【正文】 firms are likely to enter this market since existing firms are earning economic profits.DIF: 2 REF: 142 NAT: Analytic LOC: Perfect petitionTOP: Profit MSC: Analytical9. Give two reasons why the longrun industry supply curve may slope upward. Use an example to demonstrate your reasons.ANS: 1) Some resource used in production may be available only in limited quantities. 2) Firms may have different cost structures. The example provided in the text for the first reason is the market for farm products. As more people bee farmers, the price of land is bid up since its supply is limited. As the price of farm land is bid up, the costs to all farmers in the market rise. The example used to support the second reason is the market for painters. Anyone can enter the market for painting services, but not everyone has the same costs because some painters work faster than others.DIF: 3 REF: 143 NAT: Analytic LOC: Perfect petitionTOP: Supply curve MSC: Interpretive10. If identical firms that remain in a petitive market over the long run make zero economic profit, why do these firms choose to remain in the market?ANS: Because a normal rate of return on their investment is included as part of the opportunity cost of production.DIF: 2 REF: 143 NAT: Analytic LOC: Perfect petitionTOP: Economic profit MSC: InterpretiveSec00 Firms in Competitive MarketsMULTIPLE CHOICE1. A firm has market power if it cana.maximize profits.b.minimize costs.c.influence the market price of the good it sells.d.hire as many workers as it needs at the prevailing wage rate.ANS: C DIF: 1 REF: 140 NAT: AnalyticLOC: Perfect petition TOP: Market power MSC: Definitional2. The analysis of petitive firms sheds light on the decisions that lie behind the a.demand curve.b.supply curve.c.way firms make pricing decisions in the notforprofit sector of the economy.d.way financial markets set interest rates.ANS: B DIF: 1 REF: 140 NAT: AnalyticLOC: Perfect petition TOP: Competitive market MSC: Interpretive3. For any petitive market, the supply curve is closely related to the a.preferences of consumers who purchase products in that market.b.ine tax rates of consumers in that market.c.firms’ costs of production in that market.d.interest rates on government bonds.ANS: C DIF: 1 REF: 140 NAT: AnalyticLOC: Perfect petition TOP: Competitive market MSC: Interpretive4. Suppose that firms in each of the two markets listed below were to increase their prices by 20 percent. Which pair represents the example where customers would decrease their quantity purchased dramatically in one market and only slightly in the other market due to differences in market structure?a.corn and soybeansb.gasoline and restaurantsc.water and cable televisiond.spiral notebooks and college textbooksANS: D DIF: 2 REF: 140 NAT: AnalyticLOC: Perfect petition TOP: Competitive market MSC: InterpretiveSec01 Firms in Competitive Markets What is a Competitive Market?MULTIPLE CHOICE1. A key characteristic of a petitive market is that a.government antitrust laws regulate petition.b.producers sell nearly identical products.c.firms minimize total costs.d.firms have price setting power.ANS: B DIF: 1 REF: 141 NAT: AnalyticLOC: Perfect petition TOP: Competitive markets MSC: Definitional2. Which of the following is not a characteristic of a petitive market?a.Buyers and sellers are price takers.b.Each firm sells a virtually identical product.c.Free entry is limited.d.Each firm chooses an output level that maximizes profits.ANS: C DIF: 2 REF: 141 NAT: AnalyticLOC: Perfect petition TOP: Competitive markets MSC: Definitional3. In a perfectly petitive market, a.no one seller can influence the price of the product.b.price exceeds marginal revenue for each unit sold.c.average revenue exceeds marginal revenue for each unit sold.d.administrative barriers can make it difficult for firms to enter an industry.ANS: A DIF: 1 REF: 141 NAT: AnalyticLOC: Perfect petition TOP: Competitive markets MSC: Interpretive4. Who is a price taker in a petitive market?a.buyers onlyb.sellers onlyc.both buyers and sellersd.neither buyers nor sellersANS: C DIF: 1 REF: 141 NAT: AnalyticLOC: Perfect petition TOP: Competitive markets MSC: Definitional5. Competitive markets are characterized by a.a small number of buyers and sellers.b.unique products.c.the interdependence of firms.d.free entry and exit by firms.ANS: D DIF: 1 REF: 141 NAT: AnalyticLOC: Perfect petition TOP: Competitive markets MSC: Definitional6. A market is petitive if(i)firms have the flexibility to price their own product.(ii)each buyer is small pared to the market.(iii)each seller is small pared to the market.a.(i) and (ii) onlyb.(i) and (iii) onlyc.(ii) and (iii) onlyd.(i), (ii), and (iii)ANS: C DIF: 2 REF: 141 NAT: AnalyticLOC: Perfect petition TOP: Competitive markets MSC: Interpretive7. When a firm has little ability to influence market prices it is said to be in a a.petitive market.b.strategic market.c.thin market.d.power market.ANS: A DIF: 1 REF: 141 NAT: AnalyticLOC: Perfect petition TOP: Competitive markets MSC: Definitional8. In a petitive market, the actions of any single buyer or seller will a.have a negligible impact on the market price.b.have little effect on market equilibrium quantity but will affect market equilibrium price.c.affect marginal revenue and average revenue but not price.d.adversely affect the profitability of more than one firm in the market.ANS: A DIF: 2 REF: 141 NAT: AnalyticLOC: Perfect petition TOP: Competitive markets MSC: Interpretive9. Because the goods offered for sale in a petitive market are largely the same,a.there will be few s