Econ Chapter 13

A perfectly competitive firm will be profitable if price at the profit-maximizing quantity is above:

ATC

Which of the following is a requirement for a perfectly competitive market?

Buyers and sellers are price takers.

Which of the following is one of the necessary conditions for perfect competition?

No barriers to entry

A perfectly competitive firm facing a price of $50 decides to produce 500 widgets. Its marginal cost of producing the last widget is $50. If the firm's goal is maximize profit, it should:

continue producing 500 widgets.

To maximize profits, a perfectly competitive firm should produce where marginal:

cost equals marginal revenue.

Long-run market supply is a downward-sloping line in a(n):

decreasing-cost industry.

The existence of positive economic profits induces firms to:

enter an industry, which shifts the market supply curve to the right and decreases market price.

The existence of economic losses induces firms to:

exit an industry, which shifts the market supply curve to the left and increases market price.

In a perfectly competitive constant-cost industry:

factor prices do not change as industry output increases.

In a perfectly competitive decreasing-cost industry:

factor prices fall as industry output increases.

In a perfectly competitive increasing-cost industry:

factor prices rise as industry output increases.

If the marginal revenue of the next widget a firm produces is $50 and its marginal cost is $35, a firm should:

increase production.

The long-run industry supply curve will be upward-sloping if:

input prices increase with the level of output.

Suppose there is an improvement in the technology of producing TVs and the production of TVs is a competitive industry. Assuming that the TV industry is initially in equilibrium, the long-run effect of this improvement is:

lower TV prices and greater TV production.

To maximize profits, a perfectly competitive firm should produce until:

marginal cost is equal to price.

A perfectly competitive firm in the long run earns:

positive normal profits but zero economic profits.

Suppose there are 200 firms in a perfectly competitive market and each maximizes profit at 120 units of output when market price is $5.00 per unit. One of the points on the market supply curve must be at:

price = $5 and quantity supplied = 24,000.

Each firm in perfect competition:

sets quantity based on market price.

If the long-run market supply curve is perfectly elastic, an increase in demand will cause the final equilibrium to be at:

the original price but with a higher output.

The demand for clothing increases. As a result, the price of clothing increases above the minimum average cost of producing it. In the long run, if the clothing industry is perfectly competitive and is a constant-cost industry:

the supply of clothing will increase but the price will not.