Erec chapter 10

In the long run, the perfectly competitive firm in Figure 10-8 will leave the industry if the price falls below

$9

A firm earns a profit of exactly zero at its optimal output level only if

. P = AC.

A perfectly competitive firm will always maximize profits by producing where

. P = MC

A perfectly competitive industry in long-run equilibrium is described as efficient because firms

produce at the low point on their average cost curve.

A perfectly competitive firm would be willing to remain in the industry in the long run at zero economic profit because

revenue is equal to all costs, including the opportunity cost of capital and labor.

A firm in short-run equilibrium always earns positive profits if

AR > AC

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

MC curve above the minimum point on the AVC curve

For the perfectly competitive firm in Figure 10-8, what is the long-run price and quantity?

P = 9, Q = 200

A firm will shut down in the short run if

P<AVC

If a firm shuts down in the short run, its losses are equal to

TFC.

In a market with perfectly competitive firms, the market demand curve is usually ____ and the demand curve facing each individual firm ____.

downward sloping; horizontal

Firms entering a perfectly competitive industry will cause the price of the product to

fall

For a perfectly competitive firm, marginal revenue equals average revenue because the

firm's demand curve is horizontal

If a competitive firm's short run average cost curve lies above the price of the product, we can conclude that the firm

is incurring losses.

The perfectly competitive firm has no influence over price because

its output is so insignificant relative to the market as a whole.

The entry of firms into a perfectly competitive industry causes the supply curve to

move toward the right

Zero economic profits for a perfectly competitive firm in the long run means

the firm is in equilibrium

The market for a perfectly competitive industry clears at a price of $3, and the minimum average cost for all firms is $2.50. In the long run, we would expect an increase in

the number of firms

A firm can stay in business while taking a loss in the short run as long as it covers its

variable costs