Perfection Competition (final questions)
What is the shape of the long-run supply curve in a decreasing-cost industry?
Downward sloping
Which of the following is a characteristic of perfect competition?
Easy entry and exit
Which of the following equals the ratio of the change in total revenues over the change in output?
Marginal revenue
When a firm is earning zero economic profits
P = ATC
In an increasing-cost industry, an increase in output will lead to
an increase in long-run per-unit costs.
In a perfectly competitive market, positive economic profits act to
attract new entrants into the industry
Total revenue divided by quantity is
average revenue
In the long run, the perfectly competitive firm
earns only a normal profit.
When considering perfect competition the absence of entry barriers implies that
firms can enter and leave the industry without serious impediments
In the long run when a perfectly competitive firm experiences negative economic profits,
firms exit the industry, the market supply curve shifts leftward, and the market price rises.
A firm seeking to maximize economic profits should produce at the output at which
marginal revenue equals marginal cost
All firms in a perfect competition industry
produce identical products.
A firm is currently producing an output at which price equals the minimum point on the average variable cost curve. If wage rates increase, the firm will
shut down since it would no longer be covering its variable costs.
The rising portion of a perfectly competitive firm's marginal cost curve, above the intersection with AVC, is its
supply curve
If a firm is a perfect competitor, then
the demand curve for its product is perfectly elastic
If an industry's long-run per-unit costs decrease as its output increases then
the firm is most likely a decreasing-cost industry
A perfectly competitive industry's market or "going" price is established by
the forces of supply and demand
A perfectly competitive industry's short-run supply curve is best described as
the horizontal summation of the individual firms' supply curves.
With marginal cost pricing
the price charged is equal to the opportunity cost to society of producing one more unit of the good
The firm will shut down in the short run if
the price falls below its minimum AVC
Competitive pricing is efficient because
the price that consumers pay reflects the opportunity cost to society of producing the good.
A company finds that at its present level of production, MR = MC at $14, MC = AVC at $15, and MC = ATC at $20. Your advice to the firm regarding its short-run operations is
to shut down
In the long run, the price for a perfectly competitive firm
will equal the minimum average total cost
If price is below average variable costs at all rates of output, the quantity supplied by a perfectly competitive firm will equal
zero
