Econ Chapter 14 Quiz

A perfectly competitive firm

Sells a product that has perfect substitutes.

In a perfectly competitive market, one farmer's barley is

A perfect substitute for another farmer's barley.

Perfect competition ___ a fair outcome ___.

Achieves; because both their fair rules and fair results conditions are met.

If a perfectly competitive firm is maximizing its profit and is making an economic profit, which of the following is correct? 1. Price equals marginal revenue 2. Marginal revenue equals marginal cost 3. Price is greater than average total cost

All are correct.

In the long run, perfectly competitive firms produce at the level that has the minimum

Average total cost.

Firms exit a competitive market when they incur an economic loss. In the long run, this exit means that the economic losses of the surviving firms

Decrease until they equal zero.

In a perfectly competitive market, a(n) ___ occurs because ___.

Efficient outcome; firms minimize average minimum cost.

A perfectly competitive firm will maximize profit when the quantity produced is such that the

Firm's marginal revenue is equal to its marginal cost.

We know that a perfectly competitive firm is a price taker because

Its demand curve is horizontal.

A perfectly competitive firm's short-run supply curve is

Its marginal cost curve above the AVC curve.

The rutabaga market is perfectly competitive. Research is published claiming that eating rutabagas leads to gaining weight and so the demand for rutabagas permanently decreases. The permanent decrease in demand results in a

Lower price, economic losses by rutabaga farmers, and exit from the market.

If a perfectly competitive firm's average total cost is less than the price, then the firm

Makes an economic profit.

A perfectly competitive firm is a price taker because

Many other firms product the same product.

If the wheat industry is perfectly competitive with a market price of $4 per bushel and Farmer Brown charges $5 per bushel, how many bushels would Farmer Brown sell?

None.

How does the demand for any one seller's product in perfect competition compare to the market demand for that product?

The demand for any one seller's product is perfectly elastic while the market demand curve is downward sloping.