Microeconomics: Perfect Competition

In a perfectly competitive industry, firms seek to maximize: A. marginal profit B. total revenue per unit C. total profit D. their percentage of the total market

C. Total Profit

A perfectly competitive firm: A. can sell as much output as it wants at the equilibrium price B. must lower its price to sell more output C. can select the price for its output D. is a price maker

A. Can sell as much output as it wants at the equilibrium price

In the long run, perfectly competitive firms achieve: A. allocative and productive efficiency B. allocative efficiency, but not productive efficiency C. productive efficiency, but not allocative efficiency D. neither allocative nor productive efficiency

A. allocative and productive efficiency

Which of the following statements describes a perfectly competitive market under conditions of constant cost? A. the market supply curve becomes perfectly elastic in the long run. B. the market rarely experiences changes in the price and quantity sold in the short run C. If 50 units can be produced by $150, 150 units can be produced for $350 and 200 units for $450 D. The market rarely experiences changes in supply in response to changes in demand.

A. the market supply curve becomes perfectly elastic in the long run

In the short run, if ATC is greater than price at the output level where MC = MR then: A. new firms may be incentivized to enter the industry. B.the firm may be able to minimize losses. C. the firm will shut down. D. the firm will realize an economic profit.

B. The firm may be able to minimize losses

Which of the following statements describes what perfectly competitive firms experience in the long run? A. price equals ATC B. Price equals the minimum point on AVC C. Price equals the minimum point on ATC D. Marginal revenue is greater than marginal cost

C. Price equals the minimum point on ATC

Assume the Unico Corporation is producing 40 units of output and selling the output in a perfectly competitive market for $5 per unit. Its total fixed costs are $110 and its average variable cost is $4 for each of the 40 units of output. Unico: A.earns a profit of $40. B.maximizes its profits. C. earns a loss of $70. D. should shut down.

C. earns a loss of $70 TFC=110 40*4=160 160+110=270 270-200= $70

In the long run, if ATC equals price at the output level where MC=MR then: A. new firms may be incentivized to enter the industry. B. the firm will shut down C. the firm will earn a normal profit D. the firm may be able to minimize losses

C. the firm will earn a normal profit

Price for a perfectly competitive seller equals: A.average revenue divided by price. B. marginal revenue divided by price. C. total revenue. D. marginal revenue.

D. Marginal Revenue

In the short run, a perfectly competitive firm calculates the profit-maximizing (or loss-minimizing) production output by equating: A. price and average variable cost B. Price and average total cost C. price and marginal revenue D. Marginal revenue and marginal cost

D. Marginal revenue and marginal cost

Which of the following statements does NOT describe a perfectly competitive market? A. a large number of firms are involved B. Entry and exit are relatively easy C. In the short run firms can earn profits, minimize losses, or earn a normal profit. D. Price is greater than marginal revenue.

D. Price is greater than marginal revenue

A perfectly competitive firm's short-run supply curve is at its lowest point when MC equals the minimum point of: A. the average fixed cost curve B. the marginal revenue curve C. the average total cost curve D. the average variable cost curve.

D. The average variable cost curve