Econ 4 Micro: Perfect Competition

If a firm is a price taker, then the demand curve for a single firm is: The same slope as market demand perfectly elastic perfectly inelastic

perfectly elastic

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, total variable costs are: $432 $720 $576 $660

$432

Given the data provided in the table below, what will the fixed costs equal for production at quantity (Q) level 4? Q P TC TR MR MC Profit 0 $5 $9 1 $5 $10 2 $5 $12 3 $5 $15 4 $5 $19 5 $5 $24 6 $5 $30 7 $5 $45 $4.00 $36.00 $35.00 $9.00

$9.00

In long run equilibrium, firms ________. Earn negative economic profit Earn positive economic profit Neither enter nor exit the industry

Neither enter nor exit the industry

Firms in a perfectly competitive market are said to be "price takers"—that is, once the market determines an equilibrium price for the product, firms must accept this price. If you sell a product in a perfectly competitive market, but you are not happy with its price, would you raise the price, even by a cent? Yes, you would raise the price enough to meet your target pricing. Yes, you would raise the price slightly. No, you would not raise the price.

No, you would not raise the price.

How is the total revenue calculated in a perfectly competitive firm? Quantity of goods sold minus the production costs. Quantity of goods sold times the market price, minus the fixed costs. Quantity of goods sold times the market price.

Quantity of goods sold times the market price.

If a perfectly competitive firm is producing output at a point where marginal revenue is equal to marginal cost, then it should: Increase output in order to maximize profits x Decrease output in order to maximize profts Stick with that level of production in order to maximize profits

Stick with that level of production in order to maximize profits

Refer to the graph below. Total profit is: Demand =20 MC = between 12 and 18 $288 $132 $243 $144

$144

Recall that in perfect competition a firm's demand curve is a horizontal line drawn at the market price level and that P=MR. With this in mind, based on the figure below, total revenues are: $200 $240 $264 $220

$220

Refer to the graph below. In the long run: Market demand will increase resulting in positive economic profit Firms will exit the market resulting in positive economic profit Firms will exit the market until economic profits are zero

Firms will exit the market until economic profits are zero

All of the following are characteristics of Perfect Competition except: Ease of entry and exit. Large number of buyers and sellers. Incomplete information about prices. Identical goods.

Incomplete information about prices.

What is the shape of a marginal revenue curve for a perfectly competitive firm? It slopes upward It is flat It slopes downward

It is flat

Even if it is making economic losses, a perfectly competitive firm should keep operating in the short run so long as the price is not: Higher than the average variable cost Lower than the average total cost Lower than the average variable cost

Lower than the average variable cost

Does this graph show the demand curve for a perfectly competitive firm, a perfectly competitive industry, or neither? Perfectly competitive firm Perfectly competitive industry neither

Perfectly competitive industry

In a perfectly competitive market, which of the following is correct? The market demand curve is upward sloping. The firm's demand curve is downward sloping. The firm's demand curve is perfectly elastic.

The firm's demand curve is perfectly elastic.

In perfectly competitive market, which of the following is correct? The market demand curve is downward sloping and the firm's demand curve is flat. The market demand curve is flat and the firm's demand curve is downward sloping. The firm's demand curve is downward sloping and the market demand curve is downward sloping.

The market demand curve is downward sloping and the firm's demand curve is flat.

The profit-maximizing choice for a perfectly competitive firm will occur where marginal revenue is equal to ________. fixed cost marginal cost variable revenue

marginal cost