AP Econ Competition

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in the figure above, if the price is equal to P4, the firm will

Earn positive profits

which of the following is NOT correct for a competitive firm in long-run equilibrium

Marginal Cost=Marginal Revenue>LAC

for a perfectly competitive firm, the short run break-even point occurs at the level of output

Marginal revenue=price=Marginal costs

for a competitive firm at its long-run equilibrium

P=MR=MC=AC

for a firm in a competitive industry

short-run economic profits may be positive, but long-run economic profits must be zero

economists generally assume that firms attempt to maximize

total profits

in the figure above, the market price charged by this firm is

$10 per units of output

the rising portion of a competitive firm's marginal cost curve, above the intersection with AVC, is its

supply curve

economic efficiency means

that it is impossible to increase the output of any good without lowering the total value of the output of the economy

a firm should continue producing until

the cost of increasing output by one more unit equals the revenues obtainable from selling the extra unit

For a firm in a perfectly competitive industry

the demand curve is the same as the marginal revenue curve

if price is $5, marginal cost is $5, average total cost is $3, and the quantity produced is 150 units, then

the firm is earning $300 and maximizing profit

if an increase in an industry's output is accompanied by an increase in long-run per-unit costs, then

the firm is most likely an increasing costs industry

if a perfectly competitive firm is producing at a level of output at which marginal cost exceeds marginal revenue

the firm should reduce production

in the figure above, at the level between 5 units and 13 units,

the firm's economic profits are positive

a competitive industry's short-run supply curve is best described as

the horizontal summation of the individual firms' supply curves

a market failure is a situation in which

the market equilibrium leads to either too many or too few resources going towards producing the good or service

which of the following is NOT correct concerning perfectly competitive firms in the long run

the opportunity cost of capital is zero

the competitive seller's short-run supply curve is

the part of its marginal cost curve above the average variable cost curve

with marginal cost pricing

the price charged is equal to the opportunity cost to society of producing one more unit of the good

a firm making losses should operate in the short-run as long as

the price per gold unit sold is greater than the average variable cost per unit prpoduced

For a perfectly competitive firm, when Marginal Cost is less than marginal revenue

the producer will have an incentive to expand output

a firm in a perfectly competitive market maximizes profits when it finds

the quantity at which total revenue minus total cost is the greatest

assuming fixed factor prices, the short-run industry supply curve for a perfectly competitive industry is equal to

the sum of the Marginal Cost curves above minimum Average Variable Cost

a constant cost industry is one in which

there is no change in long-run per unit costs, even as output varies

a firm that shuts down in the short-run experiences losses equal to its

total fixed costs

the "lemon problem" will exist

whenever there is asymmetry in information between buyers and sellers about the quality

if price is below average variable costs at all rates of output, the quantity supplied by a perfect competitor will equal

zero

In the figure above, if the firm is operating at d2, then to maximize profits it will produce at output level

B

Which of the following is NOT characteristic of a perfectly competitive market

It is difficult for a firm to enter or leave the market

if the firm in the figure above produces output level D, it incurs an average fixed cost of production equal to the distance

KR

firms in a competitive industry are producing goods efficiently in the long run if each is producing at the minimum point of the

LAC curve

which of the following is NOT true for a perfectly competitive firm in the long run

MC>LAC

what is always true about the short run equilibrium position for a firm in perfect competition

MR=MC=P=AR

in the figure above, assuming firm 1 and firm 2 are sole producers in the industry, the industry supply at the price P1 is equal to

Q2+Q4

according to the figure above, if the firm is making zero profits, what quantity is the firm

Q=1000; P=$5

which of the following could generate economic profits for perfectly competitive firms in the short run

a decrease in inputs prices

The perfectly competitive firm faces

a perfectly elastic demand

each firm in a perfectly competitive industry is

a price taker

in a decreasing cost industry, an increase in output will lead to

a reduction in long-run per-unit costs

a competitive firm,s short-run break-even output occurs

at the minimum point of its average total cost curve

in a competitive market, positive economic profits act to

attract new entrants into the industry

profit per unit is found by the difference between

average revenue and average total cost

the demand curve of a perfectly competitive industry is

downward sloping

what is the shape of the long-run supply curve in a decreasing cost industry?

downward sloping

suppose a perfectly competitive firm faces the following short run cost and revenue conditions: Average Total Cost=$25.00; Average Variable Cost=$20.00; Marginal Cost=$25.00; Marginal Revenue=$28.00. The firm should

increase output

suppose a perfectly competitive firm faces the following short run cost and revenue conditions: Average Total Cost=$8.00; Average Variable Cost=$5.00; Marginal Cost=$8.00; Marginal Revenue=$9.00. The firm should

increase output

the marginal revenue curve of a perfectly competitive firm

is also the demand curve

a perfectly elastic demand function

is characteristic of an individual firm operating in a perfectly competitive market

in a perfectly competitive industry, the industry demand curve

is downward sloping

a constant cost industry

is one in which an increase in demand is matched by proportional increases in long-run supply

