Chapter 28 - Assignment Essays

Q: A firm in a perfectly competitive market maximizes profits when it finds

the quantity at which total revenue minus total cost is the greatest

Q: A perfectly competitive firm is maximizing profits in the short run. This implies that the firm is earning the most economic profits possible, which

can be positive, negative, or zero

Q: If markets are perfectly competitive, then the production of goods

will use the least costly combination of resources.

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The total revenue of a perfectly competitive firm is calculated by

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multiplying price by quantity.

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Refer to the above table. If the price is $5, the perfectly competitive firm should produce

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104 units.

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The perfectly competitive seller's short-run supply curve is

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the part of its marginal cost curve above the average variable cost curve.

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A constant-cost industry will have

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a perfectly elastic long-run supply curve

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Refer to the above figure. Which panel represents the long-run supply curve for an increasing cost industry?

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Panel C.

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For a firm in a perfectly competitive industry

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short-run economic profits may be positive, but long-run economic profits must be zero.

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Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $12.00; AVC = $8.00; MC = $12.00; MR = $10.00. The firm should

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decrease output.

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The shutdown rule for a firm in a perfectly competitive industry is that the firm should cease production if

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P < AVC.

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A firm in a perfectly competitive market maximizes profits when it finds

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the quantity at which total revenue minus total cost is the greatest

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Refer to the above figure. Line C in Panel B does not represent

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total revenue

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When a firm is operating at an output rate at which total revenue equal total costs, this is called

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its breakeven point.

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The equation TR/Q is used to compute

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average revenue

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A perfectly competitive firm is maximizing profits in the short run. This implies that the firm is earning the most economic profits possible, which

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can be positive, negative, or zero

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When MR < MC for a firm, the firm should

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reduce its level of output.

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A perfectly elastic long-run supply curve indicates

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a constant-cost industry.

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Which of the following statements is not true for a perfectly competitive firm?

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The firm can influence its demand curve by advertising its product

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Which of the following statements is correct?

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The market demand curve of the perfectly competitive industry is downward sloping while the demand curve of an individual firm is horizontal with a height equal to the product price

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If markets are perfectly competitive, then the production of goods

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will use the least costly combination of resources.

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If marginal revenue is less than marginal cost, the firm should

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decrease its rate of outpu

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If the long-run supply curve slopes downward, we know that this is

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a decreasing-cost industry.

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Consider an industry that is in long-run equilibrium. An increase in demand leads to an increase in the price of the good. We know that this is

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an increasing cost industry.

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The market demand curve in perfect competition is found by

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horizontally summing the demand curves of the individual consumers.

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Using the above figure, the perfectly competitive firm in the diagram will earn an economic profit if the market price is

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P4.

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The perfectly competitive firm's demand curve has

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a slope of 0.

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The demand curve for a perfectly competitive firm is

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perfectly elastic

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In a perfectly competitive market, the average revenue curve of a firm is

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the same as its demand curve.

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A perfectly competitive market has

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homogeneous products

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In a perfectly competitive market, if P > ATC in the short run, there is apt to be

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entry of new firms into the market

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When a perfectly competitive firm experiences zero economic profits,

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firms have no incentive to exit or enter the industry.

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The perfectly competitive firm cannot influence the market price because

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its production is too small to affect the market.

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Assuming fixed factor prices, the short-run industry supply curve for a perfectly competitive industry is equal to the sum of the

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MC curves above minimum AVC

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When demand is perfectly elastic, marginal revenue is

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equal to price.

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Suppose that at the current level of output, price = $10, MC = $10, AVC = $7, and ATC = $9. Which of the following is true?

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The firm should maintain the current level of output.

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In the short run, in a perfectly competitive market, a firm will shut down if

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P < AVC for all levels of output.

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The value of total output decreases when labor leaves one industry and goes to another and capital leaves the second industry and goes to the first. This indicates that

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it would be efficient to return to the first situation

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If an industry's long-run supply curve slopes downward, then the industry is

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a decreasing-cost industry.

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A perfectly competitive firm will maximize profits when

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marginal cost is equal to marginal revenue.

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In an increasing-cost industry, an increase in output will lead to

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an increase in long-run per-unit costs.

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The perfectly competitive firm maximizes profits when

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it produces and sells the quantity at which marginal revenue and marginal cost are equal.

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In the above figure, at the profit-maximizing rate of production for the perfectly competitive firm average total cost is

answer

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For the perfectly competitive firm, price

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equals average revenue and marginal revenue.

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If AVC is $6 when P = MC, a firm

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should shut down if price is less than $6

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Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $6.00; AVC = $4.00; MC = $3.50; MR = $3.50. The firm should

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shut down

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When a firm is earning zero economic profits

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P = ATC.

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Being a price taker essentially means

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a firm cannot influence the market price.

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The change in total revenues resulting from a change in output of one unit is

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marginal revenue.

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In a long-run perfectly competitive equilibrium

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P = MR = MC = ATC.

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The owner of a perfectly competitive firm that is earning economic losses in the short run

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is earning less than he would if he worked for someone else

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Suppose a perfectly competitive firm can produce 20,000 bushels of corn a year at an output at which marginal cost equals marginal revenue. The market price of corn per bushel is $1.00. The firm's total costs per year are $50,000 and fixed costs per year are $25,000. In the short run, this firm should

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shut down

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In the above figure, if the market price is $10, the firm

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produces 10 units

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If an industry's long-run per-unit costs increase as its output increases then

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the firm is most likely an increasing-cost industry.

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An increasing-cost industry will have

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an upward sloping supply curve in the long run

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The demand curve for the product of a perfectly competitive firm is

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perfectly elastic.

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In a perfectly competitive industry

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no buyer or seller can influence the market price.

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Refer to the above figure. If an individual firm wants to maximize economic profits, it should

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charge $5 for its product

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In the above figure, what is the price the firm receives if the output is 8?

answer

$10

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In a perfectly competitive market, if P < MC, then

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too much output is being produced

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For a perfectly competitive firm at its long-run competitive equilibrium point,

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P = AR = MR = LATC = SATC = MC

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If a constant-cost, perfectly competitive industry experiences an increase in the demand for its product, we would expect

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only the quantity supplied of the product to increase.

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In a decreasing-cost industry, an increase in industry output will

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lead to a lower market price

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Which of the following is NOT correct for a perfectly competitive firm in long-run equilibrium?

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MC = MR > LAC

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For a perfectly competitive firm, which of the following is NOT true?

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The total revenue curve is horizontal.

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When economic profits in a perfectly competitive industry are positive

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new firms will be attracted to the industry, and economic profits will decline to zero.

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The rate of production at which marginal revenue equals marginal cost is

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the point where profits are maximized

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Refer to the above figure. The firm's short-run shutdown price is

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at $1.

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A company finds that at its present level of production, MC = AVC at $15, MC = ATC at $20, and MC = MR at $17. Your advice to the firm regarding its short-run operations is

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to continue production at a loss.

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The exiting of firms from a perfectly competitive industry occurs when

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opportunity costs cannot be covered.

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Clothing retailers have faced greater competition in recent years as more firms have entered the clothing market. Some of the competition has come from foreign competitors, but much of it is domestic competition. As a result there is much competition in markets for many types of clothing and

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individual buyers and sellers cannot affect the market price because it is determined by the market forces of demand and supply

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What is the shape of the long-run supply curve in a decreasing-cost industry?

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Downward sloping

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Economic profits are maximized at the point at which

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marginal revenues equal marginal costs

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A price taker is a firm that

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cannot influence the market price.

