HW8

The short-run supply curve for a perfectly competitive firm is that part of the firm margial cost curve that lies above the minimum point of its average variable cost curve

true

10 If the market price is $20, what is the firm's profit-maximizing output?

1350 units

16 If the market price of each camera case is 8, what is the profit-maximizing quantity?

400 units

What is allocative efficiency

A situation which resources are allocation such that the last unit of output produced provides a marginal benefit to consumers equal to the marginal cost of producing it

When plasma television sets were first introduced prices were high and few firms were in the market. Later, economic profits attracted new firms and the price of plasma televisions fell

B. that consumers receive this new technology "free of charge" in the sense that they only have to pay a price for plasma televisions equal to the lowest production cos

A firm could continue to operate for years without earning a profit as it is producing an output where

MR>AVC

Suppose a typical firm in a perfectly competitive market is earning economic profits in the short run. Which of the diagrams in the figure depicts what happens to in the industry as it transitions to along run equilibrium?

Panel B

A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000. The prevailing market price is $48. Assuming that this firm continues to produce in the long run, what happens to output level in the long run?

The firms output increases

In a decreasing-cost industry, the entry of new firms lowers average cost at each level of output

True

a perfectly competitive firm earns a profit when price is

above minimum average total cost

Which of the following is not true for a firm in perfect competition

average revenue is greater than marginal revenue

If a perfectly competitive apple farms marginal revenue exceeds the marginal cost of last bushel of apples sold, what should the farm do to maximize its profit?

increase output

The price of a seller's product in perfect competition is determined by

market demand and market suplly

When a perfectly competitive firm finds that is market price is below is minimum average variable cost, it will sell

nothing at all; the firm shuts down

Assume that price is greater than average variable cost. If a perfectly competitive seller is producing at an output where the price is $11 and the marginal cost is $14.54, then to maximize profits the firm should

produce a smaller level of output

if a typical firm in a perfectly competitive industry is incurring losses, then

some firms will exit in the long run, causing market supply to decrease and market prices to rise increasing profits for the remaining firms

What is always true at the quantity where a firm's average total cost equals average revenue

the firm breaks even

A perfectly competitive firm has to charge the same price as every other firm in the market, therefore

the firm is a price taker

An individual seller in perfect competition will not sell at a price lower than the market price because

the seller can sell any quantity he wants at the prevailing market price

Which of the following is not a characteristic of a perfectly competitive market structure?

there are restrictions on exits of firms