Review of Chapter 11 Econ 101 Sections 1 & 4

This is for you exam preparation. Answers are on the last two pages.

MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) In a perfectly competitive market that is in long-run equilibrium, a permanent leftward shift in the market demand curve will cause
A) firms to leave the industry in the long run.
B) profits to fall in the short run.
C) the price to fall in the short run.
D) all of the above

[pic]

2) In the above figure, if the price is $4 per unit, how many units will a profit maximizing perfectly competitive firm produce?
A) 20 B) 0 C) 5 D) 30

3) In the long run, perfectly competitive firms earn zero economic profit. This result is due mainly to the assumption of
A) a perfectly elastic market demand. B) unrestricted entry and exit.
C) price taking by the firms. D) few buyers and sellers.

4) Which of the following conditions allows perfect competition to arise?
A) Attempts by each firm to make their product different from products produced by other firms reinforces competition between firms.
B) Sellers and buyers are well informed about available quantity but not prices.
C) New firms must operate more efficiently in order to overcome the competitive advantage of existing firms.
D) The minimum efficient scale of a single producer is small relative to the demand for the good or service.

[pic]

5) The figure above shows a perfectly competitive firm. The firm is operating; that is, the firm has not shut down. The firm is
A) earning a normal profit. B) incurring an economic loss of $600.
C) incurring a economic loss of $200. D) earning an economic profit of $200.

6) The figure above shows a perfectly competitive firm. The firm will shut down in the short run if
A) total fixed costs exceed $200. B)