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Chapter 13
Perfect Competition
Multiple Choice Questions
1. A price taker is a buyer or seller who:
A. has complete control over setting the market price.
B. can influence the market price.
C. has no control over setting the market price.
D. has the goal of maximizing market share, not profits.
2. A competitive market is one in which:
A. fully informed price-taking buyers and sellers easily trade a standardized good.
B. few large sellers compete for a majority of the market share.
C. government oversees its operation.
D. None of these describe a competitive market.
3. Standardized goods are:
A. goods which are regulated by government quality standards.
B. goods which are easily substitutable and not distinguishable.
C. the most common type of good produced.
D. those sold in markets with regulated price systems.
13-1
Copyright © 2014 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
4. Perfectly competitive markets:
A. are more an idealized model economists use than a real-life occurrence.
B. are the most common type of market in the United States.
C. tend to have relatively few buyers.
D. tend to have relatively few sellers.
5. Most markets in the United States:
A. have some degree of competitiveness, but are not perfectly competitive.
B. have very little competitive features and so are regulated by the government.
C. are monopolies.
D. are perfectly competitive.
6. The opposite of being a price taker is:
A. having market power.
B. having no control over the market price.
C. being able to influence the market price.
D. None of these describe the opposite of price taker.
7. An essential characteristic of a perfectly competitive market is that buyers and sellers:
A. have so much competition that they have no ability at all to set their own price.
B. have no competition and so must set the market price on their own.
C. have so much competition that that they must work together perfectly to set a market
price.
D. None of these is true.
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8. An essential characteristic of a perfectly competitive market is:
A. buyers and sellers have no control over the market price.
B. sellers are selling unique products.
C. buyers have complete control over the market price and sellers have none.
D. sellers have complete control over the market price and buyers have none.
9. In a perfectly competitive market price takers exist because:
A. there are few sellers and many buyers.
B. there are few buyers and many sellers.
C. there are many buyers and sellers.
D. there are few sellers and buyers.
10. When someone has market power, it means they:
A. can noticeably affect the market price.
B. have no control over the market price.
C. can noticeably affect the market quantity available for sale.
D. do not noticeably affect the market quantity offered for sale.
A. are a price taker.
B. can noticeably affect the market price.
C. do not affect the market quantity offered for sale.
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A. buyers and sellers share market power.
B. sellers are price makers.
C. goods are standardized.
D. goods are unique.
A. goods are standardized.
B. goods are interchangeable.
C. goods from one seller cannot be distinguished from another's.
D. All of these are true.
14. A good that is standardized is:
A. interchangeable with others in the market.
B. indistinguishable to others in the market.
C. identical to others in the market.
15. Standardized goods and services refers to those that:
A. are interchangeable.
B. have close substitutes.
C. are unique.
D. are regulated by the government.
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16. An example of a standardized good is:
A. grain.
B. iron.
C. crude oil.
D. All of these represent standardized goods.
17. Commodities:
A. are a special type of standardized good.
B. have no product differentiation.
C. are identical regardless of who produced it.
A. grain.
B. granola cereal.
C. hamburgers.
D. digital cameras.
19. One implication of goods being standardized in a market is:
A. there are no information asymmetries.
B. the government regulations must promote competition and lower prices to be efficient.
C. the similarity in products may be real or perceived.
D. None of these is an implication of standardization.
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20. A characteristic that is important, but not essential to defining a perfectly competitive market
is:
B. buyers and sellers are price takers.
C. firms can freely enter and exit the market.
D. All of these are necessary to define a perfectly competitive market.
21. Having free entry and exit in a market can help drive:
A. innovation.
B. cost-cutting.
C. quality improvements.
D. All of these are driven by the threat of entry by competitors.
22. Collusion:
A. is more likely when the threat of market entry is missing.
B. is more likely in perfectly competitive markets.
C. is less likely when the threat of market entry is missing.
23. In a perfectly competitive market, producers:
A. are able to sell as much as they want without affecting the market price.
B. can influence the price upward by restricting output.
C. often undercut the competition's price and force firms to leave the market.
D. None of these is true of perfectly competitive markets.
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24. In a perfectly competitive market, total revenue:
A. measures how much revenue the firm takes in from all sales.
B. is equal to price multiplied by quantity sold.
C. only varies due to changes in quantity, since price is constant.
25. For firms that sell one product in a perfectly competitive market, the market price:
A. is constant, regardless of quantity sold.
B. is equal to average revenue for a firm.
C. is equal to marginal revenue for a firm.
A. is taken as a constant by individual firms.
B. will not be influenced by one firm's output decision.
C. is equal to the average revenue of a firm.
A. will remain constant regardless of an individual firm's output decision.
B. is equal to the average total cost of a firm.
C. is equal to the marginal cost of a firm.
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28. For firms that sell one product in a perfectly competitive market, average revenue:
A. is calculated by total revenue divided by total output.
B. is equal to marginal revenue.
C. is equal to the market price.
A. is calculated by total output divided by total revenue.
B. is equal to marginal cost.
30. For firms that sell one product in a perfectly competitive market, marginal revenue:
A. is the additional revenue gained from selling one more unit.
B. is equal to average revenue.
C. is equal to market price.
A. is always greater than market price.
B. is always less than market price.
C. is always the same as market price.
D. All of these can be true.
13-8
A. will increase if marginal revenue is greater than it.
B. will decrease if marginal revenue is greater than it.
C. will always be the same as marginal revenue.
34. This table shows price and quantity produced for a single firm in a perfectly competitive
market.
Given the information in the table shown, what is the marginal revenue when 25 units are
produced?
A. $250
B. $25
C. $10
D. $20
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market.
Given the information in the table shown, what is the total revenue when 23 units are
produced?
A. $230
B. $10
C. $23
D. $2.30
market.
Given the information in the table shown, what is the average revenue when 24 units are
produced?
A. $240
B. $10
C. $24
D. $2.40
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market.
Given the information in the table shown, what is the market price?
A. $20
B. $10
C. $2
D. $260
38. If a perfectly competitive firm faces a market price of $3 per unit, and it decides to produce
30,000 units, the market price will likely:
A. increase.
B. decrease.
C. stay the same.
D. Cannot answer without more information.
39. If a firm in a perfectly competitive market faces a market price of $5, and it decides to
produce 400 units, the firm's total revenue will be:
A. $5.
B. $400.
C. $2,000.
D. Cannot be determined without knowing the firm's total cost.
13-11
produce 700 units, the firm's average revenue will be:
A. $4.
B. $2,800.
C. $175.
D. $700.
increase its production from 2,000 units to 4,000 units, the firm's marginal revenue:
A. will increase from $4,000 to $8,000.
B. will decrease from $8,000 to $4,000.
C. will stay the same.
increase its production from 300 units to 550 units, the firm's total revenue:
C. will stay the same at $8.
D. will likely rise, but it cannot be determined by how much.
13-12
increase its production from 4,000 to 12,000 units, the firm's marginal revenue:
A. will diminish once diminishing marginal product sets in.
B. will rise once diminishing marginal product sets in.
D. will increase from $28,000 to $84,000.
44. When a firm faces a perfectly competitive market and buys its inputs from perfectly
competitive markets, the only choice the firm has to affect its profits is to:
A. increase its selling price.
B. change the quantity it produces.
C. decrease the selling price.
45. Because firms in perfectly competitive markets can sell any quantity without driving down
prices, they should:
A. produce as much as possible to maximize profits.
B. produce at the lowest cost per unit to maximize profits.
C. try to flood the market.
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46. Firms in perfectly competitive markets who wish to maximize profits ought to:
A. produce where marginal revenue equals market price.
B. produce as many units as their scale allows.
C. produce at capacity and plan to expand in the long run.
47. Firms in perfectly competitive markets who wish to maximize profits should produce where:
A. marginal revenue and marginal cost are equal.
B. marginal revenue and market price are equal.
C. marginal revenue and average revenue are equal.
D. marginal cost and average cost are equal.
48. Firms in perfectly competitive markets who wish to maximize profits should:
A. keep producing more as long as marginal cost is less than marginal revenue.
B. produce less as long as marginal cost is greater than marginal revenue.
C. produce where marginal cost and marginal revenue are equal.
49. Firms in perfectly competitive markets who wish to maximize profits should produce:
A. more as long as marginal cost is greater than marginal revenue.
B. less as long as marginal cost is less than marginal revenue.
C. at the level where marginal cost equals marginal revenue.
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50. A firm in a perfectly competitive market can maximize its profits by:
A. producing the level of output where marginal cost equals marginal revenue.
B. producing any level below where marginal cost equals marginal revenue.
C. producing any level beyond where marginal cost equals marginal revenue.
D. producing at capacity.
51. For a firm in a perfectly competitive market, if it produces where marginal cost exceeds
marginal revenue:
A. it should cut back production to increase profits.
B. it should increase production to increase profits.
C. it is producing a profit-maximizing quantity.
D. The firm is not maximizing profits, but it is impossible to tell how quantity should be
changed without more information.
52. For a firm in a perfectly competitive market, if it is producing at a level of output where
marginal costs are less than marginal revenue:
13-15
marginal costs are equal to marginal revenue:
54. Firms in perfectly competitive markets typically have:
A. one profit-maximizing level of output.
B. several profit-maximizing levels of output to choose from.
C. two profit-maximizing levels of output to choose from.
D. no chance of maximizing profits, since they have no control over market price.
55. If a firm in a perfectly competitive market is producing at a level of output where marginal
costs exceed marginal revenue:
A. its profits must be negative.
B. its profits are maximized.
C. its profits will increase if they produce less.
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costs are less than marginal revenue:
A. its profits must be positive.
57. The profit-maximizing level of output for any firm in a perfectly competitive market is to
produce where:
A. MC = MR.
B. MC > MR.
C. MC < MR.
D. MR = P*.
13-17
58. This table shows the total costs for various levels of output for a firm operating in a perfectly
competitive market.
According to the table shown, what is the market price?
A. $500
B. $150
C. $50
D. It depends on the level of output.
13-18
competitive market.
According to the table shown, what is the firm's total revenue when 4 units are produced?
A. $160
B. $50
C. $200
D. $40
13-19
competitive market.
According to the table shown, what is the firm's marginal revenue from the 3 rd unit
produced?
A. $50
B. $90
C. $150
D. $60
13-20
competitive market.
According to the table shown, what is the firm's marginal cost from producing the 2 nd unit?
A. $10.00
B. $7.50
C. $27.50
D. $20.00
13-21
competitive market.
According to the table shown, the firm's marginal revenue:
A. is constant.
B. increases as output increases.
C. decreases as output increases.
D. increases until the 3rd unit, then decreases.
13-22
competitive market.
According to the table shown, the firm's marginal costs:
A. are constant.
B. increase as output increases.
C. decrease until the 2nd unit, then increase.
D. increase until the 4th unit, then decrease.
13-23
competitive market.
According to the table shown, the firm's profit:
A. is maximized at 3 units of output.
B. is maximized at 4 units of output.
C. is maximized at 5 units of output.
D. is not maximized at any level of output given.
13-24
competitive market.
According to the table shown, when 5 units are produced:
A. profits are maximized.
B. profits are positive.
C. the firm is producing less than the profit-maximizing amount.
D. the firm is producing more than the profit-maximizing amount.
13-25
competitive market.
According to the table shown, when 1 unit is produced:
A. marginal costs exceed marginal revenue, and the firm should produce more.
B. marginal revenue exceeds marginal costs, and the firm should produce more.
C. marginal revenue exceeds marginal costs, and the firm should produce less.
D. marginal costs exceed marginal revenue, and the firm should produce less.
13-26
competitive market.
According to the table shown, fixed costs must be:
A. $10.
B. $200.
C. $60.
D. Fixed costs cannot be determined by the information in the table.
13-27
68.
According to the graph shown, the profit at point A is:
A. lower than those at point B.
B. higher than those at point B.
C. the same as those at point B.
D. Cannot answer this question without more information.
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69.
According to the graph shown, producing 9 units earns profits that are:
A. lower than output of 11 units, and the firm should increase production.
B. higher than output of 11 units, and the firm should decrease production.
C. higher than output of 11 units, and the firm should increase production.
D. lower than output of 11 units, and the firm should decrease production.
13-29
70.
According to the graph shown, at point C the firm is earning:
A. fewer profits than at point B, and they should produce less.
B. higher profits than at point B, and they should produce more.
C. fewer profits than at point B, and they should produce more.
D. higher profits than at point B, and they should produce less.
13-30
71.
According to the graph shown, producing 14 units:
A. is not as profitable as producing 11 units.
B. will earn negative profits.
C. will earn more profits than producing 9 or 11 units.
13-31
72.
According to the graph shown, the market price is:
A. $15
B. $9
C. $11
D. Cannot be determined from the information in the graph.
73. For a firm in a perfectly competitive market, a price decrease:
A. lowers the profit-maximizing quantity.
B. increases the profit-maximizing quantity.
C. is unrelated to the profit-maximizing quantity.
D. signifies the firm should leave the market.
13-32
74. The MC of a firm:
A. crosses ATC at its minimum.
B. crosses AVC at its minimum.
C. crosses MR at the profit-maximizing level of output.
75. As long as average revenue remains above average total cost:
A. total revenue will be higher than total cost.
B. the firm will be making profits.
C. price will be greater than average total cost.
76. As long as market price remains above the average total cost, and the firm chooses the
profit-maximizing level of output, it will:
A. make profits.
B. Any of these is possible.
C. earn a loss.
D. earn zero profits.
77. If a firm is earning a profit, then:
A. total revenue must be higher than total cost.
B. the ATC must be higher than the market price.
C. the ATC must be higher than AR.
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78. If the market price falls below the bottom of the firm's ATC curve:
A. there is no level of output at which the firm can make a profit.
B. the firm is earning profits.
