Penn ECON102 Quiz 7

Question 1

In a perfectly competitive market, there are

at least thirty firms.

at least fifteen firms.

a few firms, each too large to influence the market price.

many firms, each too small to influence the market price.

Question 2

If a firm is a "price taker"

the firm's demand curve is vertical at the competitive price.

the firm's demand curve is the same as the market demand curve.

the firm's demand curve is horizontal at the competitive price.

the firm's demand curve is downward sloping with the intercept at the competitive price.

Question 3

In the above figure, assume that S0 represents the industry supply curve and D0 represents the demand curve in a perfectly competitive market. What can be said about the demand curve that an individual firm faces?

An individual firm will face a downward sloping demand curve starting at $1.25.

An individual firm will face a horizontal demand curve at $1.25.

An individual firm will face the demand curve indicated by D0.

An individual firm will face a vertical demand curve at 250.

Question 4

If a perfectly competitive firm chooses output such that MR>MC, then

it is maximizing profit.

it could expand output and make more profit.

it could decrease output and make more profit.

it should shut down.

Question 5

Which is always true for a perfectly competitive firm?

P*=d=MR

MC=MR=ATC

P*=d=ATC

MC=MR=AVC

Question 6

The above figure represents the cost curves for a perfectly competitive firm. If the market price is $4, the firm will produce

12 units.

8 units.

0 units

9 units.

6 units.

Question 7

The above figure represents the cost curves for a perfectly competitive firm. If the market price is $5, the firm will produce

0 units

8 units.

9 units.

6 units.

12 units.

Question 8

In the above figure, the left hand side graph represents a perfectly competitive industry and the right hand side graph represents a perfectly competitive firm. What is the profit maximizing price for the firm?

$2

$5

$7

$4

Question 9

In the above figure, the left hand side graph represents a perfectly competitive industry and the right hand side graph represents a perfectly competitive firm. As the demand curve increases from D1 to D2,

the firm's output increases from 9 to 11.

the firm's output decreases from 11 to 9.

the firm's output increases from 8 to 9.

the firm's output decreases from 9 to 8.

Question 10

Why do perfectly competitive firms in the long run always make zero economic profit?

Perfectly competitive firms produce homogeneous products.

There are no barriers to entry or exit in perfectly competitive industries.

Perfectly competitive firms are price takers.

There are many firms in a perfectly competitive market.