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When price equals marginal cost

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the marginal benefits of consuming an extra unit of the good exactly equals the marginal cost to society of producing the good.

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For a perfectly competitive firm, profit maximization occurs when

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marginal revenue equals marginal cost.

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Firms in a perfectly competitive industry are producing goods efficiently in the long run if each is producing at the minimum point of the

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LAC curve.

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In a perfectly competitive industry, which of the following is a market signal to resource owners?

answer

Economic profits

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A firm is currently producing at the rate of output at which total revenues just cover its total variable costs. If demand falls, the firm should

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shut down

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Which of the following is always true for a perfectly competitive firm?

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P = d = MR

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Marginal revenue equals

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the change in total revenue from selling one more unit

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For a perfectly competitive firm facing the short-run break-even price,

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it has an economic profit of zero.

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A firm that shuts down in the short run experiences losses equal to

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total fixed costs.

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In the long run when a perfectly competitive firm experiences negative economic profits,

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existing firms exit the industry.

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Below the short-run shutdown price, the firm

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is earning negative economic profits.

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At the short-run break-even price, the firm

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is making a normal rate of return on its capital investment

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In reference to the long-run firm competitive equilibrium diagram, which of the following statements is INCORRECT?

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In the long run, this firm must be part of a constant-cost industry, because its marginal revenue curve is perfectly elastic

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In a perfectly competitive industry, the industry demand curve

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is downward sloping

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The break-even price for a perfectly competitive firm is the price that is equal to

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ATC.

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For a firm in a perfectly competitive industry,

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short-run economic profits may be positive, but long-run economic profits must be zero

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Which of the following statements is not true for a perfectly competitive firm

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The firm can influence its demand curve by advertising its product

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A firm that has positive economic profits has accounting profits that are

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positive.

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Refer to the above table. If the price is $3, the perfectly competitive firm should produce

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102 units

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Consider an industry that is in long-run equilibrium. An increase in demand leads to a decrease in the price of the good. We know that this is

answer

a decreasing cost industry.

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In the above figure, what is the profit-maximizing output and price?

answer

10, $10

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What is always true about the short-run equilibrium position for a firm in perfect competition?

answer

MR = MC = P = AR

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Which of the following is NOT a characteristic of a perfectly competitive long-run equilibrium?

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Firms are producing on the downward sloping portions of their short-run average cost curves.

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The short-run industry supply curve slopes up because

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the law of diminishing marginal product applies in the short run.

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All of the following are characteristics of perfect competition EXCEPT

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product differentiation

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Factors that cause the short-run supply curve to change are factors that affect

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variable costs.

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Which of the following could generate economic profits for perfectly competitive firms in the short run, if they initially earn zero economic profits?

answer

A decrease in input prices

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A firm is currently producing an output at which price equals the minimum point on the average variable cost curve. If wage rates increase, the firm will

answer

shut down since it would no longer be covering its variable costs.

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Refer to the above figure. Profits will be negative

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when the price is below $2.

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The perfectly competitive firm's total revenue curve

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All of these

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Refer to the above figure. If the market price is equal to A, which statement can be made about profits?

answer

Profits are negative and equal to BCEA.

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Which of the following is true in perfect competition at long-run equilibrium?

answer

All of these

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Under perfect competition, the demand curve facing the firm is determined by

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the intersection of the industry demand and supply curves.

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In the long run when a perfectly competitive firm experiences positive economic profits,

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firms enter the industry, the market supply curve shifts rightward, and the market price falls

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A situation in which the price charged is equal to society's opportunity cost is known as

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marginal cost pricing.

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In the above figure, if the firm is facing demand curve d2, then to maximize profits it will produce at output level

answer

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A firm that has negative economic profits has accounting profits that are

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indeterminate without more information.

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Refer to the above table. The table represents information on the costs for Ajax Corporation. Ajax operates in a perfectly competitive market and the price of the product is $9. What does profit equal when quantity equals 3?

answer

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In the above figure, assuming Firm 1 and Firm 2 are the sole producers in the industry, the industry quantity supplied at price P2 is equal to

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Q1 + Q3.

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If a firm is earning short-run economic profits shown in the above figure, in the long run

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firms enter the industry, the market supply curve shifts rightward, and the market price falls.

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In the short run, which of the following is FALSE about the shutdown point?

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Total revenue is equal to total fixed cost.

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Which of the following is NOT correct concerning perfectly competitive firms in the long run?

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The opportunity cost of capital is zero.

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Using the above figure, the price facing the perfectly competitive firm in the long run will be

answer

P3.

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If a firm is producing an output rate at which marginal cost is greater than price, the firm

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should reduce its output level.

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Under what condition are profits maximized?

answer

at the rate of output at which marginal revenue equals marginal cost

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Under perfect competition, a firm that sets its price slightly above the market price would

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lose all of its customers.

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Which of the following is closest to a perfectly competitive market?

answer

the market for broccoli

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Suppose that at the current level of output, price = $10, MC = $14, AVC = $7, and ATC = $9. Which of the following is true?

answer

The firm should decrease output.

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A perfectly competitive firm will not earn an economic profit in the long run, because

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there are no barriers to entry into the industry.

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If an industry's long-run per-unit costs are constant as its output increases then

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the firm is most likely a constant-cost industry

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In the long run, the perfectly competitive firm

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earns only a normal profit

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In the above figure, if the market price is less than $7, the firm

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produces 0 units.

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If a perfectly competitive industry is in long-run equilibrium, then

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price equals average cost

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When price is greater than both marginal cost and average variable cost, the perfectly competitive firm

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should increase its level of output.

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Suppose the perfectly competitive equilibrium occurs such that too many units of the good are produced. This is an example of

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market failure.

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A perfectly competitive producer faces a demand curve for its own product that is

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horizontal.

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According to the above figure, if the firm is earning zero economic profits, what quantity is the firm selling and at what price?

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Q = 1,000; P = $5

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The demand curve for a perfectly competitive industry is

answer

downward sloping.

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Perfectly competitive markets are efficient because

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the cost to society for producing the goods is exactly equal to the value that society places on the good.

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When a firm is at its short-run break-even point

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economic profits equal zero and the firm is earning a nominal rate of return on investment.

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Refer to the above table. This firm operates in a perfectly competitive market in which the market price is $10 per unit. What is its profit-maximizing rate of production?

answer

106 units

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For a perfectly competitive firm facing the short-run break-even price

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it has an economic profit of zero.

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The short-run supply curve for the perfectly competitive firm is the portion of its

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MC curve above the AVC curve.

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All firms in a perfect competition industry

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produce identical products

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Which of the following is always true in the short run for a perfectly competitive firm that is maximizing economic profits?

answer

P = d = MR = MC

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Market signals

answer

are ways of conveying information

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If a perfect competitor faces P = ATC in the long run, the firm will

answer

remain in the industry.

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The short-run shutdown price for a perfectly competitive firm is where price equals

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minimum AVC

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In the above figure, at the profit-maximizing rate of production for the perfectly competitive firm total revenue is

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$100.

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In the short run, the price at which a firm's total revenues equal its total costs is

answer

the short-run break-even point.

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The vertical distance between the horizontal axis and any point on a perfect competitor's demand curve measures

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product price, marginal revenue, and average revenue.

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A firm earning economic losses should operate in the short run as long as

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the price per unit sold is greater than the average variable cost per unit produced.

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A firm that shuts down in the short run experiences losses equal to its

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total fixed costs.

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A perfectly competitive industry's market or "going" price is established by

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the forces of supply and demand

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Refer to the above figure. Profits for this firm are equal to zero

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only at points B and C.

