Micro S16D: Chapter 9

Refer to EXHIBIT 9-3. What quantity of output should the profit-maximizing firm produce?

44 Units

Perfectly competitive industries are

None of these choices are correct.

Which of the following is the best example of a homogeneous good?

Wheat

Real-world markets that approximate the four assumptions of the theory of perfect competition include

"some agricultural markets" and "the stock market".

Refer to EXHIBIT 9-1. The dollar amounts that go in blanks (A) and (B) are, respectively,

$12 & $12

In order for a firm to continue producing, price must exceed __________ and total revenue must exceed __________.

AVC; total variable costs

A constant-cost industry has a long-run (industry) supply curve that is

Horizontal

Why must profits be zero in long-run competitive equilibrium?

If profits are not zero, firms will enter or exit the industry.

For a perfectly competitive firm, profit maximization or loss minimization occurs at the output at which

MR = MC.

Does a real-world market have to meet all the assumptions of the theory of perfect competition before it is considered a perfectly competitive market?

No, probably no real-world market meets all the assumptions of the theory of perfect competition. All that is necessary is that a real-world market behave as if it satisfies all the assumptions.

Which of the following conditions does not characterize long-run competitive equilibrium?

Price is greater than marginal cost.

The profit-maximization rule is as follows:

Produce the quantity of output at which marginal revenue equals marginal cost.

Refer to EXHIBIT 9-2. What quantity does the profit-maximizing or loss-minimizing firm produce?

Q2, where the difference between "what is coming in" on the last unit and "what is going out" is zero.

In the short-run, if P < ATC, a perfectly competitive firm should

There is not enough information to answer the question

Firm X is producing the quantity of output at which marginal revenue equals marginal cost. It is

There is not enough information to answer the question.

A decreasing-cost industry is characterized by

a downward-sloping long-run supply curve.

A constant-cost industry is characterized by

a perfectly elastic long-run supply curve.

If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing that unit the firm

added more to total revenue than it added to total costs

The price at which a perfectly competitive firm sells its product is determined by

all sellers and buyers of the product.

An increasing-cost industry is characterized by

an upward-sloping long-run supply curve.

Perfectly competitive firms are price takers for all of the following reasons except that

barriers to exit force firms to sell at the market price.

In the theory of perfect competition,

both "the single firm's demand curve is horizontal" and "the market demand curve is downward sloping".

The theory of perfect competition generally assumes that

buyers and sellers act independently of other buyers and sellers.

A "price taker" is a firm that

does not have the ability to control the price of the product it sells.

The market demand curve in a perfectly competitive market is

downward sloping

The short-run industry supply curve is the

horizontal summation of the short-run supply curves for all firms in the industry.

Refer to EXHIBIT 9-1. The firm's demand curve represented by the information in this table is

horizontal.

The demand curve for a perfectly competitive firm

is perfectly horizontal.

Refer to EXHIBIT 9-1. The data in this table are relevant to a perfectly competitive firm because

it doesn't have to lower price to sell additional units of the product.

The perfectly competitive firm will seek to produce the output level for which

marginal cost equals marginal revenue.

A perfectly competitive firm should increase its level of production as long as

marginal revenue is greater than marginal cost.

If an industry advertises, then it

may or may not be a perfectly competitive industry.

The perfectly competitive firm's short-run supply curve is the

portion of its marginal cost curve that lies above its average variable cost curve.

If firms are earning zero economic profits, they must be producing at an output level at which

price equals average total cost.

Resource allocative efficiency occurs when a firm

produces the quantity of output at which price equals marginal cost.

The perfectly competitive firm will produce in the

short run if price is below average total cost but above average variable cost.

Marginal revenue is

the change in total revenue brought about by selling an additional unit of the good.

If MR > MC, then

the firm can increase its profits or minimize its losses by increasing output.

For a perfectly competitive firm,

the marginal revenue curve and the demand curve are the same.