Perfect Competition

2. 15 Perfect Competition CLICKER QUESTIONS

3. Checkpoint 15.3 Checkpoint 15.1 Checkpoint 15.2 Question 1 Question 5 Question 8 Question 6 Question 9 Question 2 Question 7 Question 10 Question 3 Question 4

4. CHECKPOINT 15.1 Question 1 A perfectly competitive firm is a price taker because _____. • many other firms produce the same product • only one firm produces the product • many firms produce a slightly differentiated product • a few firms compete • there are no barriers to entry

5. CHECKPOINT 15.1 Question 2 A perfectly competitive firm maximizes its profit by producing at the output at which _______. • total revenue equals total cost • marginal revenue is equal to marginal cost • total revenue is equal to marginal revenue • total cost is at its minimum • total revenue is at its maximum

6. CHECKPOINT 15.1 Question 3 The figure shows cost curves for a perfectly competitive dry cleaner. If the price of dry cleaning a shirt is $10 per shirt, the firm will dry clean ____ shirts an hour. • 0 • between 1 and 49 • 50 • 60 • 61 or more

7. CHECKPOINT 15.1 Question 4 If the market price is below the perfectly competitive firm’s average total cost, the firm will _________. • immediately shut down • continue to produce if the price exceeds the average fixed cost • continue to produce if the price exceeds the average variable cost • shut down if the price exceeds the average fixed cost • shut down if the price is less than the average fixed cost

8. CHECKPOINT 15.2 Question 5 A perfectly competitive firm makes a positive economic profit in the short run if the market price of the good produced is _____ of producing it. • equal to marginal cost • equal to average total cost • greater than average total cost • greater than marginal cost • greater than average variable cost

9. CHECKPOINT 15.2 Question 6 Juan’s Software Service Company is a perfectly competitive firm. Juan’s total fixed cost is $25,000, its average variable cost for 1,000 service calls is $45, and its marginal revenue is $75. Juan’s makes 1,000 service calls a month. Juan’s makes an economic profit of ______ a month. • $5,000 • $25,000 • $45,000 • $75,000 • $50,000

10. CHECKPOINT 15.2 Question 7 A perfectly competitive firm is producing the output at which marginal cost is $12 a unit and its average total cost is $8 a unit. If the market price is $10 a unit, the firm ________. • is maximizing its profit • will increase its profit if it produces a larger output • will increase its profit if it raises its price to $12 a unit • will increase its profit if it produces a smaller output • is making zero economic profit

11. CHECKPOINT 15.3 Question 8 As a result of firms leaving the perfectly competitive frozen yogurt market in the early 2000s, the market _________. • supply of frozen yogurt decreased • supply of frozen yogurt did not change, but the market demand for frozen yogurt did • demand for frozen yogurt increased • supply of frozen yogurt increased • demand for frozen yogurt increased

12. CHECKPOINT 15.3 Question 9 In the long run, new firms will enter a perfectly competitive market when firms in the market are _______. • making zero economic profit • increasing output in order to maximize profit • incurring economic losses • making positive economic profits • shutting down temporarily to reduce their economic losses

13. CHECKPOINT 15.3 Question 10 Firms in a competitive market are incurring economic losses. In the long run, firms exit the market and as they do, the economic losses of the remaining firms ______. • increase because the market demand for the good decreases • decrease until the remaining firms break even • decrease until the remaining firms make economic profits • do not change • increase because the market demand for the good does not change