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If a perfectly competitive firm is producing at an output at which marginal cost exceeds marginal revenue,

answer

the firm should reduce production.

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The firm in a perfectly competitive industry is a

answer

price taker.

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When there are large numbers of buyers and sellers, then

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no one buyer or seller has any influence on price.

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In the long run, all firms in a perfectly competitive industry

answer

break even.

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A situation in which the price charged is greater than society's opportunity cost would lead to

answer

too little being produced

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A firm's total explicit costs are $1,000. Its total implicit costs are $500, and it has a total revenue of $900. This firm receives

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neither an economic profit nor an accounting profit.

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The total amount received from the sale of output is

answer

total revenue.

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A perfectly competitive industry's market price is found by

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locating the intersection of the market demand and market supply curves.

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Which of the following is the best example of a decreasing-cost industry?

answer

the personal computer industry

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Perfect competition is characterized by

answer

many buyers and sellers

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Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $8.00; AVC = $5.00; MC = $8.00; MR = $9.00. The firm should

answer

increase output

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When considering perfect competition the absence of entry barriers implies that

answer

firms can enter and leave the industry without serious impediments.

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Refer to the above table. The table represents information on the costs for Ajax Corporation. Ajax operates in a perfectly competitive market and the price of the product is $7. What does profit equal when quantity equals 2?

answer

-$2

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In a long-run perfectly competitive equilibrium,

answer

P = MR = MC = ATC.

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In the long run in a perfectly competitive industry

answer

economic profits will be zero.

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Along an industry's long-run supply curve,

answer

economic profits are zero.

question

answer

$14

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In the above figure, when price is below E, this firm should

answer

shut down.

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If price is below average variable costs at all rates of output, the quantity supplied by a perfectly competitive firm will equal

answer

zero

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Firms in a perfectly competitive industry are earning economic losses. This is

answer

a signal to entrepreneurs that some of the firms in the industry should exit and the resources of these firms should move into production of other goods

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The firm in the above figure breaks even when quantity is

answer

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The short-run break-even price is

answer

the price at which a firm's total revenues equal its total costs.

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When a firm is at its short-run break-even point,

answer

economic profits equal zero and the firm is earning a nominal rate of return on investment.

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A firm is currently producing at the point where MC = MR. The situation for the firm at this point is P = $5, Q = 100, ATC = $6, AVC = $5.50. What do you recommend this firm do?

answer

Shut down, because AVC > P.

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Using the above figure, the short-run break-even price for the perfectly competitive firm will be

answer

P3.

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Which of the following is NOT a characteristic of a perfectly competitive market?

answer

It is difficult for a firm to enter or leave the market

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Malfeasance at Enron, a Houston-based energy firm, led to overstatement of revenues by almost $92 billion. As Enron closed its operations, U.S. energy prices remained stable. This may have been evidence that

answer

there is a competitive market in energy distribution in the United States.

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The short-run supply curve for a perfectly competitive firm is the portion of its

answer

MC curve above its AVC curve.

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Referring to the diagram, which of the following statements is INCORRECT?

answer

If the individual firm raises its price, it will capture all sales in the market

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In the above figure, if price is equal to P4, the firm will

answer

earn positive economic profits.

question

answer

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Signals are

answer

compact ways of conveying to economic decision makers information needed to identify industries where more resources are needed

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The goal of the perfectly competitive firm is to

answer

maximize total profits.

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Refer to the above figure. If the market price is equal to A, which statement can be made about economic profits?

answer

104 units

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Under perfect competition, the firm must decide

answer

the best rate of output it should produce.

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In the above figure, what happens to the firm's optimal level of output if the price it receives for its product decreases from P4 to P3?

answer

Output decreases.

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In reference to the long-run firm competitive equilibrium diagram, which of the following statements is INCORRECT?

answer

In the long run, this firm must be part of a constant-cost industry, because its marginal revenue curve is perfectly elastic.

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The rate of production that maximizes the positive difference between total revenues and total costs is the

answer

profit-maximizing rate of production

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In a perfectly competitive industry, any restrictions that prevent new firms from entering

answer

hinder economic efficiency

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A company finds that at the output level at which marginal cost equals marginal revenue, TC = $500, TVC = $400, and TR = $450. Your advice to the firm is

answer

continue to produce because loss is less than TFC.

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The demand curve for a perfectly competitive firm is horizontal because

answer

its production decisions cannot influence the market price.

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A market structure in which the decisions of individual buyers and sellers have no effect on market price is

answer

perfect competition.

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Refer to the above figure. Which panel represents the long-run supply curve for a constant cost industry?

answer

Panel A.

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Competitive pricing is efficient because

answer

the price that consumers pay reflects the opportunity cost to society of producing the good.

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In the above figure, the firm will shut down if quantity falls below

answer

question

A decreasing-cost industry will have

answer

a downward sloping supply curve in the long run.

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An industry in which an increase in output leads to a reduction in long-run per-unit costs is a(n)

answer

decreasing-cost industry.

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A constant-cost industry

answer

has a horizontal long-run supply curve.

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In a perfectly competitive market structure any firm can enter or leave the industry without serious impediments. This implies

answer

firms will move labor and capital in pursuit of profit-making opportunities to whatever business venture gives them the highest return on their investment.

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The opportunity cost to society of producing one more unit of the good is

answer

marginal cost.

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Perfect competition is a market structure

answer

in which individual buyers and sellers have no effect on the market price.

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A perfectly competitive firm faces a market clearing price of $150 per unit. Average total costs are at the minimum value of $200 per unit at an output rate of 100 units. Average variable costs are at the minimum value of $100 per unit at an output rate of 50 units. Marginal cost equals $150 per unit at an output rate of 75 units. It can be concluded that the short-run profit-maximizing output rate is

answer

75 units, at which the firm earns negative economic profits per unit sold.

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Which of the following is NOT a characteristic of perfect competition?

answer

There are substantial barriers to entry into the industry.

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Refer to the above figure. If the market price is equal to A, which statement can be made about economic profits?

answer

Economic profits are positive and equal to ABCG.

question

The demand curve faced by a perfectly competitive industry

answer

slopes downward.

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A firm's total explicit costs are $1,000. Its total implicit costs are $500, and it has a total revenue of $2000. This firm receives

answer

both an economic profit and an accounting profit.

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The short-run shutdown price occurs where price equals

answer

AVC at the minimum point.

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In the above figure, at which output level is this firm earning negative economic profits?

answer

question

Which of the following is NOT true for a perfectly competitive firm in the long run?

answer

The market demand curve of the perfectly competitive industry is downward sloping while the demand curve of an individual firm is horizontal with a height equal to the product price.

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In a perfectly competitive market, if P > MC, then

answer

too little output is being produced.

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If a firm in a perfectly competitive market raises its price,

answer

it will sell nothing.

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Suppose that at the current level of output, price = $10, MC = $4, AVC = $7, and ATC = $11. Which of the following is true?

answer

The firm should increase output.

question

For a perfect competitor, the marginal revenue curve will be

answer

...

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In the short run, a firm should shut down when

answer

...

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Refer to the above table. If the price is $3 the maximum profit this firm could earn is

answer

...

question

A perfectly competitive firm is selling 300 units of output at $4 each. At this output level, total fixed cost is $100 and total variable cost is $500. The firm

answer

...

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The profit-maximizing level of output for a firm occurs at the point at which

answer

...

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For a firm in a perfectly competitive industry, the demand curve for its own product is

answer

...

question

answer

...

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The firm in the above figure breaks even when market price is

answer

...