when a a firm has zero economic profit,

it has a positive accounting profit

If a firm is perfectly competitive, then

its demand curve is perfectly elastic

in a perfectly competitive market, a firm's short-run supply curve equals

its marginal cost curve equal to or above average variable cost curve

At the short-run break-even point, the competitive firm is

making zero economic profits

a perfectly competitive firm will maximize profits when

marginal cost is equal to marginal revenue

the short-run break-even price is the point at which

marginal cost, average total cost and marginal revenue are all equal

for a firm in perfect competition

marginal revenue and product price are equal at every level of output

a firm seeking to maximize profits should produce at the rate of output at which

marginal revenue equals marginal cost

for a competitive firm, profit maximization occurs where

marginal revenue equals marginal cost

if price and marginal cost are equal for a competitive firm, this means that the firm is

maximizing economic profit

the short-run shut down price for the firm in perfect competition is where price equals

minimum AVC

In perfect competition

no buyer or seller can influence the market price

if a constant cost competitive industry experiences an increase in the demand for its product, we would expect

only the quantity supplied of the product to increase

the exiting of firms from a perfectly competitive industry occurs when

opportunity costs can not be covered

the demand curve of a perfectly competitive firm is

perfectly elastic

accounting profits at the firm's break-even point are

positive

a law that restricts plant closings will

prevent resources from flowing to their highest valued uses

for a firm in a perfectly competitive market, average revenue equals

price

if firms are just breaking even in a competitive industry in the short-run, we can expect

price and output to remain constant

the short-run shut-down price occurs where

price equals Average Variable Cost at the minimum point

which of the following is NOT a characteristic of a perfectly competitive long-run equilibrium??

price equals long-run minimum average cost

in long-run equilibrium, the competitive firm will

produce where marginal cost equal average total cost

suppose a firm faces the following the short run cost and revenue conditions: Average Total Cost=$7.00; Average Variable Cost=$5.00; Marginal Cost=$6.50; Marginal Revenue=$6.50. The firm should

remain at the current position

which of the following is NOT a characteristic of a perfectly competitive industry?

sellers have better information about the product

with a increasing cost industry, an increase in industry output will

shift the ATC of each producing firm up

when price is greater than both marginal cost and average variable cost, the competitive firm

should increase its level of output

If a firm is producing where marginal cost is greater than price, the firm

should reduce its output level

if AVC is $6 when P=MC, a firm

should shut down if price is less than $6

in the figure above, when price is equal to P1, the firm should

shut down

suppose a perfectly competitive firm faces the following short run cost and revenue conditions: Average Total Cost=$6.00; Average Variable cost=$4.00; Marginal Cost=$3.50; Marginal Revenue=$3.50. The firm should

shut down

a firm is currently producing the quantity where price equals the minimum point on the average variable cost curve. I wage rates increase, the firm will

shut down since it would no longer be covering its variable costs

for a competitive firm, any output price below its minimum Average Variable Cost is its

shut-down price

at a competitive firm's short run breakeven price,

P=ATC

when a firm is making no economic profit,

P=ATC

when MR<MC for a firm, the firm should

increase output, unless P<AVC

according the table 2301A, if the price is $10 for a firm in a competitive market, then the firm should produce

106 units

a firm should never produce any output if

P<AVC

in the figure above, the firm will shut down if prices falls below

E

a firm should shut down in the short-run when

P<AVC

the firm in the figure above breaks even when market price is

H

if an industry has constant costs, any shift in demand will eventually

be met by an equal change in supply, and equilibrium price will not change

in the figure above, point A represents a competitive firm's

break-even point

the "lemon problem" is a situation in which

consumers are only willing to pay the price of a low-quality product because they don't know the actual level of quality

A firm in a competitive industry faces the following short run cost and revenue conditions: Average total cost=$8; average variable cost=$4; and marginal revenue=Marginal Cost=$6. The firm should

continue to operate at the same price and output in the short run

profits and losses are true market signals because they

convey information about where resources should flow into or out of, and they reward

suppose a perfectly competitive firm faces the following short run cost and revenue conditions: Average total cost=$12.00; average variable cost=$8.00; Marginal cost=$12.00; Marginal Revenue=$10.00. The firm should

decrease output

in the long run, the competitive firm

earns only a normal profit

Which of the following is NOT characteristic of a competitive industry

economic profits must be positive in the short run

in the long run in a competitive industry

economic profits will be zero

in a perfectly competitive market, if P>ATC in the short-run, there is apt to be

entry of new firms a into the market

in the figure above, if firm 1 is maximizing its profits, then , at output level Q1, marginal revenue must

equal P2

when demand is perfectly elastic, marginal revenue is

equal to price

economic profits at the short-run break-even point are

equal to zero

suppose a perfectly competitive firm faces the following short run cost and revenue conditions: Average Total Cost=$8.00; Average Variable Cost=$3.00; Marginal Cost=Marginal Revenue=5. The firm is

experiencing economic losses

when a firm has an accounting profit which is negative, it

has total revenue that is less than total cost

in the model of perfect competition, the market demand curve found by

horizontally summing the demand curves of individual consumers

price equals the minimum of long-run average cost

in long-run equilibrium


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