ch.14

In the long run, if firms are identical and there is free entry and exit in the market, all firms in the market operate at their efficient scale.

T

In the long run, if the price firms receive for their output is below their average total costs of production, some firms will exit the market.

T

In the long run, perfectly competitive firms earn small but positive economic profits.

T

In the short run, the market supply curve for a good is the sum of the quantities supplied by each firm at each price.

T

In the short run, if the price a firm receives for a good is above its average variable costs but below its average total costs of production, the firm will temporarily shut down.

F

The only requirement for a market to be perfectly competitive is for the market to have many buyers and sellers.

F

The short-run market supply curve is more elastic than the long-run market supply curve.

F

For a competitive firm, marginal revenue equals the price of the good it sells.

T

A grocery store should close at night if the a. variable costs of staying open are less than the total revenue due to staying open. b. total costs of staying open are less than the total revenue due to staying open. c. variable costs of staying open are greater than the total revenue due to staying open. d. total costs of staying open are greater than the total revenue due to staying open.

C

If an input necessary for production is in limited supply so that an expansion of the industry raises costs for all existing firms in the market, then the long-run market supply curve for a good could be a. perfectly inelastic. b. perfectly elastic. c. upward sloping. d. downward sloping.

C

In the long run, the competitive firm's supply curve is the a. entire marginal cost curve. b. upward-sloping portion of the average total cost curve. c. portion of the marginal cost curve that lies above the average total cost curve. d. upward-sloping portion of the average variable cost curve. e. portion of the marginal cost curve that lies above the average variable cost curve.

C

In the long-run, some firms will exit the market if the price of the good offered for sale is less than a. marginal revenue. b. marginal cost. c. average total cost. d. average revenue.

C

If a competitive firm doubles its output, its total revenue a. doubles. b. more than doubles. c. less than doubles. d. cannot be determined because the price of the good may rise or fall.

A

If the long-run market supply curve for a good is perfectly elastic, an increase in the demand for that good will, in the long run, cause a. an increase in the number of firms in the market but no increase in the price of the good. b. an increase the price of the good and an increase in the number of firms in the market. c. an increase the price of the good but no increase in the number of firms in the market. d. no impact on either the price of the good or the number of firms in the market.

A

The long-run market supply curve a. is always more elastic than the short-run market supply curve. b. is always perfectly elastic. c. has the same elasticity as the short-run market supply curve. d. is always less elastic than the short-run market supply curve.

A

In long-run equilibrium in a competitive market, firms are operating at a. the minimum of their average-total-cost curves. b. all of these answers are correct. c. their efficient scale. d. zero economic profit. e. the intersection of marginal cost and marginal revenue.

B

For a competitive firm, marginal revenue is a. total revenue divided by the quantity sold. b. equal to the quantity of the good sold. c. average revenue divided by the quantity sold. d. equal to the price of the good sold.

D

If a competitive firm is producing a level of output where marginal revenue exceeds marginal cost, the firm could increase profits if it a. decreased production. b. maintained production at the current level. c. temporarily shut down. d. increased production.

D

If all firms in a market have identical cost structures and if inputs used in the production of the good in that market are readily available, then the long-run market supply curve for that good should be a. downward sloping. b. perfectly inelastic. c. upward sloping. d. perfectly elastic.

D

In the short run, the competitive firm's supply curve is the portion of the marginal-cost curve that lies above the average variable cost curve. a. upward-sloping portion of the average total cost curve. b. upward-sloping portion of the average variable cost curve. c. portion of the marginal cost curve that lies above the average total cost curve. d. entire marginal cost curve. e. portion of the marginal-cost curve that lies above the average variable cost curve.

E

A firm maximizes profit when it produces output up to the point where marginal cost equals marginal revenue.

T

If a competitive firm sells three times the amount of output, its total revenue also increases by a factor of three.

T

If the price of a good rises above the minimum average total cost of production, positive economic profits will cause new firms to enter the market, which drives the price back down to the minimum average total cost of production.

T

In a competitive market, both buyers and sellers are price takers.

T

The competitive firm maximizes profit when it produces output up to the point where a. price equals average variable cost. b. marginal revenue equals average revenue. c. marginal cost equals total revenue. d. marginal cost equals marginal revenue.

D

Which of the following is not a characteristic of a competitive market? a. All of these answers are characteristics of a competitive market. b. There are many buyers and sellers in the market. c. The goods offered for sale are largely the same. d. Firms generate small but positive economic profits in the long run. e. Firms can freely enter or exit the market.

D

Which of the following markets would most closely satisfy the requirements for a competitive market? a. electricity b. cable television c. cola d. milk e. All of these answers represent competitive markets.

D

A competitive firm's long-run supply curve is the portion of its marginal cost curve that lies above its average variable cost curve.

F

A competitive firm's short-run supply curve is the portion of its marginal cost curve that lies above its average total cost curve.

F

If marginal cost exceeds marginal revenue at a firm's current level of output, the firm can increase profit if it increases its level of output.

F