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An industry in which an increase in industry output is accompanied by an increase in long-run per-unit costs is a(n)

answer

...

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A situation in which the price charged is less than society's opportunity cost would lead to

answer

...

question

Suppose a perfectly competitive asparagus farm can produce six containers of asparagus at an output at which marginal cost equals marginal revenue. The price per container of asparagus is $100 and the average total cost is $75. What is the profit or loss that this asparagus farm is earning?

answer

...

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If an industry's long-run per-unit costs decrease as its output increases then

answer

...

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In the long run in a perfectly competitive industry,

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...

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Which of the following is the best example of a decreasing-cost industry?

answer

...

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A perfectly competitive firm faces a market clearing price of $150 per unit. Average total costs are at the minimum value of $120 per unit at an output rate of 70 units. Marginal cost equals $150 per unit at an output rate of 75 units. It can be concluded that the short-run profit-maximizing output rate is

answer

...

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If there is no output for which product price is sufficient to cover variable costs,

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...

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In the above figure, assume d1 is the demand curve faced by this firm. Which is true?

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...

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Refer to the above table. This firm operates in a perfectly competitive market in which the market price is $5/unit. What is true when the firm produces 110 units?

answer

...

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Which of the following is true for the perfectly competitive firm?

answer

...

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All of the following are characteristics of a perfectly competitive market EXCEPT

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...

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The short-run break-even price

answer

...

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Profits and losses are true signals because they

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...

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Refer to the above figure. Which panel represents the long-run supply curve for a decreasing cost industry?

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...

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Each firm in a perfectly competitive industry is

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...

question

In the above figure, if d3 is the relevant demand curve for this firm, then which level of output will maximize this firm's profits or minimize its losses?

answer

...

question

Which of the following is NOT a characteristic of a perfectly competitive industry?

answer

...

question

The demand curve for the product of a perfectly competitive firm's demand curve indicates that if the firm

answer

...

question

A perfectly competitive firm faces a horizontal demand curve because it is

answer

...

question

We assume that firms, when they are deciding the best rate of output at which to produce,

answer

...

question

If a perfectly competitive firm has economic profits greater than zero, then we know that

answer

...

question

When a firm has economic profits equal to zero,

answer

...

question

In long-run equilibrium, the perfectly competitive firm will

answer

...

question

In the above figure, what is the profit at the profit-maximizing output level?

answer

...

question

Refer to the above figure. Profits for this firm are negative

answer

...

question

Refer to the above figure. When the price in the market is $4, economic profits will equal

answer

...

question

If a firm is producing an output rate at which marginal cost is equal price, the firm

answer

...

question

In the short run, the perfectly competitive firm will always earn an economic profit when

answer

...

question

For a perfectly competitive firm, any price below its minimum AVC is a

answer

...

question

Suppose the market price is $5, marginal cost is $4, and average total cost is $2. The perfectly competitive firm in that market is

answer

...

question

A true signal must

answer

...

question

Refer to the above figure. The market supply and demand curves in a perfectly competitive market intersect at $4. Which of the graphs represent the situation for an individual firm?

answer

...

question

If a perfectly competitive firm is producing at an output at which marginal cost exceeds marginal revenue

answer

...

question

When a firm is earning zero economic profits,

answer

...

question

answer

...

question

At the short-run break-even price, the firm

answer

...

question

In a perfectly competitive market, the average revenue curve of a firm is

answer

...

question

When a firm is at its short-run break-even point,

answer

...

question

Refer to the above table. This firm operates in a perfectly competitive market in which the market price is $10/unit. What is true when the firm produces 103 units?

answer

...

question

Refer to the above table. If the price is $3, the perfectly competitive firm should produce

answer

...

question

Which of the following is always true in the short run for a perfectly competitive firm that is maximizing economic profits?

answer

...

question

If AVC is $6 when P = MC, a firm

answer

...

question

If a firm shuts down in the short run

answer

...

question

When considering perfect competition the absence of entry barriers implies that

answer

...

question

Suppose a perfectly competitive firm faces the following cost and revenue conditions: ATC = $25.00; AVC = $20.00; MC = $25.00; MR = $28.00. The firm should

answer

...

question

A firm that shuts down in the short run experiences losses equal to its

answer

...

question

A perfectly competitive industry's market or "going" price is established by

answer

...

question

In the above figure, if the market price is $10, the firm

answer

...

question

Refer to the above figure. The firm's short-run shutdown price is

answer

...

question

What is the shape of the long-run supply curve in a decreasing-cost industry?

answer

...

question

What is the shape of the long-run supply curve in a decreasing-cost industry?

answer

...

question

When a firm is operating at an output rate at which total revenue equal total costs, this is called

answer

...

question

When a perfectly competitive firm experiences positive economic profits

answer

...

question

In reference to the long-run firm competitive equilibrium diagram, which of the following statements is INCORRECT?

answer

...

question

answer

...

question

Marginal revenue is

answer

...

question

Market signals

answer

...

question

A company finds that at its present level of production, MR = MC at $14, MC = AVC at $15, and MC = ATC at $20. Your advice to the firm regarding its short-run operations is

answer

...

question

With marginal cost pricing,

answer

...

question

What does it mean when the products sold by the firms in an industry are homogeneous?

answer

...

question

In a perfectly competitive market, a firm in long-run equilibrium will be operating

answer

...

question

A perfectly competitive firm faces a market clearing price of $150 per unit. Average variable costs are at the minimum value of $200 per unit at an output rate of 100 units. Marginal cost equals $150 per unit at an output rate of 75 units. It can be concluded that the short-run profit-maximizing output rate is

answer

...

question

A firm in a perfectly competitive industry faces the following cost and revenue conditions: ATC = $6; AVC = $3; MR = MC = $5. The firm is

answer

...

question

If markets are perfectly competitive, then the production of goods

answer

...

question

Which of the following is NOT a characteristic of perfect competition?

answer

...

question

A firm that shuts down in the short run experiences losses equal to

answer

...

question

Economic efficiency is indicated by

answer

...

question

Economic efficiency is indicated by

answer

...

question

answer

...

question

A firm that shuts down in the short run experiences losses equal to its

answer

...

question

Signals are

answer

...

question

The total revenue of a perfectly competitive firm is calculated by

answer

...

question

Competitive pricing is efficient because

answer

...

question

The owner of a perfectly competitive firm that is earning economic losses in the short run

answer

...

question

Referring to the diagram, which of the following statements is INCORRECT?

answer

...

question

answer

...

question

Suppose a perfectly competitive industry is in long-run equilibrium. If a decrease in demand leads to a lower long-run price, we know that

answer

...

question

If a firm is earning short-run economic profits shown in the above figure, in the long run

answer

...

question

If an industry's long-run per-unit costs increase as its output increases then

answer

...

question

A firm is currently producing at the rate of output at which total revenues just cover its total variable costs. If demand falls, the firm should

answer

...

question

Which of the following is NOT correct concerning perfectly competitive firms in the long run?

answer

...

question

A firm earning economic losses should operate in the short run as long as

answer

...

question

In a perfectly competitive industry, the firm's marginal revenue curve is

answer

...

question

In a perfectly competitive industry, the firm's marginal revenue curve is

answer

...

question

The demand curve for the product of a perfectly competitive firm's demand curve indicates that if the firm

answer

...

question

In a perfectly competitive market, if P > ATC in the short run, there is apt to be

answer

...

question

When MR < MC for a firm, the firm should

answer

...

question

Refer to the above figure. The firm will just be covering all of its variable cost but none of its fixed cost

answer

...

question

The demand curve faced by a perfectly competitive industry

answer

...

question

The motive that drives firms to enter or exit an industry is

answer

...

question

For a firm in a perfectly competitive industry, which of the following is TRUE?

answer

...

question

The price per unit times the total quantity sold is

answer

...

question

Which of the following is always true for a perfectly competitive firm?

answer

...

question

A market structure in which the decisions of individual buyers and sellers have no effect on market price is

answer

...

question

Refer to the above figure. A perfectly competitive firm that is in long-run equilibrium will be operating

answer

...

question

answer

...

question

Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $7.00; AVC = $5.00; MC = $6.50; MR = $6.50. The firm should

answer

...

