AP Econ Competition
in the figure above, if the price is equal to P4, the firm will
Earn positive profits
which of the following is NOT correct for a competitive firm in long-run equilibrium
Marginal Cost=Marginal Revenue>LAC
for a perfectly competitive firm, the short run break-even point occurs at the level of output
Marginal revenue=price=Marginal costs
for a competitive firm at its long-run equilibrium
P=MR=MC=AC
for a firm in a competitive industry
short-run economic profits may be positive, but long-run economic profits must be zero
economists generally assume that firms attempt to maximize
total profits
in the figure above, the market price charged by this firm is
$10 per units of output
the rising portion of a competitive firm's marginal cost curve, above the intersection with AVC, is its
supply curve
economic efficiency means
that it is impossible to increase the output of any good without lowering the total value of the output of the economy
a firm should continue producing until
the cost of increasing output by one more unit equals the revenues obtainable from selling the extra unit
For a firm in a perfectly competitive industry
the demand curve is the same as the marginal revenue curve
if price is $5, marginal cost is $5, average total cost is $3, and the quantity produced is 150 units, then
the firm is earning $300 and maximizing profit
if an increase in an industry's output is accompanied by an increase in long-run per-unit costs, then
the firm is most likely an increasing costs industry
if a perfectly competitive firm is producing at a level of output at which marginal cost exceeds marginal revenue
the firm should reduce production
in the figure above, at the level between 5 units and 13 units,
the firm's economic profits are positive
a competitive industry's short-run supply curve is best described as
the horizontal summation of the individual firms' supply curves
a market failure is a situation in which
the market equilibrium leads to either too many or too few resources going towards producing the good or service
which of the following is NOT correct concerning perfectly competitive firms in the long run
the opportunity cost of capital is zero
the competitive seller's short-run supply curve is
the part of its marginal cost curve above the average variable cost curve
with marginal cost pricing
the price charged is equal to the opportunity cost to society of producing one more unit of the good
a firm making losses should operate in the short-run as long as
the price per gold unit sold is greater than the average variable cost per unit prpoduced
For a perfectly competitive firm, when Marginal Cost is less than marginal revenue
the producer will have an incentive to expand output
a firm in a perfectly competitive market maximizes profits when it finds
the quantity at which total revenue minus total cost is the greatest
assuming fixed factor prices, the short-run industry supply curve for a perfectly competitive industry is equal to
the sum of the Marginal Cost curves above minimum Average Variable Cost
a constant cost industry is one in which
there is no change in long-run per unit costs, even as output varies
a firm that shuts down in the short-run experiences losses equal to its
total fixed costs
the "lemon problem" will exist
whenever there is asymmetry in information between buyers and sellers about the quality
if price is below average variable costs at all rates of output, the quantity supplied by a perfect competitor will equal
zero
In the figure above, if the firm is operating at d2, then to maximize profits it will produce at output level
B
Which of the following is NOT characteristic of a perfectly competitive market
It is difficult for a firm to enter or leave the market
if the firm in the figure above produces output level D, it incurs an average fixed cost of production equal to the distance
KR
firms in a competitive industry are producing goods efficiently in the long run if each is producing at the minimum point of the
LAC curve
which of the following is NOT true for a perfectly competitive firm in the long run
MC>LAC
what is always true about the short run equilibrium position for a firm in perfect competition
MR=MC=P=AR
in the figure above, assuming firm 1 and firm 2 are sole producers in the industry, the industry supply at the price P1 is equal to
Q2+Q4
according to the figure above, if the firm is making zero profits, what quantity is the firm
Q=1000; P=$5
which of the following could generate economic profits for perfectly competitive firms in the short run
a decrease in inputs prices
The perfectly competitive firm faces
a perfectly elastic demand
each firm in a perfectly competitive industry is
a price taker
in a decreasing cost industry, an increase in output will lead to
a reduction in long-run per-unit costs
a competitive firm,s short-run break-even output occurs
at the minimum point of its average total cost curve
in a competitive market, positive economic profits act to
attract new entrants into the industry
profit per unit is found by the difference between
average revenue and average total cost
the demand curve of a perfectly competitive industry is
downward sloping
what is the shape of the long-run supply curve in a decreasing cost industry?
