TEST BANK FOR CHAPTER 9 : PERFECT COMPETITION IN A SINGLE MARKET

TEST BANK FOR
TEST CHAPTER
BANK 9: PERFECT
FOR CHAPTER COMPETITION
9: Perfect Competition IN A SINGLE
in a Single
Market MARKET
MULTIPLE CHOICE


1. In the very short run
a. new firms may enter the industry.
b. existing firms may change the quantity they are supplying.
c. price and quantity supplied is absolutely fixed.
d. quantity supplied is absolutely fixed.
ANS: d

2. In the short run
a. new firms may enter an industry.
b. existing firms may change the quantity they are supplying.
c. price and quantity supplied are absolutely fixed.
d. quantity supplied is absolutely fixed.
ANS: b

3. The short-run market supply curve is
a. the horizontal summation of each firm’s short-run supply curve.
b. the vertical summation of each firm’s short-run supply curve.
c. the horizontal summation of each firm’s short-run average cost curve.
d. the vertical summation of each firm’s short-run average cost curve.
ANS: a

4. In the short run, an increase in market demand will usually lead to a(n)
a. decrease in price and an increase in quantity.
b. decrease in price and a decrease in quantity.
c. increase in price and an increase in quantity.
d. increase in price and a decrease in quantity.
ANS: c

5. A demand curve will shift out for any of the following reasons except
a. preference for a good increases.
b. price of a substitute falls.
c. income rises.
d. price of a complement falls.
ANS: b

6. If a 1 percent increase in price leads to a .7 percent increase in quantity supplied, the short-
run supply curve is
a. elastic.
b. inelastic.
c. unit elastic.
d. perfectly inelastic.
ANS: b




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, 2 Chapter 9: Perfect Competition in a Single Market


7. If the market for hula-hoops is characterized by a very inelastic supply curve and a very
elastic demand curve, an inward shift in the supply curve would be reflected primarily in the
form of
a. higher prices.
b. higher output.
c. lower prices.
d. lower output.
ANS: d

8. If the market for bottled spring water is characterized by a very elastic supply curve and a
very inelastic demand curve, an outward shift in the supply curve would be reflected
primarily in the form of
a. higher prices.
b. higher output.
c. lower prices.
d. lower output.
ANS: c

9. Suppose that the price elasticity of demand for a product is –1 and that the price elasticity of
supply is +1. Assume also that the income elasticity of demand is +2. Then an increase in
income of 10% will raise equilibrium price by
a. 10%.
b. 5%.
c. 20%.
d. an annual amount that cannot be determined.
ANS: a

10. Under perfect competition, if an industry is characterized by positive economic profits in the
short run
a. firms will leave the market in the long run and the short-run supply curve will shift
outward.
b. firms will enter the market in the long run and the short-run supply curve will shift
outward.
c. firms will enter the market in the long run and the short-run supply curve will shift
inward.
d. firms will leave the market in the long run and the short-run supply curve will shift
inward.
ANS: b

11. Positive economic profits exist for a firm in the long run if price is above
a. long-run average cost.
b. long-run marginal cost.
c. long-run total cost.
d. long-run variable cost.
ANS: a




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