question
Equilibrium price is $10 in a perfectly competitive market. For a perfectly competitive firm, MR = MC at 1,200 units of output. At 1,200 units, ATC is $23, and AVC is $18. The best policy for this firm is to __________ in the short run. Also, this firm earns __________ of __________ if it produces and sells 1,200 units.
answer
shut down; losses; $15,600
question
Assume the following for a certain industry: (l) there is no incentive for firms to enter or exit the industry; (2) for some firms in the industry, short-run average total cost is greater than long-run average total cost at the level of output where marginal revenue equals marginal cost; (3) all firms in the industry are currently producing the quantity of output at which marginal revenue equals marginal cost. Is the industry in long-run competitive equilibrium?
answer
No, because of number 2.
question
Assume a decreasing-cost industry that is initially in long-run competitive equilibrium. A decrease in demand will cause a(n) __________ in prices and profits, and as a result, firms will __________ the industry, causing the market supply curve to shift __________,which, in turn, will eventually cause the equilibrium price to be __________ before.
answer
a decrease; exit; leftward; higher than
question
In a perfectly competitive market, if a resource that one firm utilizes is superior to resources used by other firms, and, as a result, lowers unit costs for the firm, that firm is likely to earn __________ in the short run. In time, however, the firm's __________ curve will rise to reflect the superior-quality of the resource it employs and the firm will then earn __________.
answer
positive economic profit; ATC; normal profit
question
Equilibrium price is $25 in a perfectly competitive market. For a perfectly competitive firm, MR = MC at 2,000 units of output. At 2,000 units, ATC is $33, and AVC is $27. The best policy for this firm is to __________ in the short run. Also, total fixed cost equals __________ and total variable cost equals __________ for this firm.
answer
shut down; $12,000; $54,000
question
A firm that is a price taker can sell
answer
any quantity of product it can produce at the market equilibrium price.
question
If a firm is a price taker, its demand curve is
answer
perfectly elastic.
question
Refer to Figure 22-3. A perfectly competitive firm operating in the market depicted in graph (1) faces the demand curve depicted in
answer
graph (3)
question
In long-run equilibrium, the perfectly competitive firm earns __________ economic profits.
answer
zero
question
Which of the following is not a characteristic of perfect competition?
answer
Sellers produce and sell a heterogeneous product
question
A perfectly competitive market is initially in long-run competitive equilibrium. Then, market demand increases. As a result,
answer
the demand curve for each firm shifts upward.
question
In long-run competitive equilibrium P = SRATC, because if P > SRATC
answer
positive economic profit would attract firms to the industry in order to obtain the profits.
question
Perfectly competitive industries are
answer
relatively easy to enter or exit.
question
In the theory of perfect competition, the assumption of easy entry into and exit from the market implies
answer
zero economic profits in the long run.
question
The long-run industry supply curve is the graphic representation of the quantity of output that the industry is prepared to
answer
supply at different prices after the entry and exit of firms is completed.
question
In long-run competitive equilibrium SRATC = LRATC, because if SRATC > LRATC (at the quantity of output at which MR = MC) firms would
answer
have an incentive to change their plant size to produce their current output.
question
In the short run, the best policy for a perfectly competitive firm is to
answer
produce and sell its product as long as price is greater than average variable cost.
question
In order for a firm to continue producing, price must exceed __________ and total revenue must exceed __________.
answer
AVC; total variable costs
question
In the theory of perfect competition,
answer
the single firm faces a horizontal demand curve.
question
A perfectly competitive market is initially in long-run competitive equilibrium. Each firm in the market is earning zero economic profit. The owner of one firm decides to discriminate against employees of race X by not hiring them, or by firing those employees of race X who currently work for him. If employees of race X are high-quality employees, and other firms hire them, then the owner of the discriminating firm will soon find that his costs rise (above that of other firms) and he will begin earning
answer
...
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