C. the market price must be lower than the firm's AVC.
79. If the market price falls below a firm's minimum average total cost, the firm should:
A. definitely stop production.
B. definitely continue to operate at a loss.
C. consider how to minimize its losses.
D. pay only fixed costs.
80. In the short run, when a firm stops producing:
A. it avoids paying fixed costs.
B. it avoids paying variable costs.
C. it can avoid earning profits less than zero.
81. In the short run, the fixed costs of a firm:
A. must be paid regardless of level of output.
B. are irrelevant in deciding whether to shut down production.
C. are greater than zero when quantity produced is zero.
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82. In the short run, the relevant costs for a firm to consider whether to shut down production
are:
A. average total costs.
B. average variable costs.
C. average fixed costs.
D. fixed costs.
83. In the short run, a firm that finds itself earning a loss should compare the market price to
which cost in order to determine how to minimize its losses?
A. Average total costs
B. Average variable costs
C. Marginal costs
D. Fixed costs
84. A firm realizes that the market price has fallen below its average total costs, and it is now
earning a loss. What is the best action for the firm to take in the short run?
A. Stay open if price is greater than average variable costs.
B. Shut down immediately and pay fixed costs only.
C. Stay open if total revenue is greater than fixed costs.
D. Shut down if price is greater than average variable costs.
13-35
A. Produce where MC = MR to minimize losses if P > AVC.
B. Shut down if price is greater than average variable costs.
C. Produce where MC = MR to minimize losses if P < AVC.
D. Shut down if total revenue is less than fixed costs.
86. When the market price has fallen below a firm's ATC but is above its AVC, in the short run,
the firm:
A. will yield more revenue than variable costs by producing where MC = MR.
B. can minimize its losses by staying open.
C. is not earning positive profits.
87. If the market price ever drops below a firm's average variable costs at its profit-maximizing
level of output:
A. the firm should shut down immediately.
B. the loss-minimizing quantity of output is zero.
C. the firm is not earning enough revenue to cover the variable costs of production.
13-36
88. The short-run shutdown rule is to shut down if:
A. P > AVC.
B. P < AVC.
C. P > ATC.
D. P < ATC.
89. The long-run exit rule is to exit the industry if:
A. P > AVC.
B. P < AVC.
C. P > ATC.
D. P < ATC.
90. Given the shutdown rule, what does the firm's short-run supply curve look like?
A. It is the section of the ATC curve to the right of its minimum.
B. It is the section of the MC that lies above the ATC curve.
C. It is the section of the MC that lies above the AVC curve.
D. It is the section of the AVC curve to the right of its minimum.
91. Given the exit rule, where does a firm's long-run supply curve derive from?
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92.
Of the curves displayed in the graph shown, which is most likely the marginal cost curve?
A. A
B. B
C. C
D. None is likely to be the marginal cost curve.
13-38
93.
Of the curves displayed in the graph shown, what does curve B most likely represent?
A. Marginal cost
B. Average total cost
C. Average variable cost
D. Average fixed cost
13-39
94.
Of the curves displayed in graph shown, what does curve C most likely represent?
A. Marginal cost
D. Marginal revenue
13-40
95.
If a firm in a perfectly competitive market faces the curves in the graph shown and observes
a market price of $16, the firm:
A. can make positive profits by producing less than 43 units.
B. can make positive profits by producing where MC = MR.
C. cannot make positive profits and should shut down in the short run.
D. should continue to operate in the short run, but plan to exit in the long run.
13-41
96.
If a firm in a perfectly competitive market faces the cost curves in the graph shown and
observes a market price of $13, the firm:
A. can make positive profits by producing more than 35 units.
13-42
97.
13-43
98.
If a firm in a perfectly competitive market faces the cost curves in the graph shown, which of
the following is true?
A. The firm will make positive profits when price is higher than $15, if it chooses to produce
at its profit-maximizing level of output.
B. The firm will make positive profits when price is higher than $11, if it chooses to produce
at its profit-maximizing level of output.
C. The firm should always produce at least 43 units in order to maximize profits.
D. None of these statements is true.
13-44
99.
produces at the profit-maximizing level of output, which of the following is true?
A. A firm will plan to exit the industry if price falls below $15.
B. A firm will continue to operate in the short run if price is at least $11.
C. A firm will make positive profits any time the price is greater than $15.
13-45
100.
A. A firm will lose money and shut down in the short run if price falls below $15.
B. A firm will lose money, but continue to operate in the short run if price is at least $15.
101.In the short run, we assume that the number of firms in a perfectly competitive market:
A. is fixed.
B. varies if perfect information is present.
C. varies more than the long-run equilibrium.
13-46
102.The number of firms in a perfectly competitive market:
A. is fixed in the short run.
B. varies in the long run.
C. varies in the short run.
D. is the same at all possible long-run equilibria.
103.The market supply in a perfectly competitive market:
A. is fixed.
B. is the sum of the quantities that each individual producer is willing to supply.
C. is the total quantity of a good that the biggest market shareholder supplies at a given
price.
104.We assume that in the short run in a perfectly competitive market the:
A. number of firms is fixed.
B. total quantity supplied is fixed.
C. price is fixed.
D. All of these are true of the short run.
105.We assume that in the long run in a perfectly competitive market:
A. the firms can enter or exit.
B. the number of firms is fixed.
C. the price will be constant.
D. collusion will set in without government regulation.
13-47
106.We assume that in the short run in a perfectly competitive market firms:
A. can enter and exit the market.
B. can enter, but not exit the market.
C. can exit, but not enter the market.
D. cannot enter or exit the market.
107.The key difference between supply in the short run and supply in the long run is that we
assume that:
A. firms are able to enter and exit the market in the long run.
B. firms are able to enter and exit the market in the short run.
C. firms will not collude in the short run.
D. firms' total supply will be constant in the long run.
108.In the long run, firms will enter a perfectly competitive market if the existing firms are
making:
A. a profit.
B. negative profits.
C. zero profits.
D. Any of these could be true.
109.In the long run, firms in a perfectly competitive market will:
A. exit if the price is lower than their lowest average total cost.
B. attract other firms to the market if the price is higher than their lowest average total cost.
C. not attract other firms if they are earning zero economic profits.
13-48
110.If firms are producing at a profit-maximizing level of output where the price exceeds the
average total cost:
A. accounting profits must be positive.
B. economic profits must be positive.
C. other firms will enter the market.
111.If firms are producing at a profit-maximizing level of output where the price is less than the
average total cost:
A. economic profits may be positive.
B. accounting profits may be positive.
C. All of these are true.
D. accounting profits must be positive.
112.If firms are producing at a profit-maximizing level of output where the price is equal to the
average total cost:
A. average total cost must be minimized.
B. economic profits must be zero.
C. accounting profits must be positive.
13-49
113.If firms are producing at a profit-maximizing level of output where the price is equal to the
average total cost:
A. accounting profits may be negative.
B. accounting profits must be zero.
C. economic profits may be positive.
D. economic profits must be zero.
114.If a firm is earning a negative economic profit, it means that:
A. the resources should be invested in other business opportunities.
B. more profits could be earned with the same resources in another industry.
C. the opportunity cost is larger than what the firm is earning.
115.If a firm is earning a positive economic profit, it means that it:
A. is using its resources in the most profitable way.
B. should invest its resources in other business opportunities.
C. has an opportunity cost that is larger than what the firm is currently earning.
116.When economic profits are zero for a firm in a perfectly competitive market, it means that:
A. average total costs are zero.
B. price is equal to minimum average total cost.
C. average variable costs are minimized.
13-50
117.When economic profits are zero for a firm, it means that:
A. no firms will enter or exit the industry.
B. average revenue is equal to average total cost.
C. average total costs are minimized.
118.Each point of a firm's supply curve represents a price-quantity pair where:
A. MC = MR.
B. P = min ATC.
C. P = min AVC.
D. MC = ATC.
119.When firms enter a market, the supply increases and:
A. price falls and profits decrease.
B. price increases and profits decrease.
C. price falls and profits increase.
D. price increases and profits increase.
120.As the equilibrium price falls in a perfectly competitive market, so do firms':
A. revenue and so do their profits.
B. total costs and so do their profits.
C. revenue, and their profits rise.
D. total costs, and their profits rise.
13-51
121.When some firms leave a perfectly competitive market, the price:
A. falls, and profits of those left rise.
B. falls, and profits of those left fall.
C. increases, and profits of those left rise.
D. increases, and profits of those left fall.
122.In the long run in a perfectly competitive market:
A. firms earn zero economic profits.
B. firms operate at an efficient scale.
C. supply is perfectly elastic when all firms have the same cost structure.
123.In the long run in a perfectly competitive market:
A. firms earn positive economic profits.
C. supply is perfectly inelastic when all firms have the same cost structure.
124.In the long run, firms in a perfectly competitive market produce:
A. where average total costs are minimized.
B. at the most efficient scale.
C. where price equals marginal cost.
13-52
125.In the long run, firms in a perfectly competitive market:
A. produce a quantity that maximizes profits.
B. earn a zero economic profit.
C. choose the level of output that minimizes average total costs.
126.In the long run, firms in a perfectly competitive market choose to produce a quantity:
A. that earns zero economic profits.
B. that does not cover minimum average variable costs.
C. where marginal costs are less than average variable costs.
127.Which of the following holds true at the chosen level of output in the long run for firms in a
perfectly competitive market?
A. P = MC
B. P = minimum ATC
C. MR = MC
13-53
128.This graph represents the cost and revenue curves of a firm in a perfectly competitive
market.
According the graph shown, the firm's most efficient scale of operation is to produce
quantity:
A. Q1.
B. Q2.
C. Q3.
D. Any quantity as long as P1 is charged.
13-54
market.
According to the graph shown, the long-run output decision for this firm is:
A. Q1, P1.
B. Q1, P2.
C. Q2, P1.
D. Q3, P3.
13-55
market.
According to the graph shown, what is the market price?
A. P1
B. P2
C. P3
D. Cannot tell from the graph.
13-56
market.
According to the graph shown, if a firm is producing at Q1:
A. profits are not being maximized.
B. average total costs exceed the market price.
C. the firm should increase production.
13-57
market.
A. profits are being maximized.
B. average total costs are minimized.
C. it is producing at an efficient scale.
13-58
market.
C. the firm should expand production.
13-59
market.
According to the graph shown, if a firm is producing at Q2, and it is identical to others in the
market:
B. firms will enter this market.
C. economic profits are zero.
13-60
market.
A. firms will not enter this market.
B. profits are being maximized.
136.In a perfectly competitive market in the long run:
A. price is the same at any quantity.
B. firms produce at an efficient scale.
C. profits are maximized.
13-61
137.In a perfectly competitive market, when the price is greater than the minimum average total
cost for most firms, some will:
A. exit until the price drops to equal minimum ATC.
B. enter until the price drops to equal minimum ATC.
C. exit until the price increases to equal minimum ATC.
D. enter until the price increases to equal minimum ATC.
138.In a perfectly competitive market, when the price is greater than the minimum average total
cost for all firms:
A. positive economic profits are being earned.
B. firms will enter, causing the price to increase.
C. firms will exit, causing the price to drop.
139.In a perfectly competitive market, when the price is below the minimum average total cost for
most firms:
A. negative economic profits are being earned.
B. positive accounting profits may be earned.
C. higher accounting profits may be earned elsewhere.
13-62
140.In a perfectly competitive market, when the price is below the minimum average total cost for
all firms:
A. higher accounting profits may be earned elsewhere.
B. firms will likely leave the market.
C. the price will eventually rise once enough firms have left the market.
141.Because market price always tends back to the minimum average total cost for all identical
firms in a perfectly competitive market in the long run, in theory:
A. the supply will remain a constant quantity.
B. price will be the same at any quantity.
C. the supply curve will be upward sloping.
142.In theory, the long-run supply curve for perfectly competitive market firms who are identical
is:
A. perfectly elastic.
B. perfectly inelastic.
C. upward sloping.
D. downward sloping.
13-63
143.In reality, the long-run supply curve tends to be:
C. upward sloping.
144.In reality, the long-run supply curve for a perfectly competitive market is upward sloping
because:
A. of changing costs of production that firms may face.
B. not all firms have identical cost structures.
C. experienced firms will have different information and costs than new firms.
145.If the demand increases in a perfectly competitive market, the price will:
A. temporarily increase.
B. increase permanently.
C. temporarily decrease.
D. decrease permanently.
146.If the demand increases in a perfectly competitive market, in the short run the supply curve
will:
A. increase.
B. decrease.
C. not change.
D. either increase or decrease.
13-64
147.If the demand increases in a perfectly competitive market, what will likely occur?
A. Firms will temporarily make a profit due to a higher price.
B. Firms will enter the market in hopes of capturing some profits.
C. The short-run supply curve will shift to the right, causing price to eventually fall.
148.If the demand increases in a perfectly competitive market, firms will likely:
A. experience a loss due to increased competition.
B. set prices artificially higher permanently.
C. enter the market in hopes of capturing some profits.
149.If the demand in a perfectly competitive market decreases, the price will:
B. temporarily decrease.
C. increase permanently.
150.If the demand in a perfectly competitive market decreases, the supply curve will:
A. not change in the short run.
B. increase in the long run.
C. increase in the short run.
D. decrease in the short run.
13-65
151.If the demand decreases in a perfectly competitive market, firms will likely:
A. experience negative profits in the short run.
B. experience zero profits in the long run.
C. exit the market in hopes of capturing profits elsewhere.
152.When demand increases in a perfectly competitive market, the market price:
A. increases in the short run and falls in the long run.
B. decreases in the short run and increases in the long run.
C. increases in the short run and stays permanently higher in the long run.
D. decreases in the short run and stays permanently lower in the long run.
153.The short-run supply curve is _______________ and the long-run supply curve is
_______________ in a perfectly competitive market in which all firms have identical cost
structures.
A. upward sloping; upward sloping
B. upward sloping; perfectly elastic
C. perfectly elastic; upward sloping
D. downward sloping; upward sloping
13-66
154.When demand increases in a perfectly competitive market, in the short run _______________,
and in the long run _______________.
A. quantity supplied increases; supply increases
B. quantity supplied increases; supply decreases
C. quantity supplied decreases; supply decreases
D. quantity supplied decreases; supply increases
155.When demand increases in a perfectly competitive market, in the short run

