Final exam practice - C

The "perfect information" assumption of perfect competition includes all of the following except one. Which one?

Consumers can anticipate price changes.

What is a key assumption of a perfectly competitive market?

Each seller has a very small share of the market.

Which of following is an example of a homogeneous product?

Gasoline AND Copper

The perfectly competitive firm's marginal revenue curve is

HORIZONTAL

If current output is less than the profit-maximizing output, which must be true?

Marginal revenue is greater than marginal cost.

Because of the relationship between a perfectly competitive firm's demand curve and its marginal revenue curve, the profit maximization condition for the firm can be written as

P = MC

At the profit-maximizing level of output, what is true of the total revenue (TR) and total cost (TC) curves?

They must have the same slope.

A price taker is

a perfectly competitive firm AND a firm that cannot influence the market price.

Several years ago, Alcoa was effectively the sole seller of aluminum because the firm owned nearly all of the aluminum ore reserves in the world. This market was not perfectly competitive because this situation violated the:

free entry assumption AND free entry assumption

At the profit-maximizing level of output, marginal profit

is zero.

The demand curve facing a perfectly competitive firm is the same as:

its average revenue curve and its marginal revenue curve.

A firm maximizes profit by operating at the level of output where

marginal revenue equals marginal cost.

Marginal profit is equal to

marginal revenue minus marginal cost.

Marginal profit is negative when:

output exceeds the profit-maximizing level.

The demand curve facing a perfectly competitive firm is

perfectly horizontal.

Revenue is equal to

price times quantity

The amount of output that a firm decides to sell has no effect on the market price in a competitive industry because

the firm's output is a small fraction of the entire industry's output

If the market price for a competitive firm's output doubles then

the marginal revenue doubles

Marginal revenue, graphically, is

the slope of the total revenue curve at a given point.

If any of the assumptions of perfect competition are violated,

there may still be enough competition in the industry to make the model of perfect competition usable.

If current output is less than the profit-maximizing output, then the next unit produced

will increase revenue more than it increases cost.