Home / Questions / Think of the characteristics of perfect competition and use them to decide which of the

Think of the characteristics of perfect competition and use them to decide which of the

 Think of the characteristics of perfect competition and use them to decide which of the
                            following firms is most likely to belong in a perfectly competitive market.

a.pizza restaurant

b.cookie producer

c.bicycle store

d.generic canned peas producer

e.corn farm

132.              If all the firms producing a good in an industry have market shares that are insignificant,
                            that is, close to zero percent of industry sales,

a.they shut down, that is, go out of business in the long run

b.their output levels are close to zero as well

c.they are in a perfectly competitive market

d.profit is at best zero because cost must be at least greater than zero

e.they should advertise

133.              If a perfectly competitive firm doubles its output,

a.price will fall, obeying the law of demand

b.it will have no effect on price

c.the market supply curve shifts to the left

d.its profit will double

e.it prevents other firms from entering the market

134.              Barriers to entry in a perfectly competitive industry

a.are nonexistent

b.are impossible to overcome

c.are possible to overcome, but more difficult an obstacle to entry than are barriers in
monopolistic competition

d.result from patents and economies of scale

e.are essentially financial rather than technical

135.              According to the text, grass mowing, T-shirt production, and potato farming are examples
                            of firms

a.that regularly advertise to increase market share

b.whose markets are highly seasonal

c.with high production differentiation

d.with high brand loyalty

e.with no barriers to entry

136.              If a perfectly competitive firm raises its price,

a.the quantity demanded of its good falls because the firm faces a downward- sloping
demand curve

b.the quantity demanded of its good falls to zero

c.new firms will enter, attracted by the higher price

d.it loses some of its market share

e.other firms in the industry must follow the leader

137.              A perfectly competitive firm need never consider

a.price because it cannot control price

b.its fixed cost because it cannot shut down

c.its market share because advertising keeps it competitive

d.the effect of its own production on price

e.barriers to entry because the barriers never change

138.              Diane Rae is a farmer in the perfectly competitive industry of sugar cane. She knows that
                            she can sell more output than she currently does

a.only by lowering the price of her sugar cane

b.only if she is able to drive out some of her competition

c.without affecting the market price

d.by raising the barriers to entry so that more of the market is left to those like herself
who are already in the industry

e.only if she can develop a patent on sales

139.              Fred Monroe is a fisherman in the perfectly competitive fish industry in northern
                            Minnesota. After years of experience, he knows that the demand curve for the fish he
                            sells is



c.downward sloping

d.the same as the industry demand

e.upward sloping

140.              When a producer’s demand curve is a horizontal straight line, we know that

a.market demand is horizontal as well

b.there is considerable brand loyalty for the producer’s good

c.the producer is a monopolist

d.the producer has significant market share

e.the producer is in a perfectly competitive industry


141.              Richard raises Rhode Island Red chickens. Consumers, when buying chicken in the
                            supermarket, view all other types of chickens as perfect substitutes for the Rhode Island
                            Red. There are no barriers to entry in the chicken industry and, as a result, there are
                            many, many chicken producers. An economist knows that 

a.if Richard raises his price, he differentiates his chickens from the others on the

b.the demand curve Richard faces is horizontal

c.if Richard lowers his price, he differentiates his chickens from the others on the

d.Richard can increase brand loyalty and market share by advertising

e.Richard’s relevant market is not chicken

142.              You probably know why firms advertise. But the incentives to advertise vary from
                            market structure to market structure. In which market structure is there a weak, but still
                            existent, reason to advertise?



c.monopolistic competition

d.perfect competition

e.there is no weak incentive—they are always strong



143.              When you watch a professional football game, you may see the Nike swoosh on the
                            players’ jerseys. When you see people on the street, you may see people wearing Nike
                            T-shirts or Nike shoes. It seems, at times, most everybody sports that swoosh. You are
                            likley to say: “Gosh, Nike must be a monopoly.” But think twice. Is it? To define the
                            market it’s in, it would be most helpful if you had information concerning

a.its prices relative to those of other firms producing similar goods, such as Reebok

b.the shape of its demand curve

c.its cross elasticities of demand with other goods and its market share

d.whether or not brand loyalty exists

e.whether it advertises or not

Dec 09 2019 Read more Less More

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