1 of 314

question

The total revenue of a perfectly competitive firm is calculated by

answer

multiplying price by quantity.

question

Refer to the above table. If the price is $5, the perfectly competitive firm should produce

answer

104 units.

question

The perfectly competitive seller's short-run supply curve is

answer

the part of its marginal cost curve above the average variable cost curve.

question

A constant-cost industry will have

answer

a perfectly elastic long-run supply curve

question

Refer to the above figure. Which panel represents the long-run supply curve for an increasing cost industry?

answer

Panel C.

question

For a firm in a perfectly competitive industry

answer

short-run economic profits may be positive, but long-run economic profits must be zero.

question

Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $12.00; AVC = $8.00; MC = $12.00; MR = $10.00. The firm should

answer

decrease output.

question

The shutdown rule for a firm in a perfectly competitive industry is that the firm should cease production if

answer

P < AVC.

question

A firm in a perfectly competitive market maximizes profits when it finds

answer

the quantity at which total revenue minus total cost is the greatest

question

Refer to the above figure. Line C in Panel B does not represent

answer

total revenue

question

When a firm is operating at an output rate at which total revenue equal total costs, this is called

answer

its breakeven point.

question

The equation TR/Q is used to compute

answer

average revenue

question

A perfectly competitive firm is maximizing profits in the short run. This implies that the firm is earning the most economic profits possible, which

answer

can be positive, negative, or zero

question

When MR < MC for a firm, the firm should

answer

reduce its level of output.

question

A perfectly elastic long-run supply curve indicates

answer

a constant-cost industry.

question

Which of the following statements is not true for a perfectly competitive firm?

answer

The firm can influence its demand curve by advertising its product

question

Which of the following statements is correct?

answer

The market demand curve of the perfectly competitive industry is downward sloping while the demand curve of an individual firm is horizontal with a height equal to the product price

question

If markets are perfectly competitive, then the production of goods

answer

will use the least costly combination of resources.

question

If marginal revenue is less than marginal cost, the firm should

answer

decrease its rate of outpu

question

If the long-run supply curve slopes downward, we know that this is

answer

a decreasing-cost industry.

question

Consider an industry that is in long-run equilibrium. An increase in demand leads to an increase in the price of the good. We know that this is

answer

an increasing cost industry.

question

The market demand curve in perfect competition is found by

answer

horizontally summing the demand curves of the individual consumers.

question

Using the above figure, the perfectly competitive firm in the diagram will earn an economic profit if the market price is

answer

P4.

question

The perfectly competitive firm's demand curve has

answer

a slope of 0.

question

The demand curve for a perfectly competitive firm is

answer

perfectly elastic

question

In a perfectly competitive market, the average revenue curve of a firm is

answer

the same as its demand curve.

question

A perfectly competitive market has

answer

homogeneous products

question

In a perfectly competitive market, if P > ATC in the short run, there is apt to be

answer

entry of new firms into the market

question

When a perfectly competitive firm experiences zero economic profits,

answer

firms have no incentive to exit or enter the industry.

question

The perfectly competitive firm cannot influence the market price because

answer

its production is too small to affect the market.

question

Assuming fixed factor prices, the short-run industry supply curve for a perfectly competitive industry is equal to the sum of the

answer

MC curves above minimum AVC

question

When demand is perfectly elastic, marginal revenue is

answer

equal to price.

question

Suppose that at the current level of output, price = $10, MC = $10, AVC = $7, and ATC = $9. Which of the following is true?

answer

The firm should maintain the current level of output.

question

In the short run, in a perfectly competitive market, a firm will shut down if

answer

P < AVC for all levels of output.

question

The value of total output decreases when labor leaves one industry and goes to another and capital leaves the second industry and goes to the first. This indicates that

answer

it would be efficient to return to the first situation

question

If an industry's long-run supply curve slopes downward, then the industry is

answer

a decreasing-cost industry.

question

A perfectly competitive firm will maximize profits when

answer

marginal cost is equal to marginal revenue.

question

In an increasing-cost industry, an increase in output will lead to

answer

an increase in long-run per-unit costs.

question

The perfectly competitive firm maximizes profits when

answer

it produces and sells the quantity at which marginal revenue and marginal cost are equal.

question

In the above figure, at the profit-maximizing rate of production for the perfectly competitive firm average total cost is

answer

question

For the perfectly competitive firm, price

answer

equals average revenue and marginal revenue.

question

If AVC is $6 when P = MC, a firm

answer

should shut down if price is less than $6

question

Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $6.00; AVC = $4.00; MC = $3.50; MR = $3.50. The firm should

answer

shut down

question

When a firm is earning zero economic profits

answer

P = ATC.

question

Being a price taker essentially means

answer

a firm cannot influence the market price.

question

The change in total revenues resulting from a change in output of one unit is

answer

marginal revenue.

question

In a long-run perfectly competitive equilibrium

answer

P = MR = MC = ATC.

question

The owner of a perfectly competitive firm that is earning economic losses in the short run

answer

is earning less than he would if he worked for someone else

question

answer

shut down

question

In the above figure, if the market price is $10, the firm

answer

produces 10 units

question

If an industry's long-run per-unit costs increase as its output increases then

answer

the firm is most likely an increasing-cost industry.

question

An increasing-cost industry will have

answer

an upward sloping supply curve in the long run

question

The demand curve for the product of a perfectly competitive firm is

answer

perfectly elastic.

question

In a perfectly competitive industry

answer

no buyer or seller can influence the market price.

question

Refer to the above figure. If an individual firm wants to maximize economic profits, it should

answer

charge $5 for its product

question

In the above figure, what is the price the firm receives if the output is 8?

answer

$10

question

In a perfectly competitive market, if P < MC, then

answer

too much output is being produced

question

For a perfectly competitive firm at its long-run competitive equilibrium point,

answer

P = AR = MR = LATC = SATC = MC

question

If a constant-cost, perfectly competitive industry experiences an increase in the demand for its product, we would expect

answer

only the quantity supplied of the product to increase.

question

In a decreasing-cost industry, an increase in industry output will

answer

lead to a lower market price

question

Which of the following is NOT correct for a perfectly competitive firm in long-run equilibrium?

answer

MC = MR > LAC

question

For a perfectly competitive firm, which of the following is NOT true?

answer

The total revenue curve is horizontal.

question

When economic profits in a perfectly competitive industry are positive

answer

new firms will be attracted to the industry, and economic profits will decline to zero.

question

The rate of production at which marginal revenue equals marginal cost is

answer

the point where profits are maximized

question

Refer to the above figure. The firm's short-run shutdown price is

answer

at $1.

question

A company finds that at its present level of production, MC = AVC at $15, MC = ATC at $20, and MC = MR at $17. Your advice to the firm regarding its short-run operations is

answer

to continue production at a loss.

question

The exiting of firms from a perfectly competitive industry occurs when

answer

opportunity costs cannot be covered.

