Perfect Competition

Why are some producers forced to sell their products at the prevailing market price? Price takers find market analysis is too costly. They are very small players in the overall market. High degree of similarity to competitor's products. They can increase output without affecting quality

High degree of similarity to competitor's products.

The profit-maximizing choice for a perfectly competitive firm will occur where marginal revenue is equal to ________. Variable revenue Marginal cost Fixed cost

Marginal cost

________ refers to the additional revenue gained from selling one more unit. Accounting profit Total revenue Marginal revenue Economic profit

Marginal revenue

Firms in a prefect competitive market are said to be "price takers " - that is once the market determines an equilibrium price for a product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent? No, you would not raise the price. Yes, you would raise the price enough to meet your target pricing. Yes, you would raise the price slightly.

No, you would not raise the price.

Which of the following statement(s) are true for a perfectly competitive firm that is seeking to maximize profits? The best production choice is at a quantity where price is equal to marginal cost. Price is equal to marginal revenue. A profit-seeking firm should expand production into the zone where marginal cost is greater than marginal revenue.

Price is equal to marginal revenue. The best production choice is at a quantity where price is equal to marginal cost.

Which of the following statements accurately explains why profits for firms in a perfectly competitive industry tend to vanish in the long run? Prices drop when other perfectly competitive firms see an opportunity to earn profits and enter the market. Firms that experience losses try to increase supply to cover their costs, leading to zero profits. The demand for products falls over time, so firms are unable to generate revenue.

Prices drop when other perfectly competitive firms see an opportunity to earn profits and enter the market.

When new firms enter a perfectly competitive market, what is the impact on prices? Prices go up. Prices go down. There is no impact on prices.

Prices go down.

When firms exit a perfectly competitive market, what is the impact on prices? Prices go up. Prices go down. There is no impact on prices.

Prices go up.

If a perfect competitive firm is producing output at a point where marginal revenue is equal to marginal cost, then it should: Stick with that level of production in order to maximize profits. Increase output in order to maximize profits. Decrease output in order to maximize profits.

Stick with that level of production in order to maximize profits.

Which of the following are assumptions of perfect competition? There are many buyers and sellers. consumers have all the relevant information to make rational buying decisions. The products are identical.

There are many buyers and sellers. consumers have all the relevant information to make rational buying decisions. The products are identical.

Long-run equilibrium in perfectly competitive markets meets what two important conditions? utility efficiency allocative efficiency productive efficiency

allocative efficiency productive efficiency

If the price that a firm charges is higher than its ________ cost of production for that quantity produced, then the firm will earn profits. marginal average fixed variable

average

In a perfectly competitive market, if a firm raises the price of its product from the prevailing market price of $179 to $199, it: will cause the firm to recover some of its opportunity costs. could likely result in a notable loss of sales to competitors. is a sure sign the firm is raising the given price in the market. will likely cause the firm to reach its shutdown point immediately.

could likely result in a notable loss of sales to competitors.

In the ________, if profits are not possible, the perfectly competitive firm will seek out the quantity of output where ________. long run : fixed costs can be eliminated long run : variable costs can be increased short run : fixed costs can be reduced short run : losses are smallest

short run : losses are smallest

Kate's 24-Hour Breakfast Diner menu offers one item, a $5.00 breakfast special. Kate's variable costs (e.g., servers, cooks, electricity, food, etc.) per meal average $3.95. Her fixed costs (e.g., rent, insurance, cleaning supplies and business license) per meal average $1.25. Since the market is highly competitive, Kate should: lay-off her staff, break her lease, and close the business down immediately. keep the business open in the short-run, and plan to expand the business in the long-run. raise her prices above the perfectly competitive level set by the market. keep the business open in the short-run, but plan to go out of business in the long-run.

keep the business open in the short-run, but plan to go out of business in the long-run.

In the ________, the perfectly competitive firm will react to losses by ________ . long run : increasing capital inputs long run : reducing production or shutting down short run : increasing physical inputs

long run : reducing production or shutting down

A perfectly competitive firm should shut down immediately in order to incur only fixed costs whenever the price is: lower than the zero-profit point. higher than the average total cost. higher than the average variable cost. lower than the average variable cost.

lower than the average variable cost.

If marginal cost is rising in a competitive firm's short-run production process and its average variable cost is falling as output is increased, then: marginal cost is below average variable cost. marginal cost is below average fixed cost. marginal cost is above average variable cost. average fixed cost is constant.

marginal cost is below average variable cost.

What two lines on a cost curve diagram intersect at the zero-profit point?​ ​ The average cost curve and the variable revenue curve. ​​The average cost curve and the marginal revenue curve. The average variable cost curve and the variable revenue curve. ​

​​The average cost curve and the marginal revenue curve.

Given the data provided in the table below, what will the fixed costs equal for production at quantity (Q) level 4? QPTCTRMRMCProfit 0$5$9 1$5$10 2$5$12 3$5$15 4$5$19 5$5$24 6$5$30 7$5$45 $36.00 $35.00 $4.00 $9.00

$9.00

Suppose there is a perfectly competitive market for grapefruit. If the price for grapefruit is lower than the marginal cost of producing grapefruit, what will happen in the long run, in order for the market to achieve productive and allocative efficiency? The same amount of grapefruit will continue to be produced Fewer grapefruit will be produced More grapefruit will be produced

Fewer grapefruit will be produced

All of the following are characteristics of Perfect Competition except: Large number of buyers and sellers. Incomplete information about prices. Ease of entry and exit. Identical goods.

Incomplete information about prices.

What is the shape of a marginal revenue curve for a perfectly competitive firm? It slopes upward It is flat It slopes downward

It is flat

What two lines on a cost curve diagram intersect at the zero-profit point? The average cost curve and the variable revenue curve. The average cost curve and the marginal revenue curve. The average variable cost curve and the variable revenue curve.

The average cost curve and the marginal revenue curve.

The demand curve for a firm in a perfectly competitive market is different from that of the entire market. The market demand curve ________, while the perfectly competitive firm's demand curve ________.​ slopes upward : is a horizontal line is a horizontal line : slopes upward slopes downward : is a horizontal line

slopes downward : is a horizontal line