Chapter 8 Solutions: Perfect Competition

Ch08 Perfect Competition

Multiple Choice Questions

1. The term _________________ refers to a firm operating in a perfectly competitive market that must take the prevailing market price for its product.

A. price setter
B. business entity
C. price taker
D. trend setter

Answer: C Reference:

Explanation:

2. ______________________ refers to the additional revenue gained from selling one more unit.

A. Marginal revenue
B. Total revenue
C. Economic profit
D. Accounting profit

Answer: A Reference:

Explanation:

3. If a firm’s revenues do not cover its average variable costs, then that firm has reached its _________________ .

A. price taking point
B. shutdown point
C. marginal point
D. opportunity margin

Answer: B Reference:

Explanation:

4. In economics, the term “shutdown point” refers to the point where the

A. marginal cost curve crosses the total revenue curve.
B. average variable cost curve crosses the total revenue curve.
C. average variable cost curve crosses the marginal cost curve.
D. marginal cost curve crosses the average variable cost curve.

Answer: D Reference:

Explanation:

5. A manufacturer would likely make an ___________ in a market following the long-run process of beginning and expanding production in response to ________________ .

A. accounting profit; a strategy to grow profits
B. accounting profit; an incentive for profit
C. entry; a sustained pattern of profits
D. entry; an incentive to add to profits

Answer: C Reference:

Explanation:

6. When a business adopts a strategy of reducing and/or discontinuing production in response to a sustained pattern of losses, it is

A. considering opportunity costs.
B. preparing to exit operations.
C. preparing to reach its shutdown point.
D. considering capital investments.

Answer: B Reference:

Explanation:

7. An _________________ is calculated by subtracting the firm’s costs from its total revenues, _______________________________ .

A. accounting profit; excluding opportunity cost
B. accounting profit; including opportunity cost
C. economic profit; excluding opportunity cost
D. opportunity cost; including economic profit

Answer: A Reference:

Explanation:

8. Economic profit can be derived from calculating total revenues minus all of the firm’s costs,

A. excluding its opportunity costs.
B. including its opportunity costs.
C. including its marginal revenue.
D. excluding its marginal revenue.

Answer: B Reference:

Explanation:

11. A perfectly competitive industry is a

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