Dr. StaihrSample Questions on Perfect Competition 11/10/2014Econ 142 Principles of MicroeconomicsDr. StaihrSample Questions on Perfect Competition 11/10/2014 1. In a perfectly competitive market, if a firm is earning excessive profits, which of the following will not happen?a. The firm will increase its price to take advantage of the profitsb. New firms will enter the marketc. The market supply curve will shift rightwardd. The market price will fall2. Which of the following is incorrect regarding perfect competition? In perfect competition…a. The firm’s price is also its marginal revenueb. The firm’s only decision is what price to charge for its productc. At the point where P = MC, if ATC > P the firm is suffering lossesd. At the point where P = MC, if ATC = P the firm is breaking even3. For a perfectly competitive market which of the following is incorrect?a. A large number of firms operate in this marketb. All firms sell essentially the same productc. The firm’s supply curve is the average total cost curved. A firm can earn excessive profits in the short run but not in the long runUse the information contained in the following to answer the following 4 questions.This graph is identical to the one we discussed in class. Assume this represents a perfectly competitive firm. The market price of this good is $11. Answer the following four questions.4. If this firm is producing the profit-maximizing level of output that level will be approximately…a. 157b. 110c. 80d. 1005. At the profit-maximizing level of output, per-unit profits will be (approximately)a. $4b. $2c. $3d. $06. At the profit-maximizing level of output, total profits will be (approximately)a. $140b. $260c. $200d. $3307. Given the situation depicted in the graph above, what can we expect to happen next in this market?a. Some firms will exit the marketb. Some new firms will enter the marketc. The market price will probably increased. None of the
View Full Document
Unlocking...