【正文】 ellers in the market.b.there will be few buyers in the market.c.only a few buyers will have market power.d.sellers will have little reason to charge less than the going market price.ANS: D DIF: 2 REF: 141 NAT: AnalyticLOC: Perfect petition TOP: Competitive markets MSC: Interpretive10. Which of the following is not a characteristic of a perfectly petitive market?a.Firms are price takers.b.Firms have difficulty entering the market.c.There are many sellers in the market.d.Goods offered for sale are largely the same.ANS: B DIF: 2 REF: 141 NAT: AnalyticLOC: Perfect petition TOP: Competitive markets MSC: Interpretive11. Which of the following is not a characteristic of a perfectly petitive market?a.Firms are price takers.b.Firms can freely enter the market.c.Many firms have market power.d.Goods offered for sale are largely the same.ANS: C DIF: 2 REF: 141 NAT: AnalyticLOC: Perfect petition TOP: Competitive markets MSC: Interpretive12. Free entry means thata.the government pays any entry costs for individual firms.b.no legal barriers prevent a firm from entering an industry.c.a firm39。s marginal cost curve crosses the marginal revenue curve at an output level of 1,000 units. What is the firm39。s revenue must be sufficient to cover all opportunity costs.ANS: T DIF: 2 REF: 143 NAT: AnalyticLOC: Perfect petition TOP: Zeroprofit condition MSC: Interpretive49. The shortrun supply curve in a petitive market must be more elastic than the longrun supply curve.ANS: F DIF: 2 REF: 143 NAT: AnalyticLOC: Perfect petition TOP: Supply curve MSC: Interpretive50. The longrun supply curve in a petitive market is more elastic than the shortrun supply curve.ANS: T DIF: 2 REF: 143 NAT: AnalyticLOC: Perfect petition TOP: Supply curve MSC: InterpretiveSHORT ANSWER1. Describe the difference between average revenue and marginal revenue. Why are both of these revenue measures important to a profitmaximizing firm?ANS: Average revenue is total revenue divided by the quantity of output. Marginal revenue is the change in total revenue from the sale of each additional unit of output. Marginal revenue is used to determine the profitmaximizing level of production, and average revenue is used to help determine the level of profits. Note that for all firms, price equals average revenue because AR=(PxQ)/Q=P. But only for a firm operating in a perfectly petitive industry does price also equal marginal revenue.DIF: 2 REF: 141 NAT: Analytic LOC: Perfect petitionTOP: Price MSC: Definitional2. List and describe the characteristics of a perfectly petitive market.ANS: There are many buyers and sellers in the market. The goods offered by the various sellers are largely the same. Firms can freely enter or exit the market.DIF: 2 REF: 141 NAT: Analytic LOC: Perfect petitionTOP: Competitive markets MSC: Definitional3. Why would a firm in a perfectly petitive market always choose to set its price equal to the current market price? If a firm set its price below the current market price, what effect would this have on the market?ANS: The firm could not sell any more of its product at a lower price than it could sell at the market price. As a result, it would needlessly forgo revenue if it set a price below the market price. If the firm set a higher price, it would not sell anything at all because a petitive market has many sellers who would supply the product at the market price.DIF: 2 REF: 141 NAT: Analytic LOC: Perfect petitionTOP: Profit maximization MSC: Analytical4. Use a graph to demonstrate the circumstances that would prevail in a petitive market where firms are earning economic profits. Can this scenario be maintained in the long run? Explain your answer.ANS: In a petitive market where firms are earning economic profits, new firms will have an incentive to enter the market. This entry will expand the number of firms, increase the quantity of the good supplied, and drive down prices and profits. Entry will cease once firms are producing the output level where price equals the minimum of the average total cost curve, meaning that each firm earns zero economic profits in the long run.DIF: 2 REF: 142 NAT: Analytic LOC: Perfect petitionTOP: Profit maximization MSC: Analytical5. Explain how a firm in a petitive market identifies the profitmaximizing level of production. When should the firm raise production, and when should the firm lower production?ANS: The firm selects the level of output at which marginal revenue is equal to marginal cost. If MR MC, profit will increase if the firm increases Q. If MR MC, profit will increase if the firm decreases Q.DIF: 2 REF: 142 NAT: Analytic LOC: Perfect petitionTOP: Profit maximization MSC: Analytical6. News reports from the western United States occasionally report incidents of cattle ranchers slaughtering a large number of newborn calves and burying them in mass graves rather than transporting them to markets. Assuming that this is rational behavior by profitmaximizing firms, explain what economic factors may influence such behavior.ANS: If the selling price is not sufficient to cover the variable cost of sending the calves to market, this (potentially emotionally upsetting) behavior makes economic sense.DIF: 2 REF: 142 NAT: Analytic LOC: Perfect petitionTOP: Profit maximization MSC: Analytical7. Use a graph to demonstrate the circumstances that would prevail in a perfectly petitive market where firms are experiencing economic losses. Identify costs, revenue, and the economic losses on your graph. Using your graph, determine whether an individual firm will shut down in the short run, or choose to remain in the market. Explain your answer.ANS: The losses and revenues are identified on the individual firm39。 for firms operating in perfectly petitive industries, maximizing profits also means