ECON Chp 8 Quiz

A perfectly competitive firm's supply curve is:

its marginal cost curve.

If the market price is above average total cost in the short run:

Correct the firm is making an economic profit.

Which of the following are not equal to a firm's profit under perfect competition?

MR - MC

In a perfectly competitive increasing-cost industry, the long-run market supply curve is

Upward-sloping.

In perfect competition, the prices charged by firms:

are determined by market supply and demand

Economic rent is:

equal to zero for the firm that has the highest cost.

The biggest difference between perfectly competitive markets and monopolistically competitive markets is that:

firms' products are differentiated under monopolistic competition but are identical under perfect competition.

If the market price is below minimum average variable cost in the short run:

he firm will shut down production.

In a perfectly competitive constant-cost industry, the long-run market supply curve is:

perfectly elastic.

In perfectly competitive markets, demand for an individual firm's product is:

perfectly elastic.

In perfectly competitive markets:

price equals marginal revenue at all quantities

If a perfectly competitive firm is making a loss in the short run, it should:

produce where price equals marginal cost so long as the price is higher than minimum average variable cost

The curve that is most relevant to whether a firm makes a profit or loss in the short run is`

the average total cost curve.

The curve that is most relevant to the firm's decision to produce or shut down in the short run is:

the average variable cost curve.

In long-run equilibrium under perfect competition, price is not equal to:

the firms' minimum average fixed cost. See Section 8.4.

A perfectly competitive industry begins in long-run equilibrium, but a technological innovation lowers the firms' costs. After the market adjusts, relative to the original equilibrium:

the price charged by the firms decreases, the quantity produced by a firm increases, and the market quantity increases.

A perfectly competitive constant-cost industry begins in long-run equilibrium, but demand subsequently decreases. After the market readjusts, relative to the original equilibrium:

the price charged by the firms remains the same, the quantity produced by a firm remains the same, and the market quantity decreases.

In the long run under perfect competition, if price is initially above average total cost:

the quantity produced by the firm and the price it charges will both fall.

In the long run under perfect competition, if price is initially below average total cost:

the quantity produced by the firm and the price it charges will both rise

In the short run, a perfectly competitive firm's producer surplus is equal to:

total revenue minus variable cost