question
The demand seen by a purely competitive firm is perfectly elastic—horizontal on a graph—at the market price. T o F
answer
True
question
Marginal revenue and average revenue for a purely competitive firm coincide with the firm's demand curve; total revenue rises by the product price for each additional unit sold. T o F
answer
True
question
A firm will choose to produce if it can at least break even and generate a normal profit.T o F
answer
True
question
Profit is maximized, or loss minimized, at the output at which marginal revenue (or price in pure competition) equals marginal cost, provided that price exceeds variable cost.
answer
Fact
question
If the market price is below the minimum average variable cost, the firm will minimize its losses by shutting down.
answer
Fact
question
A competitive firm's short-run supply curve is the portion of its marginal cost (MC) curve that lies above its average variable cost (AVC) curve.
answer
Fact
question
If price P is greater than minimum average variable cost, the firm will produce the amount of output where MR (= P) = MC in order to either maximize its profit (if price exceeds minimum ATC) or minimize its loss (if price lies between minimum AVC and minimum ATC).
answer
Fact
question
Market supply in a competitive industry is the horizontal sum of the individual supply curves of all of the firms in the industry. The market equilibrium price is determined by where the industry's market supply curve intersects the industry's market demand curve.
answer
Fact
question
In pure competition, entrepreneurs remove resources from industries and firms that are generating economic losses in order to transfer them to industries and firms that are generating economic profits.
answer
Fact
question
In the long run, the entry of firms into an industry will compete away any economic profits, and the exit of firms will eliminate economic losses, so price and minimum average total cost are equal. Entry and exit cease when the firms in the industry return to making a normal profit (zero economic profit).
answer
Fact
question
The long-run supply curves of constant-, increasing-, and decreasing-cost industries are horizontal, upsloping, and downsloping, respectively.
answer
Fact
question
A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should:
answer
produce because the resulting loss is less than its TFC.
question
Which of the following statements applies to a purely competitive producer?
answer
It will not advertise its product.
question
Price is constant to the individual firm selling in a purely competitive market because:
answer
each seller supplies a negligible fraction of total supply.
question
A competitive firm in the short run can determine the profit-maximizing (or loss-minimizing) output by equating:
answer
marginal revenue and marginal cost.
question
When a firm is maximizing profit, it will necessarily be:
answer
maximizing the difference between total revenue and total cost.
question
Which of the following statements is correct?
answer
Economic profits induce firms to enter an industry; losses encourage firms to leave.
question
An increasing-cost industry is associated with:
answer
an upsloping long-run supply curve.
question
The MR = MC rule applies:
answer
in both the short run and the long run.
question
Creative destruction is least beneficial to:
answer
workers in the "destroyed" industries
question
If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then:
answer
new firms will enter this market.
question
Long-run competitive equilibrium:
answer
esults in zero economic profits.
question
Economists use the term imperfect competition to describe:
answer
those markets that are not purely competitive.
Order an Essay Now & Get These Features For Free:
Turnitin Report
Formatting
Title Page
Citation
Outline