__________________, and in the long run __________________.
A. prices increase; supply increases
B. prices increase; prices stay permanently higher
C. quantity supplied increases; prices increase
D. quantity supplied decreases; prices decrease
13-67
Chapter 13 Perfect Competition Answer Key
Multiple Choice Questions
1. A price taker is a buyer or seller who:
A. has complete control over setting the market price.
B. can influence the market price.
C. has no control over setting the market price.
D. has the goal of maximizing market share, not profits.
AACSB: Reflective Thinking

Blooms: Understand
Learning Objective: 13-01 Describe the characteristics of a perfectly competitive market.
Topic: Perfectly Competitive Markets
2. A competitive market is one in which:
A. fully informed price-taking buyers and sellers easily trade a standardized good.
B. few large sellers compete for a majority of the market share.
C. government oversees its operation.
D. None of these describe a competitive market.

Blooms: Understand
13-68
3. Standardized goods are:
A. goods which are regulated by government quality standards.
B. goods which are easily substitutable and not distinguishable.
C. the most common type of good produced.
D. those sold in markets with regulated price systems.

Blooms: Understand
4. Perfectly competitive markets:
A. are more an idealized model economists use than a real-life occurrence.
B. are the most common type of market in the United States.
C. tend to have relatively few buyers.
D. tend to have relatively few sellers.

Blooms: Understand
5. Most markets in the United States:
A. have some degree of competitiveness, but are not perfectly competitive.
B. have very little competitive features and so are regulated by the government.
C. are monopolies.
D. are perfectly competitive.

Blooms: Understand
13-69
6. The opposite of being a price taker is:
A. having market power.
B. having no control over the market price.
C. being able to influence the market price.
D. None of these describe the opposite of price taker.

Blooms: Understand
7. An essential characteristic of a perfectly competitive market is that buyers and sellers:
A. have so much competition that they have no ability at all to set their own price.
B. have no competition and so must set the market price on their own.
C. have so much competition that that they must work together perfectly to set a market
price.

Blooms: Understand
13-70
A. buyers and sellers have no control over the market price.
B. sellers are selling unique products.
C. buyers have complete control over the market price and sellers have none.
D. sellers have complete control over the market price and buyers have none.

Blooms: Understand
9. In a perfectly competitive market price takers exist because:
A. there are few sellers and many buyers.
B. there are few buyers and many sellers.
C. there are many buyers and sellers.
D. there are few sellers and buyers.

Blooms: Understand
A. can noticeably affect the market price.
B. have no control over the market price.
C. can noticeably affect the market quantity available for sale.
D. do not noticeably affect the market quantity offered for sale.

Blooms: Understand
13-71
A. are a price taker.
B. can noticeably affect the market price.
C. do not affect the market quantity offered for sale.

Blooms: Understand
A. buyers and sellers share market power.
B. sellers are price makers.
C. goods are standardized.
D. goods are unique.

Blooms: Understand
13-72
B. goods are interchangeable.
C. goods from one seller cannot be distinguished from another's.

Blooms: Understand
14. A good that is standardized is:
A. interchangeable with others in the market.
B. indistinguishable to others in the market.
C. identical to others in the market.

Blooms: Understand
15. Standardized goods and services refers to those that:
A. are interchangeable.
B. have close substitutes.
C. are unique.
D. are regulated by the government.

Blooms: Understand
13-73
A. grain.
B. iron.
C. crude oil.
D. All of these represent standardized goods.

Blooms: Understand
17. Commodities:
A. are a special type of standardized good.
B. have no product differentiation.
C. are identical regardless of who produced it.

Blooms: Understand
13-74
A. grain.
B. granola cereal.
C. hamburgers.
D. digital cameras.

Blooms: Understand
19. One implication of goods being standardized in a market is:
A. there are no information asymmetries.
B. the government regulations must promote competition and lower prices to be efficient.
C. the similarity in products may be real or perceived.
D. None of these is an implication of standardization.

Blooms: Understand
13-75
20. A characteristic that is important, but not essential to defining a perfectly competitive
market is:
B. buyers and sellers are price takers.
C. firms can freely enter and exit the market.
D. All of these are necessary to define a perfectly competitive market.

Blooms: Understand
21. Having free entry and exit in a market can help drive:
A. innovation.
B. cost-cutting.
C. quality improvements.
D. All of these are driven by the threat of entry by competitors.
AACSB: Analytic
Blooms: Apply
Learning Objective: 13-02 Calculate average; marginal; and total revenue.
Topic: Marginal Revenue and Average Revenue
13-76
22. Collusion:
A. is more likely when the threat of market entry is missing.
B. is more likely in perfectly competitive markets.
C. is less likely when the threat of market entry is missing.
AACSB: Analytic
Blooms: Apply
23. In a perfectly competitive market, producers:
A. are able to sell as much as they want without affecting the market price.
B. can influence the price upward by restricting output.
C. often undercut the competition's price and force firms to leave the market.
D. None of these is true of perfectly competitive markets.
AACSB: Analytic
Blooms: Apply
24. In a perfectly competitive market, total revenue:
A. measures how much revenue the firm takes in from all sales.
B. is equal to price multiplied by quantity sold.
C. only varies due to changes in quantity, since price is constant.
AACSB: Analytic
Blooms: Apply
13-77
A. is constant, regardless of quantity sold.
B. is equal to average revenue for a firm.
C. is equal to marginal revenue for a firm.
AACSB: Analytic
Blooms: Apply
A. is taken as a constant by individual firms.
B. will not be influenced by one firm's output decision.
C. is equal to the average revenue of a firm.
AACSB: Analytic
Blooms: Apply
13-78
A. will remain constant regardless of an individual firm's output decision.
B. is equal to the average total cost of a firm.
C. is equal to the marginal cost of a firm.
AACSB: Analytic
Blooms: Apply
A. is calculated by total revenue divided by total output.
B. is equal to marginal revenue.
AACSB: Analytic
Blooms: Apply
A. is calculated by total output divided by total revenue.
B. is equal to marginal cost.
AACSB: Analytic
Blooms: Apply
13-79
A. is the additional revenue gained from selling one more unit.
B. is equal to average revenue.
C. is equal to market price.
AACSB: Analytic
Blooms: Apply
D. All of these can be true.
AACSB: Analytic
Blooms: Apply
13-80
AACSB: Analytic
Blooms: Apply
A. will increase if marginal revenue is greater than it.
B. will decrease if marginal revenue is greater than it.
C. will always be the same as marginal revenue.
AACSB: Analytic
Blooms: Apply
13-81
market.
Given the information in the table shown, what is the marginal revenue when 25 units are
produced?
A. $250
B. $25
C. $10
D. $20
AACSB: Analytic
Blooms: Apply
13-82
market.
Given the information in the table shown, what is the total revenue when 23 units are
produced?
A. $230
B. $10
C. $23
D. $2.30
AACSB: Analytic
Blooms: Apply
13-83
market.
Given the information in the table shown, what is the average revenue when 24 units are
produced?
A. $240
B. $10
C. $24
D. $2.40
AACSB: Analytic
Blooms: Apply
13-84
market.
Given the information in the table shown, what is the market price?
A. $20
B. $10
C. $2
D. $260
AACSB: Analytic
Blooms: Apply
38. If a perfectly competitive firm faces a market price of $3 per unit, and it decides to
produce 30,000 units, the market price will likely:
A. increase.
B. decrease.
C. stay the same.
D. Cannot answer without more information.
AACSB: Analytic
Blooms: Apply
13-85
produce 400 units, the firm's total revenue will be:
A. $5.
B. $400.
C. $2,000.
D. Cannot be determined without knowing the firm's total cost.
AACSB: Analytic
Blooms: Apply
produce 700 units, the firm's average revenue will be:
A. $4.
B. $2,800.
C. $175.
D. $700.
AACSB: Analytic
Blooms: Apply
13-86
increase its production from 2,000 units to 4,000 units, the firm's marginal revenue:
AACSB: Analytic
Blooms: Apply
increase its production from 300 units to 550 units, the firm's total revenue:
C. will stay the same at $8.
D. will likely rise, but it cannot be determined by how much.
AACSB: Analytic
Blooms: Apply
13-87
increase its production from 4,000 to 12,000 units, the firm's marginal revenue:
A. will diminish once diminishing marginal product sets in.
B. will rise once diminishing marginal product sets in.
D. will increase from $28,000 to $84,000.
AACSB: Analytic
Blooms: Apply
44. When a firm faces a perfectly competitive market and buys its inputs from perfectly
competitive markets, the only choice the firm has to affect its profits is to:
A. increase its selling price.
B. change the quantity it produces.
C. decrease the selling price.