downward sloping
suppose a perfectly competitive firm faces the following short run cost and revenue conditions: Average Total Cost=$25.00; Average Variable Cost=$20.00; Marginal Cost=$25.00; Marginal Revenue=$28.00. The firm should
increase output
suppose a perfectly competitive firm faces the following short run cost and revenue conditions: Average Total Cost=$8.00; Average Variable Cost=$5.00; Marginal Cost=$8.00; Marginal Revenue=$9.00. The firm should
increase output
the marginal revenue curve of a perfectly competitive firm
is also the demand curve
a perfectly elastic demand function
is characteristic of an individual firm operating in a perfectly competitive market
in a perfectly competitive industry, the industry demand curve
is downward sloping
a constant cost industry
is one in which an increase in demand is matched by proportional increases in long-run supply
when a a firm has zero economic profit,
it has a positive accounting profit
If a firm is perfectly competitive, then
its demand curve is perfectly elastic
in a perfectly competitive market, a firm's short-run supply curve equals
its marginal cost curve equal to or above average variable cost curve
At the short-run break-even point, the competitive firm is
making zero economic profits
a perfectly competitive firm will maximize profits when
marginal cost is equal to marginal revenue
the short-run break-even price is the point at which
marginal cost, average total cost and marginal revenue are all equal
for a firm in perfect competition
marginal revenue and product price are equal at every level of output
a firm seeking to maximize profits should produce at the rate of output at which
marginal revenue equals marginal cost
for a competitive firm, profit maximization occurs where
marginal revenue equals marginal cost
if price and marginal cost are equal for a competitive firm, this means that the firm is
maximizing economic profit
the short-run shut down price for the firm in perfect competition is where price equals
minimum AVC
In perfect competition
no buyer or seller can influence the market price
if a constant cost competitive industry experiences an increase in the demand for its product, we would expect
only the quantity supplied of the product to increase
the exiting of firms from a perfectly competitive industry occurs when
opportunity costs can not be covered
the demand curve of a perfectly competitive firm is
perfectly elastic
accounting profits at the firm's break-even point are
positive
a law that restricts plant closings will
prevent resources from flowing to their highest valued uses
for a firm in a perfectly competitive market, average revenue equals
price
if firms are just breaking even in a competitive industry in the short-run, we can expect
price and output to remain constant
the short-run shut-down price occurs where
price equals Average Variable Cost at the minimum point
which of the following is NOT a characteristic of a perfectly competitive long-run equilibrium??
price equals long-run minimum average cost
in long-run equilibrium, the competitive firm will
produce where marginal cost equal average total cost
suppose a firm faces the following the short run cost and revenue conditions: Average Total Cost=$7.00; Average Variable Cost=$5.00; Marginal Cost=$6.50; Marginal Revenue=$6.50. The firm should
remain at the current position
which of the following is NOT a characteristic of a perfectly competitive industry?
sellers have better information about the product
with a increasing cost industry, an increase in industry output will
shift the ATC of each producing firm up
when price is greater than both marginal cost and average variable cost, the competitive firm
should increase its level of output
If a firm is producing where marginal cost is greater than price, the firm
should reduce its output level
if AVC is $6 when P=MC, a firm
should shut down if price is less than $6
in the figure above, when price is equal to P1, the firm should
shut down
suppose a perfectly competitive firm faces the following short run cost and revenue conditions: Average Total Cost=$6.00; Average Variable cost=$4.00; Marginal Cost=$3.50; Marginal Revenue=$3.50. The firm should
shut down
a firm is currently producing the quantity where price equals the minimum point on the average variable cost curve. I wage rates increase, the firm will
shut down since it would no longer be covering its variable costs
for a competitive firm, any output price below its minimum Average Variable Cost is its
shut-down price
at a competitive firm's short run breakeven price,
P=ATC
when a firm is making no economic profit,
P=ATC
when MR<MC for a firm, the firm should
increase output, unless P<AVC
according the table 2301A, if the price is $10 for a firm in a competitive market, then the firm should produce
106 units
a firm should never produce any output if
P<AVC
in the figure above, the firm will shut down if prices falls below
E
a firm should shut down in the short-run when
P<AVC
the firm in the figure above breaks even when market price is
H
if an industry has constant costs, any shift in demand will eventually
be met by an equal change in supply, and equilibrium price will not change
in the figure above, point A represents a competitive firm's
break-even point
the "lemon problem" is a situation in which
consumers are only willing to pay the price of a low-quality product because they don't know the actual level of quality
A firm in a competitive industry faces the following short run cost and revenue conditions: Average total cost=$8; average variable cost=$4; and marginal revenue=Marginal Cost=$6. The firm should
continue to operate at the same price and output in the short run
profits and losses are true market signals because they
convey information about where resources should flow into or out of, and they reward
suppose a perfectly competitive firm faces the following short run cost and revenue conditions: Average total cost=$12.00; average variable cost=$8.00; Marginal cost=$12.00; Marginal Revenue=$10.00. The firm should
decrease output
in the long run, the competitive firm
earns only a normal profit
Which of the following is NOT characteristic of a competitive industry
economic profits must be positive in the short run
in the long run in a competitive industry
economic profits will be zero
in a perfectly competitive market, if P>ATC in the short-run, there is apt to be
entry of new firms a into the market
in the figure above, if firm 1 is maximizing its profits, then , at output level Q1, marginal revenue must
equal P2
when demand is perfectly elastic, marginal revenue is
equal to price
economic profits at the short-run break-even point are
equal to zero
suppose a perfectly competitive firm faces the following short run cost and revenue conditions: Average Total Cost=$8.00; Average Variable Cost=$3.00; Marginal Cost=Marginal Revenue=5. The firm is
experiencing economic losses
when a firm has an accounting profit which is negative, it
has total revenue that is less than total cost
in the model of perfect competition, the market demand curve found by
horizontally summing the demand curves of individual consumers
price equals the minimum of long-run average cost
in long-run equilibrium