question

answer

individual buyers and sellers cannot affect the market price because it is determined by the market forces of demand and supply

question

What is the shape of the long-run supply curve in a decreasing-cost industry?

answer

Downward sloping

question

Economic profits are maximized at the point at which

answer

marginal revenues equal marginal costs

question

A price taker is a firm that

answer

cannot influence the market price.

question

When price equals marginal cost

answer

the marginal benefits of consuming an extra unit of the good exactly equals the marginal cost to society of producing the good.

question

For a perfectly competitive firm, profit maximization occurs when

answer

marginal revenue equals marginal cost.

question

Firms in a perfectly competitive industry are producing goods efficiently in the long run if each is producing at the minimum point of the

answer

LAC curve.

question

In a perfectly competitive industry, which of the following is a market signal to resource owners?

answer

Economic profits

question

A firm is currently producing at the rate of output at which total revenues just cover its total variable costs. If demand falls, the firm should

answer

shut down

question

Which of the following is always true for a perfectly competitive firm?

answer

P = d = MR

question

Marginal revenue equals

answer

the change in total revenue from selling one more unit

question

For a perfectly competitive firm facing the short-run break-even price,

answer

it has an economic profit of zero.

question

A firm that shuts down in the short run experiences losses equal to

answer

total fixed costs.

question

In the long run when a perfectly competitive firm experiences negative economic profits,

answer

existing firms exit the industry.

question

Below the short-run shutdown price, the firm

answer

is earning negative economic profits.

question

At the short-run break-even price, the firm

answer

is making a normal rate of return on its capital investment

question

In reference to the long-run firm competitive equilibrium diagram, which of the following statements is INCORRECT?

answer

In the long run, this firm must be part of a constant-cost industry, because its marginal revenue curve is perfectly elastic

question

In a perfectly competitive industry, the industry demand curve

answer

is downward sloping

question

The break-even price for a perfectly competitive firm is the price that is equal to

answer

ATC.

question

For a firm in a perfectly competitive industry,

answer

short-run economic profits may be positive, but long-run economic profits must be zero

question

Which of the following statements is not true for a perfectly competitive firm

answer

The firm can influence its demand curve by advertising its product

question

A firm that has positive economic profits has accounting profits that are

answer

positive.

question

Refer to the above table. If the price is $3, the perfectly competitive firm should produce

answer

102 units

question

Consider an industry that is in long-run equilibrium. An increase in demand leads to a decrease in the price of the good. We know that this is

answer

a decreasing cost industry.

question

In the above figure, what is the profit-maximizing output and price?

answer

10, $10

question

What is always true about the short-run equilibrium position for a firm in perfect competition?

answer

MR = MC = P = AR

question

Which of the following is NOT a characteristic of a perfectly competitive long-run equilibrium?

answer

Firms are producing on the downward sloping portions of their short-run average cost curves.

question

The short-run industry supply curve slopes up because

answer

the law of diminishing marginal product applies in the short run.

question

All of the following are characteristics of perfect competition EXCEPT

answer

product differentiation

question

Factors that cause the short-run supply curve to change are factors that affect

answer

variable costs.

question

Which of the following could generate economic profits for perfectly competitive firms in the short run, if they initially earn zero economic profits?

answer

A decrease in input prices

question

A firm is currently producing an output at which price equals the minimum point on the average variable cost curve. If wage rates increase, the firm will

answer

shut down since it would no longer be covering its variable costs.

question

Refer to the above figure. Profits will be negative

answer

when the price is below $2.

question

The perfectly competitive firm's total revenue curve

answer

All of these

question

Refer to the above figure. If the market price is equal to A, which statement can be made about profits?

answer

Profits are negative and equal to BCEA.

question

Which of the following is true in perfect competition at long-run equilibrium?

answer

All of these

question

Under perfect competition, the demand curve facing the firm is determined by

answer

the intersection of the industry demand and supply curves.

question

In the long run when a perfectly competitive firm experiences positive economic profits,

answer

firms enter the industry, the market supply curve shifts rightward, and the market price falls

question

A situation in which the price charged is equal to society's opportunity cost is known as

answer

marginal cost pricing.

question

In the above figure, if the firm is facing demand curve d2, then to maximize profits it will produce at output level

answer

question

A firm that has negative economic profits has accounting profits that are

answer

indeterminate without more information.

question

answer

question

In the above figure, assuming Firm 1 and Firm 2 are the sole producers in the industry, the industry quantity supplied at price P2 is equal to

answer

Q1 + Q3.

question

If a firm is earning short-run economic profits shown in the above figure, in the long run

answer

firms enter the industry, the market supply curve shifts rightward, and the market price falls.

question

In the short run, which of the following is FALSE about the shutdown point?

answer

Total revenue is equal to total fixed cost.

question

Which of the following is NOT correct concerning perfectly competitive firms in the long run?

answer

The opportunity cost of capital is zero.

question

Using the above figure, the price facing the perfectly competitive firm in the long run will be

answer

P3.

question

If a firm is producing an output rate at which marginal cost is greater than price, the firm

answer

should reduce its output level.

question

Under what condition are profits maximized?

answer

at the rate of output at which marginal revenue equals marginal cost

question

Under perfect competition, a firm that sets its price slightly above the market price would

answer

lose all of its customers.

question

Which of the following is closest to a perfectly competitive market?

answer

the market for broccoli

question

Suppose that at the current level of output, price = $10, MC = $14, AVC = $7, and ATC = $9. Which of the following is true?

answer

The firm should decrease output.

question

A perfectly competitive firm will not earn an economic profit in the long run, because

answer

there are no barriers to entry into the industry.

question

If an industry's long-run per-unit costs are constant as its output increases then

answer

the firm is most likely a constant-cost industry

question

In the long run, the perfectly competitive firm

answer

earns only a normal profit

question

In the above figure, if the market price is less than $7, the firm

answer

produces 0 units.

question

If a perfectly competitive industry is in long-run equilibrium, then

answer

price equals average cost

question

When price is greater than both marginal cost and average variable cost, the perfectly competitive firm

answer

should increase its level of output.

question

Suppose the perfectly competitive equilibrium occurs such that too many units of the good are produced. This is an example of

answer

market failure.

question

A perfectly competitive producer faces a demand curve for its own product that is

answer

horizontal.

question

According to the above figure, if the firm is earning zero economic profits, what quantity is the firm selling and at what price?

answer

Q = 1,000; P = $5

question

The demand curve for a perfectly competitive industry is

answer

downward sloping.

question

Perfectly competitive markets are efficient because

answer

the cost to society for producing the goods is exactly equal to the value that society places on the good.

question

When a firm is at its short-run break-even point

answer

economic profits equal zero and the firm is earning a nominal rate of return on investment.

question

Refer to the above table. This firm operates in a perfectly competitive market in which the market price is $10 per unit. What is its profit-maximizing rate of production?

answer

106 units

question

For a perfectly competitive firm facing the short-run break-even price

answer

it has an economic profit of zero.

question

The short-run supply curve for the perfectly competitive firm is the portion of its

answer

MC curve above the AVC curve.

question

All firms in a perfect competition industry

answer

produce identical products

question

Which of the following is always true in the short run for a perfectly competitive firm that is maximizing economic profits?

answer

P = d = MR = MC

question

Market signals

answer

are ways of conveying information

question

If a perfect competitor faces P = ATC in the long run, the firm will

answer

remain in the industry.

question

The short-run shutdown price for a perfectly competitive firm is where price equals

answer

minimum AVC

question

In the above figure, at the profit-maximizing rate of production for the perfectly competitive firm total revenue is

answer

$100.