Blooms: Understand
Learning Objective: 13-03 Find a firm's optimal quantity of output.
Topic: MR, MC, and Profit Maximization
13-88
45. Because firms in perfectly competitive markets can sell any quantity without driving down
prices, they should:
A. produce as much as possible to maximize profits.
B. produce at the lowest cost per unit to maximize profits.
C. try to flood the market.

Blooms: Understand
46. Firms in perfectly competitive markets who wish to maximize profits ought to:
A. produce where marginal revenue equals market price.
B. produce as many units as their scale allows.
C. produce at capacity and plan to expand in the long run.

Blooms: Understand
13-89
47. Firms in perfectly competitive markets who wish to maximize profits should produce
where:
A. marginal revenue and marginal cost are equal.
B. marginal revenue and market price are equal.
C. marginal revenue and average revenue are equal.
D. marginal cost and average cost are equal.

Blooms: Understand
48. Firms in perfectly competitive markets who wish to maximize profits should:
A. keep producing more as long as marginal cost is less than marginal revenue.
B. produce less as long as marginal cost is greater than marginal revenue.
C. produce where marginal cost and marginal revenue are equal.

Blooms: Understand
13-90
49. Firms in perfectly competitive markets who wish to maximize profits should produce:
A. more as long as marginal cost is greater than marginal revenue.
B. less as long as marginal cost is less than marginal revenue.
C. at the level where marginal cost equals marginal revenue.

Blooms: Understand
50. A firm in a perfectly competitive market can maximize its profits by:
A. producing the level of output where marginal cost equals marginal revenue.
B. producing any level below where marginal cost equals marginal revenue.
C. producing any level beyond where marginal cost equals marginal revenue.
D. producing at capacity.

Blooms: Understand
13-91
51. For a firm in a perfectly competitive market, if it produces where marginal cost exceeds
marginal revenue:

Blooms: Understand
marginal costs are less than marginal revenue:

Blooms: Understand
13-92
marginal costs are equal to marginal revenue:

Blooms: Understand
54. Firms in perfectly competitive markets typically have:
A. one profit-maximizing level of output.
B. several profit-maximizing levels of output to choose from.
C. two profit-maximizing levels of output to choose from.
D. no chance of maximizing profits, since they have no control over market price.

Blooms: Understand
13-93
costs exceed marginal revenue:
A. its profits must be negative.

Blooms: Understand
costs are less than marginal revenue:
A. its profits must be positive.

Blooms: Understand
13-94
57. The profit-maximizing level of output for any firm in a perfectly competitive market is to
produce where:
A. MC = MR.
B. MC > MR.
C. MC < MR.
D. MR = P*.

Blooms: Understand
58. This table shows the total costs for various levels of output for a firm operating in a
perfectly competitive market.
According to the table shown, what is the market price?
A. $500
B. $150
C. $50
D. It depends on the level of output.

Blooms: Understand
13-95
According to the table shown, what is the firm's total revenue when 4 units are produced?
A. $160
B. $50
C. $200
D. $40

Blooms: Understand
13-96
According to the table shown, what is the firm's marginal revenue from the 3 rd unit
produced?
A. $50
B. $90
C. $150
D. $60

Blooms: Understand
13-97
According to the table shown, what is the firm's marginal cost from producing the 2nd
unit?
A. $10.00
B. $7.50
C. $27.50
D. $20.00

Blooms: Understand
13-98
According to the table shown, the firm's marginal revenue:
A. is constant.
B. increases as output increases.
C. decreases as output increases.
D. increases until the 3rd unit, then decreases.

Blooms: Understand
13-99
According to the table shown, the firm's marginal costs:
A. are constant.
B. increase as output increases.
C. decrease until the 2nd unit, then increase.
D. increase until the 4th unit, then decrease.

Blooms: Understand
13-100
According to the table shown, the firm's profit:
A. is maximized at 3 units of output.
B. is maximized at 4 units of output.
C. is maximized at 5 units of output.
D. is not maximized at any level of output given.

Blooms: Understand
13-101
According to the table shown, when 5 units are produced:
A. profits are maximized.
B. profits are positive.
C. the firm is producing less than the profit-maximizing amount.
D. the firm is producing more than the profit-maximizing amount.

Blooms: Understand
13-102
According to the table shown, when 1 unit is produced:
A. marginal costs exceed marginal revenue, and the firm should produce more.
B. marginal revenue exceeds marginal costs, and the firm should produce more.
C. marginal revenue exceeds marginal costs, and the firm should produce less.
D. marginal costs exceed marginal revenue, and the firm should produce less.

Blooms: Understand
13-103
According to the table shown, fixed costs must be:
A. $10.
B. $200.
C. $60.
D. Fixed costs cannot be determined by the information in the table.

Blooms: Understand
13-104
68.
According to the graph shown, the profit at point A is:
A. lower than those at point B.
B. higher than those at point B.
C. the same as those at point B.
D. Cannot answer this question without more information.

Blooms: Understand
13-105
69.
According to the graph shown, producing 9 units earns profits that are:
A. lower than output of 11 units, and the firm should increase production.
B. higher than output of 11 units, and the firm should decrease production.
C. higher than output of 11 units, and the firm should increase production.
D. lower than output of 11 units, and the firm should decrease production.

Blooms: Understand
13-106
70.
According to the graph shown, at point C the firm is earning:
A. fewer profits than at point B, and they should produce less.
B. higher profits than at point B, and they should produce more.
C. fewer profits than at point B, and they should produce more.
D. higher profits than at point B, and they should produce less.

Blooms: Understand
13-107
71.
According to the graph shown, producing 14 units:
A. is not as profitable as producing 11 units.
B. will earn negative profits.
C. will earn more profits than producing 9 or 11 units.

Blooms: Understand
13-108
72.
According to the graph shown, the market price is:
A. $15
B. $9
C. $11
D. Cannot be determined from the information in the graph.

Blooms: Understand
73. For a firm in a perfectly competitive market, a price decrease:
A. lowers the profit-maximizing quantity.
B. increases the profit-maximizing quantity.
C. is unrelated to the profit-maximizing quantity.
D. signifies the firm should leave the market.

Blooms: Understand
Topic: Profit Maximization
13-109
74. The MC of a firm:
A. crosses ATC at its minimum.
B. crosses AVC at its minimum.
C. crosses MR at the profit-maximizing level of output.

Blooms: Understand
75. As long as average revenue remains above average total cost:
A. total revenue will be higher than total cost.
B. the firm will be making profits.
C. price will be greater than average total cost.

Blooms: Understand
13-110
76. As long as market price remains above the average total cost, and the firm chooses the
profit-maximizing level of output, it will:
A. make profits.
B. Any of these is possible.
C. earn a loss.
D. earn zero profits.

Blooms: Understand
Learning Objective: 13-04 Describe a firm's decision to shut down and when to exit the market; and explain the difference
between these choices.
Topic: Shutdown and Exit Rules
77. If a firm is earning a profit, then:
A. total revenue must be higher than total cost.
B. the ATC must be higher than the market price.
C. the ATC must be higher than AR.

Blooms: Understand
13-111
78. If the market price falls below the bottom of the firm's ATC curve:
A. there is no level of output at which the firm can make a profit.
B. the firm is earning profits.
C. the market price must be lower than the firm's AVC.

Blooms: Understand
79. If the market price falls below a firm's minimum average total cost, the firm should:
A. definitely stop production.
B. definitely continue to operate at a loss.
C. consider how to minimize its losses.
D. pay only fixed costs.

Blooms: Understand
13-112
80. In the short run, when a firm stops producing:
A. it avoids paying fixed costs.
B. it avoids paying variable costs.
C. it can avoid earning profits less than zero.

Blooms: Understand
81. In the short run, the fixed costs of a firm:
A. must be paid regardless of level of output.
B. are irrelevant in deciding whether to shut down production.
C. are greater than zero when quantity produced is zero.

Blooms: Understand
13-113
82. In the short run, the relevant costs for a firm to consider whether to shut down production
are:
A. average total costs.
B. average variable costs.
C. average fixed costs.
D. fixed costs.

Blooms: Understand
83. In the short run, a firm that finds itself earning a loss should compare the market price to
which cost in order to determine how to minimize its losses?
A. Average total costs
B. Average variable costs
C. Marginal costs
D. Fixed costs

Blooms: Understand
13-114
A. Stay open if price is greater than average variable costs.
B. Shut down immediately and pay fixed costs only.
C. Stay open if total revenue is greater than fixed costs.
D. Shut down if price is greater than average variable costs.

Blooms: Understand
A. Produce where MC = MR to minimize losses if P > AVC.
B. Shut down if price is greater than average variable costs.
C. Produce where MC = MR to minimize losses if P < AVC.
D. Shut down if total revenue is less than fixed costs.

Blooms: Understand
13-115
86. When the market price has fallen below a firm's ATC but is above its AVC, in the short run,
the firm:
A. will yield more revenue than variable costs by producing where MC = MR.
B. can minimize its losses by staying open.
C. is not earning positive profits.

Blooms: Understand
87. If the market price ever drops below a firm's average variable costs at its profit-maximizing
level of output:
A. the firm should shut down immediately.
B. the loss-minimizing quantity of output is zero.
C. the firm is not earning enough revenue to cover the variable costs of production.

Blooms: Understand
13-116
88. The short-run shutdown rule is to shut down if:
A. P > AVC.
B. P < AVC.
C. P > ATC.
D. P < ATC.

Blooms: Understand
89. The long-run exit rule is to exit the industry if:
A. P > AVC.
B. P < AVC.
C. P > ATC.
D. P < ATC.

Blooms: Understand
13-117
90. Given the shutdown rule, what does the firm's short-run supply curve look like?

Blooms: Understand
91. Given the exit rule, where does a firm's long-run supply curve derive from?

Blooms: Understand
13-118
92.
Of the curves displayed in the graph shown, which is most likely the marginal cost curve?
A. A
B. B
C. C
D. None is likely to be the marginal cost curve.

Blooms: Understand
13-119
93.
Of the curves displayed in the graph shown, what does curve B most likely represent?
A. Marginal cost
D. Average fixed cost

Blooms: Understand
13-120
94.
Of the curves displayed in graph shown, what does curve C most likely represent?
A. Marginal cost
D. Marginal revenue

Blooms: Understand
13-121
95.
If a firm in a perfectly competitive market faces the curves in the graph shown and
A. can make positive profits by producing less than 43 units.

Blooms: Understand
13-122
96.

Blooms: Understand
13-123
97.

Blooms: Understand
13-124
98.
If a firm in a perfectly competitive market faces the cost curves in the graph shown, which
of the following is true?
A. The firm will make positive profits when price is higher than $15, if it chooses to
produce at its profit-maximizing level of output.
B. The firm will make positive profits when price is higher than $11, if it chooses to
produce at its profit-maximizing level of output.
C. The firm should always produce at least 43 units in order to maximize profits.
D. None of these statements is true.

Blooms: Understand
13-125
99.
A. A firm will plan to exit the industry if price falls below $15.
B. A firm will continue to operate in the short run if price is at least $11.

Blooms: Understand
13-126
100.
A. A firm will lose money and shut down in the short run if price falls below $15.
B. A firm will lose money, but continue to operate in the short run if price is at least $15.

Blooms: Understand
101. In the short run, we assume that the number of firms in a perfectly competitive market:
A. is fixed.
B. varies if perfect information is present.
C. varies more than the long-run equilibrium.

