question
Perfect competition is characterized by all of the following except
answer
heavy advertising by individual sellers.
question
Which of the following is the best example of a perfectly competitive firm?
answer
a corn farmer in illinois
question
Letters are used to represent the terms used to answer this question: price (P), quantity of output (Q), total cost (TC) and average total cost (ATC). Which of the following equations is equal to a firm's profit?
answer
(P×Q)−TC
question
If, for a given output level, a perfectly competitive firm's price is less than its average variable cost, then the firm
answer
should shut down
question
In a perfectly competitive industry, in the long−run equilibrium
answer
the typical firm earns zero profit.
question
Producing where marginal revenue equals marginal cost is equivalent to producing where
answer
total profit is maximized.
question
A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The fixed cost of production is $20,000. The price of each good is $10. Should the firm continue to produce in the short run?
answer
Yes, it should continue to produce because the firm's revenues cover the total variable cost of $16,000.
question
If the market price is $25, the average revenue of selling five units is
answer
$25
question
Ben's Peanut Shoppe suffers a short−run loss. Ben will not choose to shut down if
answer
his Peanut Shoppe's total revenue exceeds his variable cost.
question
If a typical firm in a perfectly competitive industry is earning profits, then
answer
new firms will enter in the long run causing market supply to increase, market price to fall, and profits to decrease.
question
Which of the following describes the difference between the market demand curve for a perfectly competitive industry and the demand curve for a firm in this industry?
answer
The market demand curve is downward sloping; the firm's demand curve is a horizontal line.
question
Jason, a high−school student mows lawns for families in his neighborhood. The going rate is $12 for each lawn−mowing service. Jason would like to charge $20 because he believes he has more experience mowing lawns than the many other teenagers who also offer the same service. If the market for lawn mowing services is perfectly competitive, what would happen if Jason raised his price?
Part 2
Part 2
answer
If Jason raises his price, he would lose all his customers.
question
What is productive efficiency?
answer
a situation in which resources are allocated such that goods can be produced at their lowest possible average cost
question
Both individual buyers and sellers in perfect competition
answer
have to take the market price as a given.
question
An individual seller in perfect competition will not sell at a price lower than the market price because
answer
the seller can sell any quantity she wants at the prevailing market price.
question
For a firm in a perfectly competitive market, price is
answer
equal to both average revenue and marginal revenue.
question
If the market price is $25 in a perfectly competitive market, the marginal revenue from selling the fifth unit is
answer
$25
question
If, for the last unit of a good produced by a perfectly competitive firm, MR > MC, then in producing it, the firm
answer
added more to total revenue than it added to total costs.
question
Which of the following statements is correct?
answer
Economic profit takes into account all costs involved in producing a product.
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