Chapter 8:Perfect competition

a market structure describes the nature of an industry based on the:

# and size of firms in the industry

A firm in a perfectly competitive market maximizes its profits when its marginal cost equals its total revenue. T F

False

A perfectively competitive industry's market demand curve is a horizontal line. T F

False

if a competitive firm can increase its profits by increasing its output, then the firms

MR<MC

In a perfectly competitive industry, one would expect that a natural disaster that decreases the production of a significant number of firms in the industry would cause market prices to rise. T F

True

If a perfectly competitive firm earns zero economic profit, it

can expect to se about the same amount of competition in the future

in a perfectly competitive market,each firms demand curve is:

horizontal

The firms in a perfectly competitive market produce _____ products.

identical

a perfectly competitive industry is characterized by:

many small firms each producing identical products and no barriers to entry

the price charges by a firm in a perfectly competitive market always equals its:

marginal revenue

the profit-maximizing level of output for a firm in a perfectly competitive market occurs where:

marginal revenue=marginal cost

A firm earning a zero economic profit is _____ the financial expectations of its investors.

meeting

If firms in a perfectly competitive market are earning positive economic profits in the short run, one would expect that in the long run:

new firms would enter the market and market prices would decrease

which market structure has relatively small buyers and sellers,a standardized production, good info for both buyers and sellers and no barriers to entry

perfect competition

what is the correct market structures in order from the highest number of sellers to the lowest?

perfect competition; monopolistic competition; oligopoly; monopoly

the demand curve for fro an individual perfectly competitive firm is

perfectly elastic

A firm is a ____if its actions have no impact on the market price of a good.

price taker

assume that P1>P2>AVC. If market price decreases from P1 to P2 then the perfectly competitive firm that maximizes profit should

reduce production

if the avg TC is $10 and the price is $8 at the profit maximizing quantity, what will happen in the long run in a perfectly competitive market?

some firms will exit the market pushing the market price higher

which statement explains the logic of the profit maximization rule for a perfectly competitive firm?

the firm should produce every unit of output that adds more to the revenue than it adds to the costs so that the firm captures all the available profit

firms in perfectively competitive industries earn____economic profits

zero