Ch. 8

When firms in an industry are earning zero economic profit: A. the number of firms in the industry is stable. B. they are likely to be investigated for price gouging. C. their stocks are not valued by investors. D. they are earning zero accounting profits.

A. the number of firms in the industry is stable.

A perfectly competitive firm is producing 100 units (profit maximizing). If the price is $12, marginal cost is $12, and average total cost is $11, this firm's profits are: A. $10. B. $100. C. $0. D. $1.

B. $100.

If the marginal revenue for the next unit being produced is $50, but the marginal cost is $45, the firm should: A. hold production constant. B. increase production. C. decrease production. D. consider stopping production before more losses are incurred.

B. increase production.

In a perfectly competitive market, individual firms set: A. neither prices nor quantities. B. quantities but not prices. C. prices and quantities. D. prices but not quantities.

B. quantities but not prices.

For a perfectly competitive industry in the long run all of the following are true, EXCEPT: A. consumer surplus is maximized. B. firms are earning a positive economic profit. C. the industry has achieved allocative efficiency. D. the industry has achieved productive efficiency.

B. firms are earning a positive economic profit.

The perfectly competitive firm's short-run supply curve is the: A. AVC curve. B. MC curve above the TC curve. C. MC curve above the AVC curve. D. MC curve above the ATC curve.

C. MC curve above the AVC curve.

Market structure analysis allows economists to: A. eliminate economic profits. B. create the conditions of competition. C. predict the behavior of firms. D. remodel the economy.

C. predict the behavior of firms.

A perfectly competitive firm should continue to produce until: A. MC = TC. B. MC is at a minimum. C. MC = P. D. ATC is at a minimum.

C. MC = P.

When perfectly competitive firms are earning short-run economic profits, all of the following happens, EXCEPT : A. market prices fall. B. firms are attracted to the industry by the profits. C. supply increases. D. the number of firms in the industry will fall.

D. the number of firms in the industry will fall.

A perfectly competitive firm has total revenues equal to $360 when it produces 40 units. What is the marginal revenue for the 41st unit? A. $8.78 B. $369 C. $360 D. $9

D. $9

The perfectly competitive market structure assumes all of the following except: ease of entry and exit. identical products. a small number of buyers and sellers. zero economic profit in the long run.

a small number of buyers and sellers.