Blooms: Understand
13-127
Learning Objective: 13-05 Draw a short-run supply curve for a competitive market with identical firms.
Topic: Short-Run Supply
102. The number of firms in a perfectly competitive market:
A. is fixed in the short run.
B. varies in the long run.
C. varies in the short run.
D. is the same at all possible long-run equilibria.

Blooms: Understand
103. The market supply in a perfectly competitive market:
A. is fixed.
B. is the sum of the quantities that each individual producer is willing to supply.
C. is the total quantity of a good that the biggest market shareholder supplies at a given
price.

Blooms: Understand
13-128
104. We assume that in the short run in a perfectly competitive market the:
A. number of firms is fixed.
B. total quantity supplied is fixed.
C. price is fixed.
D. All of these are true of the short run.

Blooms: Understand
105. We assume that in the long run in a perfectly competitive market:
A. the firms can enter or exit.
B. the number of firms is fixed.
C. the price will be constant.
D. collusion will set in without government regulation.

Blooms: Understand
Learning Objective: 13-06 Draw a long-run supply curve for a competitive market with identical firms; and describe its
implications for profit-seeking firms.
Topic: Long-Run Supply
106. We assume that in the short run in a perfectly competitive market firms:
A. can enter and exit the market.
B. can enter, but not exit the market.
C. can exit, but not enter the market.
D. cannot enter or exit the market.
13-129
Blooms: Understand
107. The key difference between supply in the short run and supply in the long run is that we
assume that:
A. firms are able to enter and exit the market in the long run.
B. firms are able to enter and exit the market in the short run.
C. firms will not collude in the short run.
D. firms' total supply will be constant in the long run.

Blooms: Understand
108. In the long run, firms will enter a perfectly competitive market if the existing firms are
making:
A. a profit.
B. negative profits.
C. zero profits.
D. Any of these could be true.

Blooms: Understand
13-130
109. In the long run, firms in a perfectly competitive market will:
A. exit if the price is lower than their lowest average total cost.
B. attract other firms to the market if the price is higher than their lowest average total
cost.
C. not attract other firms if they are earning zero economic profits.

Blooms: Understand
110. If firms are producing at a profit-maximizing level of output where the price exceeds the
average total cost:
A. accounting profits must be positive.
B. economic profits must be positive.
C. other firms will enter the market.

Blooms: Understand
13-131
111. If firms are producing at a profit-maximizing level of output where the price is less than
the average total cost:
A. economic profits may be positive.
B. accounting profits may be positive.
C. All of these are true.
D. accounting profits must be positive.

Blooms: Understand
112. If firms are producing at a profit-maximizing level of output where the price is equal to the
average total cost:
A. average total cost must be minimized.
B. economic profits must be zero.
C. accounting profits must be positive.

Blooms: Understand
13-132
113. If firms are producing at a profit-maximizing level of output where the price is equal to the
average total cost:
A. accounting profits may be negative.
B. accounting profits must be zero.
C. economic profits may be positive.
D. economic profits must be zero.

Blooms: Understand
114. If a firm is earning a negative economic profit, it means that:
A. the resources should be invested in other business opportunities.
B. more profits could be earned with the same resources in another industry.
C. the opportunity cost is larger than what the firm is earning.

Blooms: Understand
13-133
115. If a firm is earning a positive economic profit, it means that it:
A. is using its resources in the most profitable way.
B. should invest its resources in other business opportunities.
C. has an opportunity cost that is larger than what the firm is currently earning.

Blooms: Understand
116. When economic profits are zero for a firm in a perfectly competitive market, it means that:
A. average total costs are zero.
B. price is equal to minimum average total cost.
C. average variable costs are minimized.

Blooms: Understand
13-134
117. When economic profits are zero for a firm, it means that:
A. no firms will enter or exit the industry.
B. average revenue is equal to average total cost.
C. average total costs are minimized.

Blooms: Understand
118. Each point of a firm's supply curve represents a price-quantity pair where:
A. MC = MR.
B. P = min ATC.
C. P = min AVC.
D. MC = ATC.

Blooms: Understand
13-135
119. When firms enter a market, the supply increases and:
A. price falls and profits decrease.
B. price increases and profits decrease.
C. price falls and profits increase.
D. price increases and profits increase.

Blooms: Understand
120. As the equilibrium price falls in a perfectly competitive market, so do firms':
A. revenue and so do their profits.
B. total costs and so do their profits.
C. revenue, and their profits rise.
D. total costs, and their profits rise.

Blooms: Understand
13-136
121. When some firms leave a perfectly competitive market, the price:
A. falls, and profits of those left rise.
B. falls, and profits of those left fall.
C. increases, and profits of those left rise.
D. increases, and profits of those left fall.

Blooms: Understand
122. In the long run in a perfectly competitive market:
A. firms earn zero economic profits.
C. supply is perfectly elastic when all firms have the same cost structure.

Blooms: Understand
13-137
123. In the long run in a perfectly competitive market:
A. firms earn positive economic profits.
C. supply is perfectly inelastic when all firms have the same cost structure.

Blooms: Understand
124. In the long run, firms in a perfectly competitive market produce:
A. where average total costs are minimized.
B. at the most efficient scale.
C. where price equals marginal cost.

Blooms: Understand
13-138
125. In the long run, firms in a perfectly competitive market:
A. produce a quantity that maximizes profits.
B. earn a zero economic profit.
C. choose the level of output that minimizes average total costs.

Blooms: Understand
126. In the long run, firms in a perfectly competitive market choose to produce a quantity:
A. that earns zero economic profits.
B. that does not cover minimum average variable costs.
C. where marginal costs are less than average variable costs.

Blooms: Understand
13-139
127. Which of the following holds true at the chosen level of output in the long run for firms in a
perfectly competitive market?
A. P = MC
B. P = minimum ATC
C. MR = MC

Blooms: Understand
13-140
128. This graph represents the cost and revenue curves of a firm in a perfectly competitive
market.
According the graph shown, the firm's most efficient scale of operation is to produce
quantity:
A. Q1.
B. Q2.
C. Q3.
D. Any quantity as long as P1 is charged.

Blooms: Understand
13-141
market.
According to the graph shown, the long-run output decision for this firm is:
A. Q1, P1.
B. Q1, P2.
C. Q2, P1.
D. Q3, P3.

Blooms: Understand
13-142
market.
According to the graph shown, what is the market price?
A. P1
B. P2
C. P3
D. Cannot tell from the graph.

Blooms: Understand
13-143
market.
C. the firm should increase production.

Blooms: Understand
13-144
market.
B. average total costs are minimized.

Blooms: Understand
13-145
market.
C. the firm should expand production.

Blooms: Understand
13-146
market.
According to the graph shown, if a firm is producing at Q2, and it is identical to others in
the market:
B. firms will enter this market.
C. economic profits are zero.

Blooms: Understand
13-147
market.
A. firms will not enter this market.
B. profits are being maximized.

Blooms: Understand
13-148
136. In a perfectly competitive market in the long run:
A. price is the same at any quantity.
B. firms produce at an efficient scale.
C. profits are maximized.

Blooms: Understand
137. In a perfectly competitive market, when the price is greater than the minimum average
total cost for most firms, some will:
A. exit until the price drops to equal minimum ATC.
B. enter until the price drops to equal minimum ATC.
C. exit until the price increases to equal minimum ATC.
D. enter until the price increases to equal minimum ATC.

Blooms: Understand
13-149
138. In a perfectly competitive market, when the price is greater than the minimum average
total cost for all firms:
A. positive economic profits are being earned.
B. firms will enter, causing the price to increase.
C. firms will exit, causing the price to drop.

Blooms: Understand
139. In a perfectly competitive market, when the price is below the minimum average total cost
for most firms:
A. negative economic profits are being earned.
B. positive accounting profits may be earned.
C. higher accounting profits may be earned elsewhere.

Blooms: Understand
13-150
140. In a perfectly competitive market, when the price is below the minimum average total cost
for all firms:
A. higher accounting profits may be earned elsewhere.
B. firms will likely leave the market.
C. the price will eventually rise once enough firms have left the market.

Blooms: Understand
141. Because market price always tends back to the minimum average total cost for all
identical firms in a perfectly competitive market in the long run, in theory:
A. the supply will remain a constant quantity.
B. price will be the same at any quantity.
C. the supply curve will be upward sloping.

Blooms: Understand
Learning Objective: 13-07 Explain why a long-run supply curve might slope upward.
13-151
142. In theory, the long-run supply curve for perfectly competitive market firms who are
identical is:
C. upward sloping.

Blooms: Understand
143. In reality, the long-run supply curve tends to be:
C. upward sloping.

Blooms: Understand
13-152
144. In reality, the long-run supply curve for a perfectly competitive market is upward sloping
because:
A. of changing costs of production that firms may face.
B. not all firms have identical cost structures.
C. experienced firms will have different information and costs than new firms.

Blooms: Understand
145. If the demand increases in a perfectly competitive market, the price will:
B. increase permanently.
C. temporarily decrease.
AACSB: Analytic
Blooms: Apply
Learning Objective: 13-08 Calculate the effect of a shift in demand on a market in long-run equilibrium.
Topic: Market Adjustments
13-153
146. If the demand increases in a perfectly competitive market, in the short run the supply
curve will:
A. increase.
B. decrease.
C. not change.
D. either increase or decrease.
AACSB: Analytic
Blooms: Apply
147. If the demand increases in a perfectly competitive market, what will likely occur?
A. Firms will temporarily make a profit due to a higher price.
B. Firms will enter the market in hopes of capturing some profits.
C. The short-run supply curve will shift to the right, causing price to eventually fall.
AACSB: Analytic
Blooms: Apply
13-154
148. If the demand increases in a perfectly competitive market, firms will likely:
A. experience a loss due to increased competition.
B. set prices artificially higher permanently.
C. enter the market in hopes of capturing some profits.
AACSB: Analytic
Blooms: Apply
149. If the demand in a perfectly competitive market decreases, the price will:
B. temporarily decrease.
C. increase permanently.
AACSB: Analytic
Blooms: Apply
150. If the demand in a perfectly competitive market decreases, the supply curve will:
A. not change in the short run.
B. increase in the long run.
C. increase in the short run.
D. decrease in the short run.
AACSB: Analytic
Blooms: Apply
13-155
151. If the demand decreases in a perfectly competitive market, firms will likely:
A. experience negative profits in the short run.
B. experience zero profits in the long run.
C. exit the market in hopes of capturing profits elsewhere.
AACSB: Analytic
Blooms: Apply
152. When demand increases in a perfectly competitive market, the market price:
A. increases in the short run and falls in the long run.
B. decreases in the short run and increases in the long run.
C. increases in the short run and stays permanently higher in the long run.
D. decreases in the short run and stays permanently lower in the long run.
AACSB: Analytic
Blooms: Apply
13-156
153. The short-run supply curve is _______________ and the long-run supply curve is
_______________ in a perfectly competitive market in which all firms have identical cost
structures.
A. upward sloping; upward sloping
B. upward sloping; perfectly elastic
C. perfectly elastic; upward sloping
D. downward sloping; upward sloping
AACSB: Analytic
Blooms: Apply
154. When demand increases in a perfectly competitive market, in the short run
_______________, and in the long run _______________.
A. quantity supplied increases; supply increases
B. quantity supplied increases; supply decreases
C. quantity supplied decreases; supply decreases
D. quantity supplied decreases; supply increases
AACSB: Analytic
Blooms: Apply
13-157
155. When demand increases in a perfectly competitive market, in the short run
__________________, and in the long run __________________.
A. prices increase; supply increases
B. prices increase; prices stay permanently higher
C. quantity supplied increases; prices increase
D. quantity supplied decreases; prices decrease
AACSB: Analytic
Blooms: Apply
13-158
Another random document with
no related content on Scribd:
Or winged winds in speed outvies.
Nay, she might fly o’er fields of grain
Nor crush in flight the tapering wheat, 10
Or skim the surface of the main,
Nor let the billows touch her feet.
Where’er she moves, from house and land
The youths and ancient matrons throng,
And fixed in greedy wonder stand 15
Beholding as she speeds along:
In kingly dye that scarf was dipped:
’Tis gold confines those tresses’ flow:
Her pastoral wand with steel is tipped,
And Lycian are her shafts and bow. 20
BOOK VIII
Soon as Turnus set high on Laurentum’s tower the
ensign of war, and the horns clanged forth their harsh
music, soon as he shook the reins in the mouth of his
fiery steeds, and clashed his armour, at once came a stirring
of men’s souls: all Latium conspires in tumultuous rising, 5
and the warrior bands are inflamed to madness. The
generals, Messapus and Ufens and Mezentius, scorner of
the gods, assume the lead, mustering succour from all
sides and unpeopling the fields of their tillers far and
wide. Venulus too is sent to the town of mighty Diomede 10
to entreat help, and set forth that the Teucrians are
planting foot in Latium: that Æneas is arrived by sea
and intruding his vanquished home-gods, and announcing
himself as the Latians’ destined king; that many tribes
are flocking to the standard of the Dardan chief, and the 15
contagion of his name is spreading over Latium’s length
and breadth. What is to be the end of such a beginning,
what, should fortune favour him, he promises to himself
as the issue of the battle, Diomede will know better than
king Turnus or king Latinus. 20
So go things in Latium. The chief of Laomedon’s line

