 Show Chapter 14 Firms in Competitive Markets MULTIPLE CHOICE 1.A firm has market power if it can a.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:CPTS:1DIF: 1REF:14-0 NAT:AnalyticLOC:Perfect competitionTOP:Market power MSC:Definitional 2.A book store that has market power can a.influence the market price for the books it sells. b.minimize costs more efficiently than its competitors. c. reduce its advertising budget more so than its competitors. d.ignore profit-maximizing strategies when setting the price for its books. ANS:APTS:1DIF:1REF:14-0 NAT:AnalyticLOC:Perfect competitionTOP:Market power MSC:Applicative 3. The analysis of competitive firms sheds light on the decisions that lie behind the a.demand curve. b.supply curve. c.way firms make pricing decisions in the not-for-profit sector of the economy. d.way financial markets set interest rates. ANS:BPTS:1DIF:1REF:14-0 NAT:AnalyticLOC:Perfect competitionTOP:Competitive markets MSC:Interpretive 4.For any competitive market, the supply curve is closely related to the a.preferences of consumers who purchase products in that market. b.income tax rates of consumers in that market. c.firms’ costs of production in that market. d.interest rates on government bonds. ANS:CPTS:1DIF:1REF:14-0 NAT:AnalyticLOC:Perfect competitionTOP:Competitive markets MSC:Interpretive 5.Suppose a firm in each of the two markets listed below were to increase its price by 20 percent. In which pair would the firm in the first market listed experience a dramatic decline in sales, but the firm in the second market listed would not? a.corn and soybeans b.gasoline and restaurants c.water and cable television d.spiral notebooks and college textbooks ANS:DPTS:1 DIF:2REF:14-0 NAT:AnalyticLOC:Perfect competitionTOP:Competitive markets MSC:Applicative 1 © 2012 Cengage Learning. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part. What is free entry in economics?In economics, free entry is a condition in which firms can freely enter the market for an economic good by establishing production and beginning to sell the product.
Which of the following is not a characteristic of a perfectly competitive market?The correct answer is A. Perfect competition is not characterized by low prices because organizations that participate in their operations determine the price at which specific goods are tagged. The other choices are characteristics of a perfectly competitive market because its participants trade homogeneous products.
Which of the following is a characteristic of a competitive market?Answer and Explanation: The following is a characteristic of a competitive market: d. Buyers and sellers are price takers. In this scenario, there are large numbers of buyers and sellers and homogeneous goods being traded.
What is free entry equilibrium?A free entry equilibrium is just a Nash equilibrium of the symmetric game, such that some firms are active and some inactive. In other words, there is at least a potential entrant optimally deciding not to actually enter .
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Which of the following industries is least likely to exhibit a characteristic of free entry?
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