question

In the short run, the price at which a firm's total revenues equal its total costs is

answer

the short-run break-even point.

question

The vertical distance between the horizontal axis and any point on a perfect competitor's demand curve measures

answer

product price, marginal revenue, and average revenue.

question

A firm earning economic losses should operate in the short run as long as

answer

the price per unit sold is greater than the average variable cost per unit produced.

question

A firm that shuts down in the short run experiences losses equal to its

answer

total fixed costs.

question

A perfectly competitive industry's market or "going" price is established by

answer

the forces of supply and demand

question

Refer to the above figure. Profits for this firm are equal to zero

answer

only at points B and C.

question

If a perfectly competitive firm is producing at an output at which marginal cost exceeds marginal revenue,

answer

the firm should reduce production.

question

The firm in a perfectly competitive industry is a

answer

price taker.

question

When there are large numbers of buyers and sellers, then

answer

no one buyer or seller has any influence on price.

question

In the long run, all firms in a perfectly competitive industry

answer

break even.

question

A situation in which the price charged is greater than society's opportunity cost would lead to

answer

too little being produced

question

A firm's total explicit costs are $1,000. Its total implicit costs are $500, and it has a total revenue of $900. This firm receives

answer

neither an economic profit nor an accounting profit.

question

The total amount received from the sale of output is

answer

total revenue.

question

A perfectly competitive industry's market price is found by

answer

locating the intersection of the market demand and market supply curves.

question

Which of the following is the best example of a decreasing-cost industry?

answer

the personal computer industry

question

Perfect competition is characterized by

answer

many buyers and sellers

question

Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $8.00; AVC = $5.00; MC = $8.00; MR = $9.00. The firm should

answer

increase output

question

When considering perfect competition the absence of entry barriers implies that

answer

firms can enter and leave the industry without serious impediments.

question

answer

-$2

question

In a long-run perfectly competitive equilibrium,

answer

P = MR = MC = ATC.

question

In the long run in a perfectly competitive industry

answer

economic profits will be zero.

question

Along an industry's long-run supply curve,

answer

economic profits are zero.

question

answer

$14

question

In the above figure, when price is below E, this firm should

answer

shut down.

question

If price is below average variable costs at all rates of output, the quantity supplied by a perfectly competitive firm will equal

answer

zero

question

Firms in a perfectly competitive industry are earning economic losses. This is

answer

a signal to entrepreneurs that some of the firms in the industry should exit and the resources of these firms should move into production of other goods

question

The firm in the above figure breaks even when quantity is

answer

question

The short-run break-even price is

answer

the price at which a firm's total revenues equal its total costs.

question

When a firm is at its short-run break-even point,

answer

economic profits equal zero and the firm is earning a nominal rate of return on investment.

question

A firm is currently producing at the point where MC = MR. The situation for the firm at this point is P = $5, Q = 100, ATC = $6, AVC = $5.50. What do you recommend this firm do?

answer

Shut down, because AVC > P.

question

Using the above figure, the short-run break-even price for the perfectly competitive firm will be

answer

P3.

question

Which of the following is NOT a characteristic of a perfectly competitive market?

answer

It is difficult for a firm to enter or leave the market

question

answer

there is a competitive market in energy distribution in the United States.

question

The short-run supply curve for a perfectly competitive firm is the portion of its

answer

MC curve above its AVC curve.

question

Referring to the diagram, which of the following statements is INCORRECT?

answer

If the individual firm raises its price, it will capture all sales in the market

question

In the above figure, if price is equal to P4, the firm will

answer

earn positive economic profits.

question

answer

question

Signals are

answer

compact ways of conveying to economic decision makers information needed to identify industries where more resources are needed

question

The goal of the perfectly competitive firm is to

answer

maximize total profits.

question

Refer to the above figure. If the market price is equal to A, which statement can be made about economic profits?

answer

104 units

question

Under perfect competition, the firm must decide

answer

the best rate of output it should produce.

question

In the above figure, what happens to the firm's optimal level of output if the price it receives for its product decreases from P4 to P3?

answer

Output decreases.

question

In reference to the long-run firm competitive equilibrium diagram, which of the following statements is INCORRECT?

answer

In the long run, this firm must be part of a constant-cost industry, because its marginal revenue curve is perfectly elastic.

question

The rate of production that maximizes the positive difference between total revenues and total costs is the

answer

profit-maximizing rate of production

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In a perfectly competitive industry, any restrictions that prevent new firms from entering

answer

hinder economic efficiency

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A company finds that at the output level at which marginal cost equals marginal revenue, TC = $500, TVC = $400, and TR = $450. Your advice to the firm is

answer

continue to produce because loss is less than TFC.

question

The demand curve for a perfectly competitive firm is horizontal because

answer

its production decisions cannot influence the market price.

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A market structure in which the decisions of individual buyers and sellers have no effect on market price is

answer

perfect competition.

question

Refer to the above figure. Which panel represents the long-run supply curve for a constant cost industry?

answer

Panel A.

question

Competitive pricing is efficient because

answer

the price that consumers pay reflects the opportunity cost to society of producing the good.

question

In the above figure, the firm will shut down if quantity falls below

answer

question

A decreasing-cost industry will have

answer

a downward sloping supply curve in the long run.

question

An industry in which an increase in output leads to a reduction in long-run per-unit costs is a(n)

answer

decreasing-cost industry.

question

A constant-cost industry

answer

has a horizontal long-run supply curve.

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In a perfectly competitive market structure any firm can enter or leave the industry without serious impediments. This implies

answer

firms will move labor and capital in pursuit of profit-making opportunities to whatever business venture gives them the highest return on their investment.

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The opportunity cost to society of producing one more unit of the good is

answer

marginal cost.

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Perfect competition is a market structure

answer

in which individual buyers and sellers have no effect on the market price.

question

answer

75 units, at which the firm earns negative economic profits per unit sold.

question

Which of the following is NOT a characteristic of perfect competition?

answer

There are substantial barriers to entry into the industry.

question

Refer to the above figure. If the market price is equal to A, which statement can be made about economic profits?

answer

Economic profits are positive and equal to ABCG.

question

The demand curve faced by a perfectly competitive industry

answer

slopes downward.

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A firm's total explicit costs are $1,000. Its total implicit costs are $500, and it has a total revenue of $2000. This firm receives

answer

both an economic profit and an accounting profit.

question

The short-run shutdown price occurs where price equals

answer

AVC at the minimum point.

question

In the above figure, at which output level is this firm earning negative economic profits?

answer

question

Which of the following is NOT true for a perfectly competitive firm in the long run?

answer

The market demand curve of the perfectly competitive industry is downward sloping while the demand curve of an individual firm is horizontal with a height equal to the product price.

question

In a perfectly competitive market, if P > MC, then

answer

too little output is being produced.

question

If a firm in a perfectly competitive market raises its price,

answer

it will sell nothing.

question

Suppose that at the current level of output, price = $10, MC = $4, AVC = $7, and ATC = $11. Which of the following is true?

answer

The firm should increase output.

question

For a perfect competitor, the marginal revenue curve will be

answer

...

question

In the short run, a firm should shut down when

answer

...

question

Refer to the above table. If the price is $3 the maximum profit this firm could earn is

answer

...

question

A perfectly competitive firm is selling 300 units of output at $4 each. At this output level, total fixed cost is $100 and total variable cost is $500. The firm

answer

...

question

The profit-maximizing level of output for a firm occurs at the point at which

answer

...

question

For a firm in a perfectly competitive industry, the demand curve for its own product is

answer

...

question

answer

...