sees it all, and is tossed on a sea of cares; now on this
point, now on that, he throws in a moment the forces of
his mind, hurrying it into all quarters and sweeping the
whole range of thought: as in water a flickering beam 25
on a brazen vat, darted back by the sun or the bright
moon’s image, flits far and wide over the whole place,
now at last mounting to the sky and striking the ceiling
of the roof. Night came, and tired life the earth over,
bird and beast alike, were lapped deep in slumber, when 30
Æneas, good king, troubled at heart by the anxious war,
stretched himself on the bank under heaven’s chilly cope,
and let repose at last steal over his frame. Before him
appeared in person the god of the place, old Tiber of the
pleasant stream, rising among the poplar foliage: a gray
mantle of transparent linen floated about him, and his 5
hair was shaded with bushy reeds: and thus he began to
address the chief and relieve his care: “O offspring of
heaven’s stock, who are bringing back to us safe from
the foe the city of Troy, and preserving Pergamus in enduring
life, yourself looked for long on the Laurentian 10
soil and in the fields of Latium, here is your abiding place
of rest, here, distrust it not, permanence for your home-gods:
let not war’s threatenings make you afraid, the
swellings of the anger of heaven have all given way.
Even now, that you may not think this the idle coinage 15
of sleep, under the oaks on the bank you shall find an
enormous swine lying with a litter of thirty head just
born, white herself throughout her lazy length, her children
round her breasts as white as she: a sign that when
thirty years have made their circuit, Ascanius shall found 20
that city known by the illustrious name of the White.
Of no doubtful issue are these words of mine. Now for
the way in which you may triumphantly unravel the
present knot, grant me your attention, and I will show
you in brief. On this my coast, Arcadians, a race sprung 25
from Pallas, who have followed king Evander and his
banner, have chosen themselves a site and built a city
on the hills, called from the name of their ancestor Pallas,
Pallanteum. These are forever engaged in war with the
Latian nation: let them join your camp as allies, and 30
make league with them. I myself will lead you between
the banks, straight along my stream, that as you journey
up your oars may surmount the adverse current. Up
then, goddess-born, and ere the stars have well set, offer
prayer in due course to Juno, and overbear with suppliant 35
vows her anger and her menace. Once triumphant,
you shall pay your worship to me. I am he whom you
see here with brimming flood grazing the banks and
threading rich cultured lands, sea-green Tiber, the river
whom gods love best. Here rises my royal palace, the
crown of lofty cities.” The river-god said, and plunged
into his deep pool, down to the bottom; night and sleep
at once fled from Æneas. He rises, and with his eyes 5
fixed on the sun’s rays just dawning on the sky, he lifts
up in due form water from the river in the hollow of
his hands, and pours forth to heaven words like these:
“Nymphs, Laurentian nymphs, whence rivers derive their
birth, and thou, father Tiber, with thy hallowed flood, 10
take Æneas to your bosom, and at last relieve him from
perils. Whatever the spring of the pool where thou
dwellest in thy pity for our troubles, whatever the soil
whence thy goodly stream arises, ever shalt thou be
honoured by me with sacrifice, ever with offerings, the 15
river with the crescent horn, the monarch of Hesperian
waters. Be but thou present, and confirm by thy deed
thy heavenly tokens.” So saying, he chooses two biremes
from the fleet and fits them with rowers, while he gives
his comrades arms to wear. 20
When lo, a sudden portent marvellous to view—stretched

in milk-white length along the sward, herself of
one hue with her white litter, conspicuous on the verdant
bank is seen a sow, whom pious Æneas to thee, even to
thee, mightiest Juno, immolates in sacrifice, and sets her 25
with all her brood before the altar. That whole night
long Tiber smoothed his brimming stream, and so stood
with hushed waves, half recoiling, as to lay down a watery
floor as of some gentle lake or peaceful pool, that the oar
might have nought to struggle with. So they begin their 30
voyage and speed with auspicious cheers. Smooth along
the surface floats the anointed pine: marvelling stand
the waters, marvelling the unwonted wood, to see the
warriors’ shields gleaming far along the stream, and the
painted vessels gliding between the banks. The rowers 35
give no rest to night or day, as they surmount the long
meanders, sweep under the fringe of diverse trees, and
cut through the woods that look green in the still expanse.
The sun had climbed in full blaze the central cope of
heaven, when from afar they see walls, and a citadel,
and the roofs of straggling habitations—the place which
the power of Rome has now made to mate the skies:
then it was but Evander’s poor domain. At once they 5
turn their prows to land and approach the town.
It happened that on that day the Arcadian monarch

was performing a yearly sacrifice to Amphitryon’s mighty
child[250] and the heavenly brotherhood in a grove before the
city. With him his son Pallas, with him all the prime of 10
his warriors and his unambitious senate were offering incense,
and the new-shed blood was steaming warm on the
altar. Soon as they saw tall ships gliding toward them
through the shadowy trees, and plying the oar in silence,
alarmed by the sudden apparition, each and all start up 15
from the sacrificial board. Pallas, bolder than the rest,
bids them not break the sacred observance, and snatching
up a weapon flies himself to meet the strangers, and
from a height at distance, “Warriors,” he cries, “what
cause has led you to venture on a path you know not? 20
whither are you bound? what is your nation, your family?
is it peace you bring us or war?” Then father Æneas
bespeaks him thus from the lofty stern, stretching forth
in his hand a branch of peaceful olive: “These are Trojans
you see. These weapons mean hostility to the 25
Latins, who have driven us from their land by a tyrannous
war. Our errand is to Evander. Take back our message,
and say that chosen chiefs of Dardany are at his gate,
praying for an armed alliance.” That mighty name
struck awe into Pallas. “Disembark,” he cries, “whoever 30
you be, and speak to my sire in person, and come
beneath our home-gods’ hospitable shelter,” and gave his
hand in welcome, and clung to the hand he clasped.
They advance under the shade of the grove, and leave
the river behind. 35
Then Æneas addresses the king with friendly courtesy:

“Best of the sons of Greece, to whom it has pleased Fortune
that I should make my prayer and stretch out boughs
wreathed with fillets, I felt no fear for that you were a
Danaan leader, an Arcadian, allied by lineage with the
two sons of Atreus: I felt that my own worth, and the
gods’ hallowed oracles, and the old connection of our
ancestry, and your world-wide fame, had linked me to 5
you, and brought me before you at once by destiny and
of my own will. Dardanus, first father and founder of the
town of Ilion, born, as Greeks tell, of Electra, daughter of
Atlas, came among Teucer’s people: Electra’s father was
mighty Atlas, he that bears up on his shoulders the 10
spheres of heaven. Your progenitor is Mercury, whom
beauteous Maia[251] conceived and brought forth on Cyllene’s
chill summit; but Maia, if tradition be credited, is the
child of Atlas, the same Atlas who lifts up the stars of
the firmament. Thus our two races part off from one 15
and the same stock. Trusting to this, I sent no embassy,
nor contrived the first approaches to you by rule
and method: in myself, in my own person, I have made
the experiment, and come to your gate as a suppliant.
The same tribe which persecutes you, the Daunians, is 20
now persecuting us with cruel war: should they drive us
away, they foresee nought to hinder their subduing all
Hesperia utterly to their yoke, and mastering either sea,
that washes it above or below. Take our friendship and
give us yours. On our side are hearts valiant in war, 25
and a gallant youth approved by adventure.”
Æneas ended. Long ere this the other’s eye was scanning
the speaker’s countenance and eyes, and surveying
his whole frame. Then he returns in brief: “With what
joy, bravest of the Teucrians, do I welcome and acknowledge 30
ye! how well I call to mind the words, the voice,
the look of your sire, the great Anchises! For I remember
how Priam, son of Laomedon, journeying to Salamis,
to see the kingdom of his sister Hesione, went on to visit
the chill frontier of Arcadia. In those days the first 35
bloom of youth was clothing my cheeks. I admired the
Teucrian leaders, I admired Laomedon’s royal son; but
Anchises’ port was nobler than all. My mind kindled
with a youth’s ardour to accost one so great, and exchange
the grasp of the hand. I made my approach, and eagerly
conducted him to the walls of Pheneus.[252] On leaving he
gave me a beauteous quiver with Lycian arrows, and a
scarf embroidered with gold, and two bridles which my 5
Pallas has now, all golden. So now I both plight you
here with the hand you ask, and soon as to-morrow’s light
shall restore to the earth its blessing, I will send you back
rejoicing in an armed succour, and reënforced with stores.
Meanwhile, since you are arrived here as my friends, join 10
in gladly solemnizing with us this our yearly celebration,
which it were sin to postpone, and accustom yourselves
thus early to the hospitalities of your new allies.”
This said, he bids set on again the viands and the cups,
erewhile removed, and himself places the warriors on a 15
seat of turf, welcoming Æneas in especial grace with the
heaped cushion of a shaggy lion’s hide, and bidding him
occupy a throne of maple wood. Then chosen youths
and the priest of the altar with emulous zeal bring in the
roasted carcases of bulls, pile up in baskets the gifts of 20
the corn-goddess prepared by art, and serve the wine-god
round. Æneas and the warriors of Troy with him
regale themselves on a bull’s long chine[o] and on sacrificial
entrails.
When hunger had been quenched and appetite allayed, 25

