competitive markets (test 2 eco)

Which of the following is not a characteristic of a monopolistically competitive market structure?

Each firm must react to actions of other firms

Which of the following statements is correct?

Economic profit takes into account all costs involved in producing a product

How are sunk costs and fixed costs related?

In the short run they are equal to each other

For a perfectly competitive firm, which of the following is not true at profit maximization?

Market price is greater than marginal cost

What is always true at the quantity where a firm's average total cost equals average revenue?

The firm breaks even

Which of the following is a characteristic of an oligopolistic market structure?

There are few dominant sellers

Which of the following is not a characteristic of a perfectly competitive market structure?

There are restrictions on exit of firms

Mark Frost grows apples in a perfectly competitive market. If we drew a line in a graph that illustrates Mark's total revenue from selling apples, it would be

a straight, upward-sloping line

A perfectly competitive firm earns a profit when price is

above minimum average total cost

Which of the following describes a situation in which every good or service is produced up to the point where the last unit provides a marginal benefit to consumers equal to the marginal cost of producing it?

allocative efficiency

In the long run, the entry of new firms in an industry

benefits consumers by forcing prices down to the level of average cost

Firms in perfect competition are price takers because

each firm is too small relative to the market to be able to influence the price

The demand curve for each seller's product in perfect competition is horizontal at the market price because

each seller is too small to affect the market price

For a firm in a perfectly competitive market, price is

equal to both average revenue and marginal revenue

Perfect competition is characterized by all of the following except

heavy advertising by individual sellers

Market supply is found by

horizontally summing the relevant part of each individual producer's marginal cost curve

If, for a perfectly competitive firm, price exceeds the marginal cost of production, the firm should

increase its output

If a perfectly competitive apple farm's marginal revenue exceeds the marginal cost of the last bushel of apples sold, what should the farm do to maximize its profit?

increase output

A perfectly competitive firm has to charge the same price as every other firm in the market. Therefore, the firm

is a price taker

The price a perfectly competitive firm receives for its output

is determined by the interaction of all sellers and all buyers in the firm's market

If a perfectly competitive firm's price is above its average total cost, the firm

is earning a profit

A perfectly competitive firm's marginal revenue

is equal to its price

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost, the firm

is incurring a loss

A perfectly competitive firm's supply curve is its

marginal cost curve above its minimum average variable cost

All of the following can be used to compute average profit except

marginal profit minus marginal cost

A perfectly competitive firm will maximize its profit at the level of output where the vertical distance between its total revenue curve and total cost curve is the largest. This is the same level of output where

marginal revenue equals marginal cost

For a perfectly competitive firm, at profit maximization

marginal revenue equals marginal cost

If total revenue exceeds fixed cost, a firm

may or may not produce in the short run, depending on whether total revenue covers variable cost

If a typical firm in a perfectly competitive industry is earning profits, then

new firms will enter in the long run causing market supply to increase, market price to fall, and profits to decrease

At the profit-maximizing level of output for a perfectly competitive firm

price equals marginal cost

Assume that price is greater than average variable cost. If a perfectly competitive seller is producing at an output where price is $11 and the marginal cost is $14.54, then to maximize profits the firm should

produce a smaller level of output

To maximize profit, a perfectly competitive firm

should produce the quantity of output that results in the greatest difference between total revenue and total cost

If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, then the firm

should shut down

If a perfectly competitive firm's total revenue is less than its total variable cost, the firm

should stop production by shutting down temporarily

If a typical firm in a perfectly competitive industry is incurring losses, then

some firms will exit in the long run, causing market supply to decrease and market price to rise, increasing profits for the remaining firms

Marginal revenue is

the change in total revenue divided by the change in the quantity of output

For a perfectly competitive firm, average revenue is equal to

the market price

The supply curve of a perfectly competitive firm in the short run is

the portion of the firm's marginal cost curve above the minimum point of the average variable cost curve

Which of the following is the best example of a perfectly competitive industry?

the wheat market

In the short run, a firm that is operating at a loss has two options. These options are

to shut down temporarily or continue to produce

A perfectly competitive firm's short-run supply curve is

upward sloping and is the portion of the marginal cost curve that lies above the average variable cost curve