Chapter 22 - Perfect Competition

1		Statement I. There are no more than three or four large firms in a perfectly competitive industry. Statement II. Perfect competitors produce an identical product.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
2		Which one of the following industries comes closest to perfect competition?
			A)	automobile manufacturing
			B)	fast food
			C)	wheat farming
			D)	computer software
3		When we say a good or service is identical, we mean that
			A)	all buyers think it is identical.
			B)	all sellers think it is identical.
			C)	all buyers and sellers think it is identical.
4		Statement I. Perfect competition is the prevalent form of competition in the American economy. Statement II. When we refer to "many" firms in the definition of perfect competition, we mean at least 50 firms.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
5		Over the last 15 or 20 years widespread computerization has generally led to
			A)	more competition and lower prices.
			B)	more competition and higher prices.
			C)	less competition and lower prices.
			D)	less competition and higher prices.
6		The perfect competitor's demand curve is __________ a horizontal line.
			A)	always
			B)	usually
			C)	sometimes
			D)	never
7		The perfect competitor's price is set by
			A)	the government.
			B)	the largest firm in the industry.
			C)	herself or himself.
			D)	market supply and demand.
8		In the short run the perfect competitor
			A)	makes a profit.
			B)	takes a loss.
			C)	may make a profit or take a loss.
9		When the perfect competitor is taking a loss, over the long run some firms will
			A)	enter the industry and equilibrium price will rise.
			B)	enter the industry and equilibrium price will fall.
			C)	leave the industry and equilibrium price will rise.
			D)	leave the industry and equilibrium price will fall.
10		The perfect competitor always attains peak efficiency in the
			A)	short run.
			B)	long run.
			C)	both the short run and the long run.
			D)	neither the short run nor the long run.
11		Economic profits are generally
			A)	higher than accounting profits.
			B)	lower than accounting profits.
			C)	identical to accounting profits.
12		When we talk decreasing costs in a decreasing cost industry, we are referring to the
			A)	ATC.
			B)	AVC.
			C)	AFC.
			D)	marginal cost
13		Statement I: A decreasing cost industry cannot be a perfectly competitive industry. Statement II: Any firm that loses money will leave the industry in the long run.
			A)	Statement I is true and statement II is false.
			B)	Statement II is true and statement I is false.
			C)	Both statements are true.
			D)	Both statements are false.
14		The most efficient output
			A)	is always equal to the most profitable output for the perfect competitor.
			B)	is never equal to the most profitable output for the perfect competitor.
			C)	is equal to the most profitable output for the perfect competitor only in the long run.
			D)	is equal to the most profitable output for the perfect competitor only in the short run.
15		The perfect competitor has a perfectly elastic demand curve
			A)	only in the short run.
			B)	only in the long run.
			C)	in both the short run and the long run.
			D)	in neither the short run nor the long run.