ECON 102 EXAM 2 QUESTIONS AND CORRECT
VERIFIED ANSWERS LATEST UPDATE
TESTED AND GRADED A+
When a firm earns zero economic profits, it does which of the following?
A
Has a positive accounting profit
B
Has a negative accounting profit
C
Cannot continue to produce and should shut down
D
Has opportunity costs that are larger than accounting profits --CORRECT ANSWER--Has a
positive accounting profit
Why are perfectly competitive markets are considered economically efficient?
A
There is only a small amount of deadweight loss
B
The opportunity cost of society for making the good is equal to society's value of the good.
C
Consumers enjoy the goods produced in these markets most
D
Page | 1
,Firms always have low and identical costs --CORRECT ANSWER--The opportunity cost of
society for making the good is equal to society's value of the good.
Given all the characteristics of perfect competition, which of the following is the main factor
that affects consumers' decisions on which firm to purchase a good from?
A
Opinions of friends
B
Quality of the good
C
Price
D
Reputation of the firm --CORRECT ANSWER--C
Price
The clothing and attire retail market has seen an increased number of firms entering the
industry. Thus, there is a lot of competition in markets for many types of clothing. What is
the result of this high amount of competition?
A
Individual buyers and sellers cannot affect the market price.
B
Firms have a lot of flexibility in pricing their products.
C
One individual firm can determine the market price.
D
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,Some firms must necessarily leave since the prices will be too low. --CORRECT ANSWER--
Individual buyers and sellers cannot affect the market price.
Which of the following is NOT true regarding perfectly competive markets?
A. It is difficult or impossible for a firm to enter and compete in the market.
B. All firms in the market are price takers.
C. Homogenous goods are sold by the firms.
D. The market contains many buyers and sellers. --CORRECT ANSWER--It is difficult or
impossible for a firm to enter and compete in the market.
Regarding perfect competition, what does it mean when the goods sold by the firms in a
market are homogeneous?
A
Firms can produce the same good with different inputs and different costs.
B
The good sold by one firm is a perfect substitute of the good sold by another firm in the same
market.
C
The firms in the market are the same size.
D
The goods sold by one firm are complements of the goods sold by another firm in another
market. --CORRECT ANSWER--The good sold by one firm is a perfect substitute of the
good sold by another firm in the same market.
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, In a perfectly competitive market, a single firm that sets its price a small amount above the
market price will do which of the following?
A
Make lower profits than other firms, but the exact amount less depends on the elasticity of
demand for the product
B
Have lower revenues but receive zero economic profits
C
Not sell any units at all
D
Earn profits higher than other firms as long as the other firms continued to charge the market
price --CORRECT ANSWER--Not sell any units at all
For a firm in a perfectly competitive industry, the demand curve for its own product is
_________.
A
Vertical
B
Downward sloping
C
The same as the marginal cost curve
D
The same as the price --CORRECT ANSWER--The same as the price
Page | 4
VERIFIED ANSWERS LATEST UPDATE
TESTED AND GRADED A+
When a firm earns zero economic profits, it does which of the following?
A
Has a positive accounting profit
B
Has a negative accounting profit
C
Cannot continue to produce and should shut down
D
Has opportunity costs that are larger than accounting profits --CORRECT ANSWER--Has a
positive accounting profit
Why are perfectly competitive markets are considered economically efficient?
A
There is only a small amount of deadweight loss
B
The opportunity cost of society for making the good is equal to society's value of the good.
C
Consumers enjoy the goods produced in these markets most
D
Page | 1
,Firms always have low and identical costs --CORRECT ANSWER--The opportunity cost of
society for making the good is equal to society's value of the good.
Given all the characteristics of perfect competition, which of the following is the main factor
that affects consumers' decisions on which firm to purchase a good from?
A
Opinions of friends
B
Quality of the good
C
Price
D
Reputation of the firm --CORRECT ANSWER--C
Price
The clothing and attire retail market has seen an increased number of firms entering the
industry. Thus, there is a lot of competition in markets for many types of clothing. What is
the result of this high amount of competition?
A
Individual buyers and sellers cannot affect the market price.
B
Firms have a lot of flexibility in pricing their products.
C
One individual firm can determine the market price.
D
Page | 2
,Some firms must necessarily leave since the prices will be too low. --CORRECT ANSWER--
Individual buyers and sellers cannot affect the market price.
Which of the following is NOT true regarding perfectly competive markets?
A. It is difficult or impossible for a firm to enter and compete in the market.
B. All firms in the market are price takers.
C. Homogenous goods are sold by the firms.
D. The market contains many buyers and sellers. --CORRECT ANSWER--It is difficult or
impossible for a firm to enter and compete in the market.
Regarding perfect competition, what does it mean when the goods sold by the firms in a
market are homogeneous?
A
Firms can produce the same good with different inputs and different costs.
B
The good sold by one firm is a perfect substitute of the good sold by another firm in the same
market.
C
The firms in the market are the same size.
D
The goods sold by one firm are complements of the goods sold by another firm in another
market. --CORRECT ANSWER--The good sold by one firm is a perfect substitute of the
good sold by another firm in the same market.
Page | 3
, In a perfectly competitive market, a single firm that sets its price a small amount above the
market price will do which of the following?
A
Make lower profits than other firms, but the exact amount less depends on the elasticity of
demand for the product
B
Have lower revenues but receive zero economic profits
C
Not sell any units at all
D
Earn profits higher than other firms as long as the other firms continued to charge the market
price --CORRECT ANSWER--Not sell any units at all
For a firm in a perfectly competitive industry, the demand curve for its own product is
_________.
A
Vertical
B
Downward sloping
C
The same as the marginal cost curve
D
The same as the price --CORRECT ANSWER--The same as the price
Page | 4
