Micro S16D: Chapter 9
Refer to EXHIBIT 9-3. What quantity of output should the profit-maximizing firm produce?
44 Units
Perfectly competitive industries are
None of these choices are correct.
Which of the following is the best example of a homogeneous good?
Wheat
Real-world markets that approximate the four assumptions of the theory of perfect competition include
"some agricultural markets" and "the stock market".
Refer to EXHIBIT 9-1. The dollar amounts that go in blanks (A) and (B) are, respectively,
$12 & $12
In order for a firm to continue producing, price must exceed __________ and total revenue must exceed __________.
AVC; total variable costs
A constant-cost industry has a long-run (industry) supply curve that is
Horizontal
Why must profits be zero in long-run competitive equilibrium?
If profits are not zero, firms will enter or exit the industry.
For a perfectly competitive firm, profit maximization or loss minimization occurs at the output at which
MR = MC.
Does a real-world market have to meet all the assumptions of the theory of perfect competition before it is considered a perfectly competitive market?
No, probably no real-world market meets all the assumptions of the theory of perfect competition. All that is necessary is that a real-world market behave as if it satisfies all the assumptions.
Which of the following conditions does not characterize long-run competitive equilibrium?
Price is greater than marginal cost.
The profit-maximization rule is as follows:
Produce the quantity of output at which marginal revenue equals marginal cost.
Refer to EXHIBIT 9-2. What quantity does the profit-maximizing or loss-minimizing firm produce?
Q2, where the difference between "what is coming in" on the last unit and "what is going out" is zero.
In the short-run, if P < ATC, a perfectly competitive firm should
There is not enough information to answer the question
Firm X is producing the quantity of output at which marginal revenue equals marginal cost. It is
There is not enough information to answer the question.
A decreasing-cost industry is characterized by
a downward-sloping long-run supply curve.
A constant-cost industry is characterized by
a perfectly elastic long-run supply curve.
If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing that unit the firm
added more to total revenue than it added to total costs
The price at which a perfectly competitive firm sells its product is determined by
all sellers and buyers of the product.
An increasing-cost industry is characterized by
an upward-sloping long-run supply curve.
Perfectly competitive firms are price takers for all of the following reasons except that
barriers to exit force firms to sell at the market price.
In the theory of perfect competition,
both "the single firm's demand curve is horizontal" and "the market demand curve is downward sloping".
The theory of perfect competition generally assumes that
buyers and sellers act independently of other buyers and sellers.
A "price taker" is a firm that
does not have the ability to control the price of the product it sells.
The market demand curve in a perfectly competitive market is
downward sloping
The short-run industry supply curve is the
horizontal summation of the short-run supply curves for all firms in the industry.
Refer to EXHIBIT 9-1. The firm's demand curve represented by the information in this table is
horizontal.
The demand curve for a perfectly competitive firm
is perfectly horizontal.
Refer to EXHIBIT 9-1. The data in this table are relevant to a perfectly competitive firm because
it doesn't have to lower price to sell additional units of the product.
The perfectly competitive firm will seek to produce the output level for which
marginal cost equals marginal revenue.
A perfectly competitive firm should increase its level of production as long as
marginal revenue is greater than marginal cost.
If an industry advertises, then it
may or may not be a perfectly competitive industry.
The perfectly competitive firm's short-run supply curve is the
portion of its marginal cost curve that lies above its average variable cost curve.
If firms are earning zero economic profits, they must be producing at an output level at which
price equals average total cost.
Resource allocative efficiency occurs when a firm
produces the quantity of output at which price equals marginal cost.
The perfectly competitive firm will produce in the
short run if price is below average total cost but above average variable cost.
Marginal revenue is
the change in total revenue brought about by selling an additional unit of the good.
If MR > MC, then
the firm can increase its profits or minimize its losses by increasing output.
For a perfectly competitive firm,
the marginal revenue curve and the demand curve are the same.
