EC350: Firms in Perfectly Competitive Markets

Long-run equilibrium in perfect competition results in:

both productive and allocative efficiency

What does the shaded area in the graph represent for a perfectly competitive firm that produces at output level Q?

negative economic profit

According to the graph, if a perfectly competitive firm is producing at point A, which of the following is true?

the firm earns zero economic profit

What is the term given to a cost that has already been paid and cannot be recovered?

Sunk Cost

If the average total cost curve is above the demand curve, then this firm is:

having economic losses

If the average total cost is above the demand curve, then this firm is:

having economic losses

In perfect competition, when a firm is making positive economic profit in the short run, then new firms enter the market causing the market supply curve to __________ and the market price to __________.

shift rightward, decrease

As the market demand shifts to the left, how will the firm's level of output change?

the firm will decrease its output and suffer losses

The perfectly competitive firm represented in the graph on the right is experiencing a

profit in the short run

In perfect competition, the marginal revenue is the same as:

price

According to the graph, which level of output maximizes profit?

8 shirts per minute

In the short run, the firm should:

operate if price > average variable cost

According to the graph, what is the value of total fixed cost for this perfectly competitive firm?

$2,400

At which price in this graph is the perfectly competitive firm earning negative economic profit?

$250

According to the data in the table, what level of output maximizes profit?

8 units of output

According to the graph the shut-down point corresponds to:

Point D

In this graph, the market is initially in long-run equilibrium at point A. If this is a constant-cost industry, after the decrease in demand, which point is likely to be a short-run equilibrium and which point is likely to be the next long-run equilibrium?

Point D is a short-run equilibrium and point C is the new long-run equilibrium

A buyer or seller that is unable to affect the market price is called a

Price taker

According to the graph, which demand curve is associated with the shutdown point for this perfectly competitive firm?

demand curve 2

According to the data in the table, when the price is $4, the firm would produce

four units of output, although it would suffer a loss from doing so.

According to the graphs, which of the following is likely to happen in this market in the long run?

no other firms will enter this market

A firm in perfect competition earn profit if:

price is greater than average total cost

A firm in perfect competition earns profit if:

price is greater than average total cost

The perfectly competitive firm represented in the graph on the right is experiencing a __________.

profit in the short run

Which graph best depicts an industry in which the firm's average costs decrease as the industry expands production?

the graph on the left

Which of the following is a characteristic of a perfectly competitive market?

there are large numbers of buyers and sellers