question
True or false:
It is possible for a firm to enjoy a short-run producer surplus, while at the same time suffering a short-run economic loss.
It is possible for a firm to enjoy a short-run producer surplus, while at the same time suffering a short-run economic loss.
answer
True
question
If a market is productively efficient,
answer
the output is being produced at the lowest possible resource cost
question
We say that equilibrium in a perfectly competitive market is allocatively efficient because
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the sum of consumer and producer surplus is maximized.
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In the short run, a firm will produce a positive amount of output as long as
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P>AVC at some output level
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The short-run supply curve of a perfectly competitive firm is
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the part of its marginal cost curve rising above the average variable cost curve
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Many country inns shut down in the off-season because
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the off-season revenue can't cover variable cost.
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The motivating force behind an increase in supply in a long run adjustment to equilibrium is
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economic profits that are present in the short-run
question
In the long run in perfect competition, no firm can earn normal profit.
answer
False
question
The total revenue curve of a perfectly competitive firm
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has a constant slope as output increases
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The demand curve faced by a perfectly competitive firm is
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perfectly elastic
question
In the short run, a perfectly competitive firm will always shut down if, at all positive output levels total revenue is
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less than variable cost
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A perfectly competitive firm's profit per unit of output equals
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price minus average total cost
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Because it is small relative to the market, a perfectly competitive firm faces an inelastic demand curve.
answer
False
question
Which of the following characterizes a perfectly competitive market?
answer
perfect information
question
Perfectly competitive firms are price takers because
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each firm is small and goods are perfect substitutes for one another
question
Marginal revenue is the change in total revenue from using one or more unit of an input in the short run.
answer
false
question
The golden rule of profit maximization states that firms maximize profit by producing at the rate of output at which price equals average total cost.
answer
False
question
In perfect competition, each firm's output is a large fraction of total market supply.
answer
False
question
Suppose Thelma and Louise both sell fried green tomatoes in a perfectly competitive market. if Louise increases her output,
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The price Thelma can charge is unaffected
question
The demand curve for the output of a perfectly competitive firm is
answer
perfectly elastic
question
In perfect competition, if one firm raises its price,
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that firm will lose revenues because other firms will not follow.
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Marginal revenue is defined as
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the change in total revenue divided by the change in quantity
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A firm with positive accounting profit may be suffering an economic loss.
answer
True
question
A perfectly competitive firm will produce at an economic loss (negative profit) in the short run rather than discontinue production if there is a rate of output at which price
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exceeds average variable cost
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Firms in perfect competition will leave the industry if they
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suffer long run losses
question
After an increase in demand in a constant-cost industry, firms will find themselves with higher average cost curves.
answer
False
question
Firms in a perfectly competitive market achieve both allocative and productive efficiency in the short run.
answer
False
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