module 7 chapter 8
Which of the following statements is true?
In long-run equilibrium, a competitive firm produces at the point of minimum average total cost
Profit is maximized when which of the following conditions occurs?
Marginal revenue equals marginal cost.
In long-run equilibrium, the perfectly competitive firm sets its price equal to which of the following?
Short-run average total cost. Short-run marginal cost. Long-run average cost. Correct! *All of these.
Suppose product price is fixed at $24; MR = MC at Q = 200; AFC = $6; AVC = $25. What do you advise this firm to do?
Shut down operations.
Which of the following is a characteristic of a competitive price-taker market?
There are many firms in the market, each producing a small share of total market output.
What is the largest possible loss that is consistent with a firm producing in a perfectly competitive market in long-run competitive equilibrium?
Zero.
Under perfect competition, no matter how much output is produced, the total revenue curve is:
a positively-sloped line.
A perfectly competitive firm's short-run supply curve is the part of its marginal cost curve that is:
above the minimum level of average variable cost.
As the electronic components industry expands, the salaries paid to electrical engineers rise in response to higher demand. We can conclude that the electronic components industry is:
an increasing-cost industry.
A perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the:
average variable cost curve.
If a perfectly competitive industry's long-run supply curve is downward sloping, we can conclude that input prices will:
decrease as industry output increases.
The long run is a planning period: Correct!
during which the firm can vary its plant size.
In the short run, the supply curve for a perfectly competitive firm is its marginal cost curve for all levels of output.
false
If a firm has no ability to select the price of its product, it:
has a horizontal individual demand curve.
Jerome, the florist, sold 500 bridesmaid's bouquets in June. He estimates his costs that month were ATC = $10, AVC = $6, and MC = $9. If he sold each bouquet at the constant market price of $9, Jerome:
made a loss of $500.
As market price increases in the short run, a profit-maximizing firm in a perfectly competitive market will expand output along its:
marginal cost curve.
A firm operating in a perfectly competitive market is a price taker because:
no firm has a significant market share. no firm's product is perceived as different. setting a price higher than the going price results in zero sales. Correct! *all of these.
The demand for the product of a competitive price-taker firm is:
perfectly elastic.
A perfectly competitive firm in the short-run can earn:
positive economic profits. negative economic profits. zero economic profits. Correct Answer *all of these are possible
When the price of a good is a constant, the marginal revenue per unit of output is the same as:
price
When choosing the production level for tomorrow you find that at an output of 100 units, the total variable costs are $20,000 and the average fixed cost is only $50. If the market price is $200, you should: Correct!
shut down produce where MC=MR
In a perfectly competitive industry, assume there is a permanent increase in demand for a product. The process of transition to a new long-run equilibrium will include:
the exit of firms. temporarily lower production costs. *neither
A perfectly competitive firm will shut down in the short run when marginal revenue equals marginal cost at a price less than minimum average variable cost.
true
A perfectly competitive market is characterized by the free entry and exit of firms.
true
A perfectly competitive market is characterized by the free entry and exit of firms. Correct!
true
If marginal revenue exceeds marginal cost in the short run, the perfectly competitive firm earns an economic profit in the short-run.
true
In long-run equilibrium, a perfectly competitive firm's short-run marginal cost curve crosses the long-run average cost curve at the lowest point on the long-run average cost curve.
true
