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Microeconomics 9th Edition by William Boye – Test Bank

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Microeconomics 9th Edition by William Boye – Test Bank

Chapter 09 Perfect Competition

MULTIPLE CHOICE

1. Many agricultural products, such as wheat, are produced by thousands of different producers that grow essentially the same product. The market structure model that would best characterize such a market is:
a. perfect competition.
b. monopoly.
c. monopolistic competition.
d. oligopoly.
e. perfect oligopoly.

ANS: A DIF: Easy OBJ: ch. 09, 1
NAT: Reflective Thinking | Perfect Competition
TOP: The Perfectly Competitive Firm in the Short Run MSC: Application

2. Which of the following is true of the model of perfect competition?
a. There is a high degree of product differentiation.
b. Consumers do not have adequate information concerning the prices and quality of products in the market.
c. There are significant barriers to entry and exit.
d. There are only a few, large firms in the market.
e. An individual firm cannot affect the market price.

ANS: E DIF: Easy OBJ: ch. 09, 1
NAT: Analytic | Perfect Competition TOP: The Perfectly Competitive Firm in the Short Run
MSC: Knowledge

3. The model of perfect competition best applies to markets with:
a. a few firms selling identical products.
b. a few firms selling differentiated products.
c. many firms selling differentiated products.
d. many firms selling identical products.
e. significant barriers to entry and exit.

ANS: D DIF: Easy OBJ: ch. 09, 1
NAT: Analytic | Perfect Competition TOP: The Perfectly Competitive Firm in the Short Run
MSC: Knowledge

4. Which of the following statements characterizes perfect competition?
a. Producers enjoy complete freedom of entry and exit from the industry.
b. Producers sell differentiated products.
c. Producers are price makers.
d. Consumers are price makers.
e. The firm is not free to choose the quantity that it wishes to produce.

ANS: A DIF: Easy OBJ: ch. 09, 1
NAT: Analytic | Perfect Competition TOP: The Perfectly Competitive Firm in the Short Run
MSC: Knowledge

5. At the twenty-fifth anniversary of the Woodstock Festival in 1994, there were many vendors who sold tie-dyed t-shirts. No matter where one went, each vendor was selling these t-shirts for $15 apiece. Which market structure model would best characterize such a situation?
a. Perfect competition
b. Monopolistic competition
c. Monopoly
d. Oligopoly
e. Duopoly

ANS: A DIF: Moderate OBJ: ch. 09, 1
NAT: Reflective Thinking | Perfect Competition
TOP: The Perfectly Competitive Firm in the Short Run MSC: Application

6. Perfect competition describes firm behavior when:
a. there are few firms producing identical products.
b. there are few firms producing highly differentiated products.
c. there are many firms producing identical products and entry is easy.
d. there are many firms producing highly differentiated products.
e. there are so few firms operating that government intervention is required to ensure fairness.

ANS: C DIF: Easy OBJ: ch. 09, 1
NAT: Analytic | Perfect Competition TOP: The Perfectly Competitive Firm in the Short Run
MSC: Knowledge

7. Which of the following statements concerning perfect competition is not true?
a. Firms are price takers.
b. The demand curve facing the individual firm is horizontal.
c. The firm’s demand curve is identical to its marginal revenue curve.
d. The firms produce differentiated products.
e. If the firm raises its price, it will lose all of its customers.

ANS: D DIF: Easy OBJ: ch. 09, 1
NAT: Analytic | Perfect Competition TOP: The Perfectly Competitive Firm in the Short Run
MSC: Knowledge

8. One assumption of the model of perfect competition is that entry into the market is easy. This implies that:
a. there are government licensing requirements for a firm to enter the market.
b. there are not significant economies of scale relative to the size of the market.
c. one firm has gained a patent in the industry.
d. significant economies of scale do exist in the industry.
e. there is no government intervention.

ANS: B DIF: Easy OBJ: ch. 09, 1
NAT: Analytic | Perfect Competition TOP: The Perfectly Competitive Firm in the Short Run
MSC: Knowledge

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