king Evander begins: “Think not that these solemnities
of ours, these ritual feastings, this altar so blest in divine
presence, have been riveted on us by idle superstition,
unknowing of the gods of old; no, guest of Troy, it is
deliverance from cruel dangers that makes us sacrifice 30
and pay again and again worship where worship is due.
First of all cast your eyes on this rock-hung crag: observe
how the masses of stone are flung here and there, how
desolate and exposed stands the mountain’s recess, and
how the rocks have left the trail of a giant downfall. 35
Here once was a cave, retiring in enormous depth, tenanted
by a terrible shape, Cacus, half man, half brute: the sun’s
rays could never pierce it; the ground was always steaming
with fresh carnage; fixed to its imperious portals
were hanging human countenances ghastly with hideous
gore. This monster’s father was Vulcan: Vulcan’s were
the murky fires that he disgorged from his mouth as he
towered along in enormous bulk. To us also at length 5
in our yearning need time brought the arrival of a divine
helper. For the mightiest of avengers, Alcides, triumphing
in the slaughter and the spoils of the triple Geryon,[253]
was in our land, and was driving by this road as a conqueror
those giant oxen, and the cattle were filling valley 10
and river-side. But Cacus, infatuated by fiendish frenzy,
not to leave aught of crime or craft undared or unessayed,
carries off from the stalls four bulls of goodly form, and
heifers no fewer of surpassing beauty. And these, that
they might leave no traces by their forward motion, he 15
dragged by the tail to his cave, haled them with reversed
footprints to tell the story, and so concealed them in the
dark rocky den. Thus the seeker found no traces to lead
him to the cavern. Meantime, when Amphitryon’s son
was at last removing from their stalls his feasted herds 20
and preparing to quit the country, the oxen gave a farewell
low, filling the whole woodland with their plainings,
and taking clamorous leave of the hills. One of the
heifers returned the sound, lowing from the depth of the
vast cavern, and thus baffled the hopes of her jealous 25
guardian. Now, if ever, Alcides’ wrath blazed up from
the black choler of his heart: he snatches up his weapons
and his club with all its weight of knots, and makes at
full speed for the skyey mountain’s height. Then first the
men of our country saw Cacus’ limbs tremble and his 30
eyes quail: away he flies swifter than the wind, and seeks
his den; fear has winged his feet. Scarce had he shut
himself in, and let down from its burst fastenings the
huge stone, suspended there by his father’s workmanship
in iron, and with that barrier fortified his straining doorway, 35
when lo! the hero of Tiryns[254] was there in the fury
of his soul: scanning every inlet he turns his face hither
and thither, gnashing with his teeth. Thrice in white
heat of wrath he surveys the whole mass of Aventine;
thrice he attempts in vain the stony portal; thrice,
staggering from the effort, he sits down in the hollow.
Before him stood a pointed crag with abrupt rocky sides
rising over the cave behind, high as the eye can reach, a 5
fitting home for the nests of unclean and hateful birds.
This, as sloping down it inclined towards the river on the
left, pushing it full on the right he upheaved and tore it
loose from its seat, then suddenly sent it down, with a
shock at which high heaven thunders, the banks start 10
apart, and the river runs back in terror. Then the cave
and the vast halls of Cacus were seen unroofed, and the
dark recesses lay open to their depths—even as if earth,
by some mighty force laid open to her depths, should
burst the doors of the mansions below, and expose the 15
realms of ghastly gloom which the gods hate, and from
above the vast abyss were to be seen, and the spectres
dazzled by the influx of day. So as Cacus stares surprised
by the sudden burst of light, pent by the walls of
his cave, and roars in strange and hideous sort, Alcides 20
from above showers down his darts, and calls every
weapon to his aid, and rains a tempest of boughs and
huge millstones. But he, seeing that no hope of flight
remains, vomits from his throat huge volumes of smoke,
marvellous to tell, and wraps the whole place in pitchy 25
darkness, blotting out all prospect from the eyes, and in
the depth of the cave masses a smothering night of blended
blackness and fire. The rage of Alcides brooked not this:
headlong he dashed through the flame, where the smoke
surges thickest and the vast cavern seethes with billows 30
of black vapour. Here while Cacus in the heart of the
gloom is vomiting his helpless fires he seizes him, twines
his limbs with his own, and in fierce embrace compresses
his strangled eyeballs and his throat now bloodless and
dry. At once the doors are burst and the black den laid 35
bare, and the plundered oxen, the spoil that his oath had
disclaimed, are exposed to light, and the hideous carcase
is dragged out by the heels. The gazers look unsatisfied
on those dreadful eyes, those grim features, the shaggy
breast of the half bestial monster, and the extinguished
furnace of his throat. Since then grateful acknowledgments
have been paid, and the men of younger time have
joyfully observed the day: foremost among them Potitius, 5
founder of the ceremony, and the Pinarian house, custodian
of the worship of Hercules. He himself set up in
the grove this altar, which shall ever be named by us
the greatest, and shall ever be the greatest in truth.
Come then, warriors, and in honour of worth so glorious 10
wreathe your locks with leaves, and present in your hands
brimming cups, and invoke our common deity, and pour
libations with gladness of heart.” As he ended, the white-green
poplar cast its Herculean shade over his locks and
hung down with a festoon of leaves, and the sacred goblet 15
charged his hand. At once all with glad hearts pour
libations on the board and make prayers to heaven.
Meantime evening is approaching nearer the slope of

heaven, and already the priests and their chief Potitius
were in procession, clad in skins in ritual sort, and bearing 20
fire in their hands. They renew the solemn feast,
and bring delicious offerings for a fresh repast, and pile
the altars with loaded chargers. Then come the Salii to
sing round about the blazing altars, their temples wreathed
with boughs of poplar, a company of youths and another 25
of old men; and these extol in song the glories and deeds
of Hercules: how in his cradle, by the pressure of his
young hand he strangled his stepmother’s monstrous
messengers, the two serpents; how in war that same
hand dashed to pieces mighty cities, Troy and Œchalia; 30
how he endured those thousand heavy labours, a slave to
king Eurystheus, by ungentle Juno’s fateful will. “Yes,
thou, unconquered hero, thou slayest the two-formed
children of the cloud, Hylæus and Pholus, thou slayest
the portent of Crete, and the enormous lion that dwelt 35
’neath Nemea’s rock. Thou never quailedst at aught in
bodily shape, no, nor at Typhœus himself, towering high,
weapons in hand; thy reason failed thee not when Lerna’s
serpent stood round thee with all her throng of heads.
Hail to thee, authentic offspring of Jove, fresh ornament
of the sky! come to us, come to these thine own rites
with favouring smile and auspicious gait.” Such things
their songs commemorate; and they crown all with Cacus’ 5
cave and the fiend himself, the fire panting from his lungs.
The entire grove echoes with their voices, and the hills
rebound.
The sacrifice over, the whole concourse returns to the

city. There walked the king, mossed over with years, 10
keeping at his side Æneas and his son as he moved along,
and lightening the way with various speech. Æneas admires,
and turns his quick glance from sight to sight:
each scene enthralls him; and with eager zest he inquires
and learns one by one the records of men of old. Then 15
spoke king Evander, the builder of Rome’s tower-crowned
hill: “These woodlands were first inhabited by native
Fauns and Nymphs, and by a race of men that sprung
from trunks of trees and hard oaken core; no rule of life,
no culture had they: they never learnt to yoke the ox, 20
nor to hive their stores, nor to husband what they got;
the boughs and the chase supplied their savage sustenance.
The first change came from Saturn, who arrived from
skyey Olympus, flying from the arms of Jove, a realmless
exile. He brought together the race, untamed as they 25
were and scattered over mountain heights, and gave them
laws, and chose for the country the name of Latium,
because he had found it a safe hiding-place. The golden
age of story was when he was king, so calm and peaceful
his rule over his people; till gradually there crept in a 30
race of worse grain and duller hue, and the frenzy of war,
and the greed of having. Then came the host of Ausonia
and the Sicanian tribes, and again and again Saturn’s
land changed its name; then came king after king, savage
Thybris with his giant bulk, from whom in after days we 35
Italians called the river Tiber: the authentic name of
ancient Albula was lost. Myself, an exile from my country,
while voyaging to the ends of the sea, all-powerful
Fortune and inevitable Destiny planted here; at my back
were the awful hests[255] of my mother, the nymph Carmentis,
and the divine sanction of Apollo.” Scarce had he
finished, when moving on he points out the altar and
the Carmental gate, as the Romans call it, their ancient 5
tribute to the nymph Carmentis, the soothsaying seer, who
first told of the future greatness of Æneas’ sons and of
the glories of Pallanteum. Next he points out a mighty
grove, which fiery Romulus made the Asylum of a later
day, and embowered by the chill dank rock, the Lupercal, 10
bearing after Arcadian wont the name of Lycæan Pan.
He shows, moreover, the forest of hallowed Argiletum,
and appeals to the spot, and recounts the death of Argus,
once his guest. Thence he leads the way to the Tarpeian
temple, even the Capitol, now gay with gold, then rough 15
with untrimmed brushwood. Even in that day the sacred
terrors of the spot awed the trembling rustics; even then
they shuddered at the forest and the rock. “This wood,”
he says, “this hill with the shaggy brow, is the home of
a god of whom we know not; my Arcadians believe that 20
they have seen there great Jove himself, oft and oft,
shaking with his right hand the shadowy Ægis[256] and calling
up the storm. Here, too, in these two towns, with
their ramparts overthrown, you see the relics and the
chronicles of bygone ages. This tower was built by father 25
Janus, that by Saturn; the one’s name Janiculum, the
other’s Saturnia.” So talking together they came nigh
the palace where Evander dwells in poverty, and saw
cattle all about lowing in the Roman forum and Carinæ’s
luxurious precinct. When they reached the gate, “This 30
door,” said the host, “Alcides in his triumph stooped to
enter; this mansion contained his presence. Nerve yourself,
my guest, to look down on riches, and make your
own soul, like his, such as a god would not disdain, and
take in no churlish sort the welcome of poverty.” He 35
said, and beneath the slope of his narrow roof ushered in
the great Æneas, and laid him to rest on a couch of leaves
and the skin of a Libyan bear.
Down comes the night, and flaps her sable wings over
the earth. But Venus, distracted, and not idly, with a
mother’s cares, disturbed by the menaces of the Laurentines
and the violence of the gathering storm, addresses
Vulcan, and in the nuptial privacy of their golden chamber 5
begins her speech, breathing in every tone the love
that gods feel: “In old days of war, while the Argive
kings were desolating Pergamus, their destined prey, and
ravaging the towers which were doomed to hostile fire,
no help for the sufferers, no arms of thy resourceful workmanship 10
did I ask; no, my dearest lord, I chose not to
task thee and thy efforts to no end, large as was my debt
to the sons of Priam, and many the tears that I shed for
Æneas’ cruel agony. Now, by Jove’s commands, he has
set his foot on Rutulian soil; so, with the past in my 15
mind, I appear as a suppliant, to ask of his power whom
I honour most, as a mother may, armour for my son.
Thee the daughter of Nereus, thee the spouse of Tithonus,
found accessible to tears. See but what nations are
mustering, what cities are closing the gate and pointing 20
the steel against me and the lives I love.” The speech
was ended, and the goddess is fondling her undecided
lord on all sides in the soft embrace of her snowy arms.
Suddenly he caught the wonted fire, the well-known heat
shot to his vitals and threaded his melting frame, even as 25
on a day when the fiery rent burst by the thunderclaps
runs with gleaming flash along the veil of cloud. His
spouse saw the triumph of her art and felt what beauty
can do. Then spoke the stern old god, subdued by everlasting
love: “Why fetch your excuses from so far? 30
whither, my queen, has fled your old affiance in me? had
you then been as anxious, even in those old days it had
been allowed to give arms to the Trojans; nor was the
almighty sire nor the destinies unwilling that Troy should
stand and Priam remain in life for ten years more. And 35
now, if war is your object and so your purpose holds, all
the care that it lies within my art to promise, what can
be wrought out of iron and molten electrum, as far as
fire can burn and wind blow—cease to show by entreaty
that you mistrust your power.” This said, he gave the
embrace she longed for, and falling on the bosom of his
spouse wooed the calm of slumber in every limb.
Then, soon as rest, first indulged, had driven sleep 5

