question
The demand curve facing a perfectly competitive firm is
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horizontal
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The market demand curve in a perfectly competitive market is
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downward sloping
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The price at which a perfectly competitive firm sells its product is determined by
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all sellers and buyers of the product
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The perfectly competitive firm will seek to produce the level of output for which
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marginal cost equals marginal revenue
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A perfectly competitive firm should increase its level of production as long as
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marginal revenue is greater than marginal cost
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If MR > MC
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the firm can increase its profits (or minimize its losses) by increasing output
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What quantity of output should the profit-maximizing firm produce?
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44 units
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What is the increase in profit that would result from producing 43 units of the product rather than producing 40 units?
answer
$10
question
Consider the following data: equilibrium price = $15, quantity of output produced = 10,000 units, average total cost = $12, and average variable cost $7. Given this data, total revenue is __________, total cost is __________, and total fixed cost is __________.
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$150,000; $120,000; $50,000
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Why must profits be zero in long-run competitive equilibrium?
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If profits are not zero, firms will enter or exit the industry.
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If an industry is in long-run competitive equilibrium and experiences a decrease in demand, then as a result the equilibrium price will __________, which will cause the representative firm's __________ curve to shift downward and some firms will __________ the industry.
answer
fall; demand; exit
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As firms exit an industry, the industry supply curve shifts __________ and the equilibrium price __________ until long-run competitive equilibrium is established and the surviving firms are earning __________ economic profits.
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leftward; rises; zero
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Which of the following is not a characteristic of perfect competition?
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sellers produce and sell a heterogeneous product
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If, for a perfectly competitive firm, marginal cost is greater than marginal revenue for the 100th unit, then it follows that
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producing the 100th unit adds more to total cost than it does to total revenue.
question
For a price taker, market equilibrium price is $50. At 1,000 units, MR = MC, ATC = $45, and AVC = $30. This price taker will
answer
earn $5,000 profits if it produces 1,000 units.
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