1.The perfectly competitive firewood market is composed of 1,000 identical consumers and 1,000 identical firms. The table given below shows cost for one representative firm and the demand schedule for one representative consumer. The profit-maximizing quantity for each firm in this market is _____. 

 

a. ​two cords of wood

 

b. ​zero cords of wood

 

c. ​four cords of woods

 

d. ​one cord of wood

 

e. ​three cords of wood

 

Table 8.1 is attached

 

2.Consider the following figure that shows the demand and the cost curves of a perfectly competitive firm. At a market price of P₁, the profit-maximizing quantity for the firm is _____. 

 

a. ​a units of output 

 

b. ​d units of output

 

c. ​e units of output 

 

d. ​between d and e units of output

 

e. ​b units of output

 

Table 8.3 is attached

 

3.In the long run, the entry of new firms in a competitive industry: 

a. ​eliminates economic profits. 

 

b. ​makes the demand curve facing each firm more inelastic.

 

c. ​drives up the equilibrium price.

 

d. ​makes the market demand curve steeper. 

 

e. ​reduces the equilibrium quantity.

4.Which of the following is likely to be present in a perfectly competitive market?

a. ​Government licenses

 

b. ​Firms producing identical products

 

c. ​Patents

 

d. ​High capital costs

 

e. ​Nonprice competition such as advertising

 

5.In the short run, if a firm shuts down, its loss is equal to:

a. ​zero.

 

b. ​its variable cost.

 

c. ​its fixed cost minus its variable cost.

 

d. ​its fixed cost.

 

e. ​its fixed cost minus total revenue.

6. If a perfectly competitive firm is incurring losses in the short run, it:

a. ​will raise its price in the short run.

 

b. ​will continue to operate in the short run if its variable cost is covered.

 

c. ​will incur a loss in the long run as well. 

 

d. ​will shut down.

 

e. ​will continue to operate in the short run if its fixed cost is covered

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