away, when flying night had run half her course; just
when a woman, compelled to support life by spinning,
even by Pallas’ slender craft, wakes to light the fire that
slumbered in the embers, adding night to her day’s work,
and keeps her handmaids labouring long by the blaze, all 10
that she may preserve her husband’s bed unsullied, and
bring up his infant sons; even so the lord of fire, at an
hour not less slothful, rises from his couch of down to
the toils of the artisan. There rises an island hard by
the Sicanian coast and Æolian Lipari, towering with fiery 15
mountains; beneath it thunders a cavern, the den of
Ætna, blasted out by Cyclop forges; the sound of mighty
blows echoes on anvils: the smeltings of the Chalybes
hiss through its depths, and the fire pants from the jaws
of the furnace; it is the abode of Vulcan, and the land 20
bears Vulcan’s name. Hither, then, the lord of fire
descends from heaven’s height. There, in the enormous
den, the Cyclops were forging the iron, Brontes, and
Steropes, and Pyracmon, the naked giant. In their hands
was the rough cast of the thunder-bolt, one of those many 25
which the great Father showers down on earth from all
quarters of heaven—part was polished for use, part still
incomplete. Three spokes of frozen rain, three of watery
cloud had they put together, three of ruddy flame and
winged southern wind; and now they were blending with 30
what they had done the fearful flash, and the noise, and
the terror, and the fury of untiring fire. In another part
they were hurrying on for Mars the car and the flying
wheels, with which he rouses warriors to madness, aye,
and whole cities; and with emulous zeal were making 35
bright with golden serpent scales the terrible Ægis, the
armour of angry Pallas, snakes wreathed together, and
full on the breast of the goddess the Gorgon herself, her
neck severed and her eyes rolling. “Away with all this,”
cries the god; “take your unfinished tasks elsewhere, you
Cyclops of Ætna, and give your attention here. Arms
are wanted for a fiery warrior. Now is the call for power,
now for swiftness of hand, now for all that art can teach. 5
Turn delay into despatch.” No more he said; but they
with speed put their shoulder to the work, sharing it in
equal parts. Copper flows in streams and golden ore, and
steel, that knows how to wound, is molten in the huge
furnace. They set up in outline a mighty shield, itself 10
singly matched against all the Latian weapons, and tangle
together seven plates, circle and circle. Some with their
gasping bellows are taking in and giving out the wind;
others are dipping the hissing copper in the lake. The
cave groans under the anvil’s weight. They, one with 15
another, with all a giant’s strength, are lifting their arms
in measured cadence, and turning with their griping
tongs the ore on this side and on that.
While the father of Lemnos[257] makes this despatch on

the Æolian shores, Evander is roused from his lowly 20
dwelling by the genial light and the morning songs of
birds under the eaves. Up rises the old man, and draws
a tunic over his frame, and puts Tyrrhenian sandals
round his feet; next he fastens from below to side and
shoulder a sword from Tegea, flinging back over him a 25
panther’s hide that drooped from the left. Moreover, two
guardian dogs go before him from his palace door, and
attend their master’s steps. So he made his way to the
lodging of his guest, and sought Æneas’ privacy, their
discourse of yesterday and the gift then promised fresh 30
in his heroic soul. Æneas likewise was astir not less early.
This had his son Pallas, that had Achates walking by his
side. They meet, and join hand in hand, and sit them
down in the midst of the mansion, and at last enjoy the
privilege of mutual talk. The king begins as follows:— 35
“Mightiest leader of the Teucrians, whom while heaven

preserves I shall never own that Troy’s powers are vanquished
or her realm overturned, we ourselves have but
small means of martial aid to back our great name; on
this side we are bounded by the Tuscan river: on that
our Rutulian foe beleaguers us, and thunders in arms
around our walls. But I have a mighty nation, a host
with an imperial heritage, which I am ready to unite with 5
you—a gleam of safety revealed by unexpected chance.
It is at the summons of destiny that you bend your steps
thither. Not far hence, built of ancient stone, is the inhabited
city of Agylla, where of old the Lydian nation,
renowned in war, took its seat on Etruscan mountains. 10
This city, after long and prosperous years, was held by
king Mezentius, by stress of tyrant rule and the terror of
the sword. Why should I recount the despot’s dreadful
murders and all his savage crimes? may the gods preserve 15
them in mind, and bring them on his own head and
his family’s! Nay, he would even link together the dead
and the living, coupling hand with hand and face with
face—so inventive is the lust of torture—and in the
slime and poison of that sickening embrace would destroy
them thus by a lingering dissolution. At last, wearied 20
by oppression, his subjects in arms besiege the frantic
monster himself and his palace, slay his retainers, shower
firebrands on his roof. He, mid the carnage, escapes to
Rutulian territory, and shelters himself under Turnus’
friendly power. So all Etruria has risen in righteous 25
wrath; at once, at the sword’s point, they demand that
the king be surrendered to their vengeance. Of these
thousands, Æneas, I will make you general. For along
the seaboard’s length their ships are swarming and panting
for the fray, and calling on the trumpet to sound, 30
while an aged soothsayer is holding them back by his
fateful utterance: ‘Chosen warriors of Mæonian land, the
power and soul of an ancient nation, whom just resentment
launches against the foe and Mezentius inflames with
righteous fury, no Italian may take the reins of a race so 35
proud: choose foreigners to lead you.’ At this the Etruscan
army settled down on yonder plain, awed by the
heavenly warning. Tarchon[o] himself has sent me ambassadors
with the royal crown and sceptre, and given to
my hands the ensigns of power, bidding me join the camp,
and assume the Tyrrhene throne. But age, with its enfeebling
chill and the exhaustion of its long term of years,
grudges me the honour of command; my day of martial 5
prowess is past. Fain would I encourage my son to the
task, but that the blood of a Sabine mother blending with
mine makes his race half Italian. You, in years and in
race alike the object of Fate’s indulgence—you, the
chosen one of Heaven—assume the place that waits 10
you, gallant general of Teucrians and Italians both. Nay,
I will give you, too, Pallas here, the hope and solace of
my age; under your tutelage let him learn to endure
military service and the war-god’s strenuous labours; let
your actions be his pattern, and his young admiration be 15
centred on you. To him I will give two hundred Arcadian
horsemen, the flower of my chivalry, and Pallas in his
own name shall give you as many more.”
Scarce had his words been uttered—and the twain

were holding their eyes in downcast thought, Æneas 20
Anchises’ son and true Achates, brooding each with his
own sad heart on many a peril, had not Cythera’s goddess
sent a sign from the clear sky. For unforeseen, flashed
from the heaven, comes a glare and a peal, and all around
seemed crashing down at once, and the clang of the 25
Tyrrhene trumpet appeared to blare through ether. They
look up: a second and a third time cracks the enormous
sound. Armour enveloped in a cloud in a clear quarter
of the firmament is seen to flash redly in the sunlight and
to ring as clashed together. The rest were all amazement; 30
but the Trojan hero recognized the sound, and in
it the promise of his goddess mother. Then he cries:
“Nay, my host, nay, ask not in sooth what chance these
wonders portend; it is I that have a call from on high.
This was the sign that the goddess who gave me birth 35
foreshowed me that she would send, should the attack of
war come, while she would bring through the air armour
from Vulcan for my help. Alas! how vast the carnage
ready to burst on Laurentum’s wretched sons! what
vengeance, Turnus, shall be mine from thee! how many
a warrior’s shield and helm and stalwart frame shalt thou
toss beneath thy waters, father Tiber! Aye, clamour for
battle, and break your plighted word!” 5
Thus having said, he rises from his lofty seat, and first
of all quickens the altars where the Herculean fires were
smouldering, and with glad heart approaches the hearth-god
of yesterday, and the small household powers; duly
they sacrifice chosen sheep, Evander for his part and the 10
Trojan youth for theirs. Next he moves on to the ships
and revisits his crew: from whose number he chooses men
to follow him to the war, eminent in valour: the rest are
wafted down the stream and float lazily along with the
current at their back, to bring Ascanius news of his father 15
and his fortunes. Horses are given to the Teucrians who
are seeking the Tyrrhene territory, and one is led along,
reserved for Æneas; a tawny lion’s hide covers it wholly,
gleaming forth with talons of gold.
At once flies rumour, blazed through the little city, 20

that the horsemen are marching with speed to the gates
of the Tyrrhene king. In alarm the matrons redouble
their vows; fear treads on the heels of danger, and the
features of the war-god loom larger on the view. Then
Evander, clasping the hand of his departing son, hangs 25
about him with tears that never have their fill, and speaks
like this: “Ah! would but Jupiter bring back my bygone
years, and make me what I was when under Præneste’s
very walls I struck down the first rank and set a
conqueror’s torch to piles of shields, and with this my 30
hand sent down to Tartarus king Erulus, whom at his
birth his mother Feronia endowed with three lives—fearful
to tell—and a frame that could thrice bear arms:
thrice had he to be struck down in death: yet from him
on that day this hand took all those three lives, and 35
thrice stripped that armour—never should I, as now, be
torn, my son, from your loved embrace. Never would
Mezentius have laid dishonour on a neighbour’s crest,
dealt with his sword that repeated havoc, and bereaved
my city of so many of her sons. But you, great powers
above, and thou, Jupiter, mightiest ruler of the gods,
have pity, I implore you, on an Arcadian monarch, and
give ear to a father’s prayer; if your august will, if destiny 5
has in store for me the safe return of my Pallas, if life
will make me see him and meet him once more, then I
pray that I may live; there is no trial I cannot bear to
outlast. But if thou, dark Fortune, threatenest any unnamed
calamity, now, oh, now, be it granted me to snap 10
life’s ruthless thread, while care wears a double face,
while hope cannot spell the future, while you, darling boy,
my love and late delight, are still in my arms: nor let
my ears be pierced by tidings more terrible.” So was the
father heard to speak at their last parting; his servants 15
were seen carrying within doors their fallen lord.
And now the cavalry had passed the city’s open gates,
Æneas among the first and true Achates, and after them
the other Trojan nobles; Pallas himself the centre of the
column, conspicuous with gay scarf and figured armour; 20
even as the morning-star just bathed in the waves of the
ocean, Venus’ favourite above all the stellar fires, sets in
a moment on the sky his heavenly countenance, and
melts the darkness. There are the trembling matrons
standing on the walls, following with their eyes the cloud 25
of dust and the gleam of the brass-clad companies. They
in their armour are moving through the underwood, their
eye on the nearest path: hark! a shout mounts up, a
column is formed, and the four-foot beat of the hoof shakes
the crumbling plain. Near the cool stream of Cære stands 30
a vast grove, clothed by hereditary reverence with wide-spread
sanctity; on all sides it is shut in by the hollows
of hills, which encompass its dark pine-wood shades.
Rumour says that the old Pelasgians dedicated it to Silvanus,
god of the country and the cattle, a grove with a 35
holiday—the people who once in early times dwelt on
the Latian frontier. Not far from this Tarchon and the
Tyrrhenians were encamped in a sheltered place, and from
the height of the hill their whole army spread already to
the view, as they pitched at large over the plain. Hither
come father Æneas and the chosen company of warriors,
and refresh the weariness of themselves and their steeds.

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Multiple Choice Questions

1. A price taker is a buyer or seller who:

A. has complete control over setting the market price.

B. can influence the market price.

C. has no control over setting the market price.

D. has the goal of maximizing market share, not profits.

2. A competitive market is one in which:

B. few large sellers compete for a majority of the market share.

C. government oversees its operation.

D. None of these describe a competitive market.

3. Standardized goods are:

A. goods which are regulated by government quality standards.

B. goods which are easily substitutable and not distinguishable.

C. the most common type of good produced.

D. those sold in markets with regulated price systems.

A. are more an idealized model economists use than a real-life occurrence.

B. are the most common type of market in the United States.

C. tend to have relatively few buyers.

D. tend to have relatively few sellers.

5. Most markets in the United States:

A. have some degree of competitiveness, but are not perfectly competitive.

D. are perfectly competitive.

6. The opposite of being a price taker is:

A. having market power.

B. having no control over the market price.

C. being able to influence the market price.

D. None of these describe the opposite of price taker.

7. An essential characteristic of a perfectly competitive market is that buyers and sellers:

D. None of these is true.

A. buyers and sellers have no control over the market price.

B. sellers are selling unique products.

9. In a perfectly competitive market price takers exist because:

A. there are few sellers and many buyers.

B. there are few buyers and many sellers.

C. there are many buyers and sellers.

D. there are few sellers and buyers.

10. When someone has market power, it means they:

A. can noticeably affect the market price.

B. have no control over the market price.

C. can noticeably affect the market quantity available for sale.

D. do not noticeably affect the market quantity offered for sale.

11. When someone has market power, it means they:

A. are a price taker.

B. can noticeably affect the market price.

C. do not affect the market quantity offered for sale.

D. None of these is true.

A. buyers and sellers share market power.

B. sellers are price makers.

C. goods are standardized.

D. goods are unique.

13. An essential characteristic of a perfectly competitive market is:

A. goods are standardized.

B. goods are interchangeable.

C. goods from one seller cannot be distinguished from another's.

D. All of these are true.