supply of frozen yogurt decreased

B. supply of frozen yogurt did not change, but the market demand for frozen yogurt did

C. demand for frozen yogurt increased

D. supply of frozen yogurt increased

E. demand for frozen yogurt increased

Question 8As a result of firms leaving the perfectly competitive frozen yogurt market in the early 2000s, the market _________.

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CHECKPOINT 15.3

A. making zero economic profit

B. increasing output in order to maximize profit

C. incurring economic losses

D. making positive economic profits

E. shutting down temporarily to reduce their economic losses

Question 9In the long run, new firms will enter a perfectly competitive market when firms in the market are _______.

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CHECKPOINT 15.3

A. increase because the market demand for the good decreases

B. decrease until the remaining firms break even

C. decrease until the remaining firms make economic profits

D. do not change

E. increase because the market demand for the good does not change

Question 10Firms in a competitive market are incurring economic losses. In the long run, firms exit the market and as they do, the economic losses of the remaining firms ______.