question
Which of the following equations shows the output of a purely competitive firm maximizing its profit (or minimizing its losses)?
answer
P=MC
question
At what point should i purely competitive firm shut down?
answer
When P<AVC or when P is less than AVC
question
Identify the demand curve faced individual firms in a purely competitive industry.
answer
straight horizontal line
question
Identify the profit-maximizing level of output at the price of $225
answer
8
question
Identify the profit-maximizing level of output at the price of $50
answer
At the price of $50, the profit-maximizing level of output is 0 because the price is less than AVC.
question
at the price of $125 will _______.
answer
At the price of $125, this firm will produce an output of 5 while incurring an economic loss
question
Identify the figure that shows an individual firm in the long-run equilibrium.
answer
when horizonal line meets all curves
question
Looking at the images below, which shows the impact of an increase in demand for a purely competitive industry that began in long-run equilibrium?
answer
Figure one, which shows positive economic profits, correctly illustrates the impact of an increase in demand on a purely competitive industry that began in long-run equillibrium (shaded area is above where all the lines meet)
question
In the long run, purely competitive firms will __________.
answer
only make a normal profit, as economic profits will attract new firms, which will increase industry supply and decrease the price below levels needed to make an economic profit
question
If purely competitive firms are incurring economic losses in the short run, _________.
answer
firms will leave the industry, reducing supply enough to return the industry price to that where all firms will make a normal profit
question
allocative efficiency is expressed as _________.
answer
P=MC
question
Productive efficiency is expressed algebraically as __________.
answer
P=minimum point of ATC
question
Price to a purely competitive firm _______.
answer
equals MC for profit maximization and is the same as demand and marginal revenue
question
In the long run, price is ___________.
answer
equal to the minimum point of ATC allowing firms to make only a normal profit
question
allocative and productive efficiency are achieved _______.
answer
always in the long run
question
In the short run, when purely competitive firms are realizing an economic profit, _________.
answer
neither allocative nor productive efficiency will be realized
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