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