question

The firm in the above figure breaks even when market price is

answer

...

question

An industry in which an increase in industry output is accompanied by an increase in long-run per-unit costs is a(n)

answer

...

question

A situation in which the price charged is less than society's opportunity cost would lead to

answer

...

question

answer

...

question

If an industry's long-run per-unit costs decrease as its output increases then

answer

...

question

In the long run in a perfectly competitive industry,

answer

...

question

Which of the following is the best example of a decreasing-cost industry?

answer

...

question

answer

...

question

If there is no output for which product price is sufficient to cover variable costs,

answer

...

question

In the above figure, assume d1 is the demand curve faced by this firm. Which is true?

answer

...

question

Refer to the above table. This firm operates in a perfectly competitive market in which the market price is $5/unit. What is true when the firm produces 110 units?

answer

...

question

Which of the following is true for the perfectly competitive firm?

answer

...

question

All of the following are characteristics of a perfectly competitive market EXCEPT

answer

...

question

The short-run break-even price

answer

...

question

Profits and losses are true signals because they

answer

...

question

Refer to the above figure. Which panel represents the long-run supply curve for a decreasing cost industry?

answer

...

question

Each firm in a perfectly competitive industry is

answer

...

question

In the above figure, if d3 is the relevant demand curve for this firm, then which level of output will maximize this firm's profits or minimize its losses?

answer

...

question

Which of the following is NOT a characteristic of a perfectly competitive industry?

answer

...

question

The demand curve for the product of a perfectly competitive firm's demand curve indicates that if the firm

answer

...

question

A perfectly competitive firm faces a horizontal demand curve because it is

answer

...

question

We assume that firms, when they are deciding the best rate of output at which to produce,

answer

...

question

If a perfectly competitive firm has economic profits greater than zero, then we know that

answer

...

question

When a firm has economic profits equal to zero,

answer

...

question

In long-run equilibrium, the perfectly competitive firm will

answer

...

question

In the above figure, what is the profit at the profit-maximizing output level?

answer

...

question

Refer to the above figure. Profits for this firm are negative

answer

...

question

Refer to the above figure. When the price in the market is $4, economic profits will equal

answer

...

question

If a firm is producing an output rate at which marginal cost is equal price, the firm

answer

...

question

In the short run, the perfectly competitive firm will always earn an economic profit when

answer

...

question

For a perfectly competitive firm, any price below its minimum AVC is a

answer

...

question

Suppose the market price is $5, marginal cost is $4, and average total cost is $2. The perfectly competitive firm in that market is

answer

...

question

A true signal must

answer

...

question

Refer to the above figure. The market supply and demand curves in a perfectly competitive market intersect at $4. Which of the graphs represent the situation for an individual firm?

answer

...

question

If a perfectly competitive firm is producing at an output at which marginal cost exceeds marginal revenue

answer

...

question

When a firm is earning zero economic profits,

answer

...

question

answer

...

question

At the short-run break-even price, the firm

answer

...

question

In a perfectly competitive market, the average revenue curve of a firm is

answer

...

question

When a firm is at its short-run break-even point,

answer

...

question

Refer to the above table. This firm operates in a perfectly competitive market in which the market price is $10/unit. What is true when the firm produces 103 units?

answer

...

question

Refer to the above table. If the price is $3, the perfectly competitive firm should produce

answer

...

question

Which of the following is always true in the short run for a perfectly competitive firm that is maximizing economic profits?

answer

...

question

If AVC is $6 when P = MC, a firm

answer

...

question

If a firm shuts down in the short run

answer

...

question

When considering perfect competition the absence of entry barriers implies that

answer

...

question

Suppose a perfectly competitive firm faces the following cost and revenue conditions: ATC = $25.00; AVC = $20.00; MC = $25.00; MR = $28.00. The firm should

answer

...

question

A firm that shuts down in the short run experiences losses equal to its

answer

...

question

A perfectly competitive industry's market or "going" price is established by

answer

...

question

In the above figure, if the market price is $10, the firm

answer

...

question

Refer to the above figure. The firm's short-run shutdown price is

answer

...

question

What is the shape of the long-run supply curve in a decreasing-cost industry?

answer

...

question

What is the shape of the long-run supply curve in a decreasing-cost industry?

answer

...

question

When a firm is operating at an output rate at which total revenue equal total costs, this is called

answer

...

question

When a perfectly competitive firm experiences positive economic profits

answer

...

question

In reference to the long-run firm competitive equilibrium diagram, which of the following statements is INCORRECT?

answer

...

question

answer

...

question

Marginal revenue is

answer

...

question

Market signals

answer

...

question

A company finds that at its present level of production, MR = MC at $14, MC = AVC at $15, and MC = ATC at $20. Your advice to the firm regarding its short-run operations is

answer

...

question

With marginal cost pricing,

answer

...

question

What does it mean when the products sold by the firms in an industry are homogeneous?

answer

...

question

In a perfectly competitive market, a firm in long-run equilibrium will be operating

answer

...

question

answer

...

question

A firm in a perfectly competitive industry faces the following cost and revenue conditions: ATC = $6; AVC = $3; MR = MC = $5. The firm is

answer

...

question

If markets are perfectly competitive, then the production of goods

answer

...

question

Which of the following is NOT a characteristic of perfect competition?

answer

...

question

A firm that shuts down in the short run experiences losses equal to

answer

...

question

Economic efficiency is indicated by

answer

...

question

Economic efficiency is indicated by

answer

...

question

answer

...

question

A firm that shuts down in the short run experiences losses equal to its

answer

...

question

Signals are

answer

...

question

The total revenue of a perfectly competitive firm is calculated by

answer

...

question

Competitive pricing is efficient because

answer

...

question

The owner of a perfectly competitive firm that is earning economic losses in the short run

answer

...

question

Referring to the diagram, which of the following statements is INCORRECT?

answer

...

question

answer

...

question

Suppose a perfectly competitive industry is in long-run equilibrium. If a decrease in demand leads to a lower long-run price, we know that

answer

...

question

If a firm is earning short-run economic profits shown in the above figure, in the long run

answer

...

question

If an industry's long-run per-unit costs increase as its output increases then

answer

...

question

A firm is currently producing at the rate of output at which total revenues just cover its total variable costs. If demand falls, the firm should

answer

...

question

Which of the following is NOT correct concerning perfectly competitive firms in the long run?

answer

...

question

A firm earning economic losses should operate in the short run as long as

answer

...

question

In a perfectly competitive industry, the firm's marginal revenue curve is

answer

...

question

In a perfectly competitive industry, the firm's marginal revenue curve is

answer

...

question

The demand curve for the product of a perfectly competitive firm's demand curve indicates that if the firm

answer

...

question

In a perfectly competitive market, if P > ATC in the short run, there is apt to be

answer

...

question

When MR < MC for a firm, the firm should

answer

...

question

Refer to the above figure. The firm will just be covering all of its variable cost but none of its fixed cost

answer

...

question

The demand curve faced by a perfectly competitive industry

answer

...

question

The motive that drives firms to enter or exit an industry is

answer

...

question

For a firm in a perfectly competitive industry, which of the following is TRUE?

answer

...

question

The price per unit times the total quantity sold is

answer

...

question

Which of the following is always true for a perfectly competitive firm?

answer

...

question

A market structure in which the decisions of individual buyers and sellers have no effect on market price is

answer

...

question

Refer to the above figure. A perfectly competitive firm that is in long-run equilibrium will be operating

answer

...

question

answer

...

question

Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $7.00; AVC = $5.00; MC = $6.50; MR = $6.50. The firm should

answer

...

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