question
How does the demand for any one seller's product in perfect competition compare to the market demand for that product?
answer
The demand for any one seller's product is perfectly elastic while the market demand curve is downward sloping.
question
If a perfectly competitive firm's average total cost is less than the price, then the firm
answer
Makes an economic profit.
question
A perfectly competitive firm is a price taker because
answer
Many other firms product the same product.
question
Perfect competition ___ a fair outcome ___.
answer
Achieves; because both their fair rules and fair results conditions are met.
question
If a perfectly competitive firm is maximizing its profit and is making an economic profit, which of the following is correct?
1. Price equals marginal revenue
2. Marginal revenue equals marginal cost
3. Price is greater than average total cost
1. Price equals marginal revenue
2. Marginal revenue equals marginal cost
3. Price is greater than average total cost
answer
All are correct.
question
In a perfectly competitive market, one farmer's barley is
answer
A perfect substitute for another farmer's barley.
question
Firms exit a competitive market when they incur an economic loss. In the long run, this exit means that the economic losses of the surviving firms
answer
Decrease until they equal zero.
question
A perfectly competitive firm will maximize profit when the quantity produced is such that the
answer
Firm's marginal revenue is equal to its marginal cost.
question
If the wheat industry is perfectly competitive with a market price of $4 per bushel and Farmer Brown charges $5 per bushel, how many bushels would Farmer Brown sell?
answer
None.
question
We know that a perfectly competitive firm is a price taker because
answer
Its demand curve is horizontal.
question
In a perfectly competitive market, a(n) ___ occurs because ___.
answer
Efficient outcome; firms minimize average minimum cost.
question
The rutabaga market is perfectly competitive. Research is published claiming that eating rutabagas leads to gaining weight and so the demand for rutabagas permanently decreases. The permanent decrease in demand results in a
answer
Lower price, economic losses by rutabaga farmers, and exit from the market.
question
In the long run, perfectly competitive firms produce at the level that has the minimum
answer
Average total cost.
question
A perfectly competitive firm
answer
Sells a product that has perfect substitutes.
question
A perfectly competitive firm's short-run supply curve is
answer
Its marginal cost curve above the AVC curve.
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