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If the demand curve faced by a single profit-maximizing firm is downward-sloping, the firm cannot be
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a purely competitive firm.
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A purely competitive firm should produce in the short run if its total revenue is sufficient to cover its
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total variable costs.
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In pure competition, the demand for the product of a single firm is perfectly
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elastic because many other firms produce the same product.
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Profit-maximizing firms (e.g. in a perfectly competitive industry) will determine the profit-maximizing (or loss-minimizing) output by equating
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marginal revenue and marginal cost.
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Marginal revenue is the
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change in total revenue associated with the sale of one more unit of output.
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Which of the following is an important characteristic of a purely competitive seller's demand curve?
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Price and marginal revenue are equal at all levels of output.
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The Marginal Revenue (MR) = Marginal Cost (MC) rule applies
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to firms in all types of industries.
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If a profit-seeking competitive firm is producing its profit-maximizing output and its total fixed costs fall by 25 percent, the firm should
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not change its output.
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The accompanying table applies to a purely competitive industry composed of 100 identical firms. If each of the 100 firms in the industry is maximizing its profit and earning only a normal profit, each must have an average total cost of
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$3.
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If a firm in a purely competitive industry is confronted with an equilibrium price of $5, its marginal revenue
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will also be $5.
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DASH Airlines is considering the addition of a flight from Red Cloud to David City. The total cost of the flight would be $1,100, of which $800 are fixed costs already incurred. Expected revenues from the flight are $600. DASH should
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add this flight, because marginal revenue exceeds marginal costs and total revenue exceeds total variable cost.
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Refer to the diagram for a purely competitive producer. The firm's short-run supply curve is
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the bcd segment and above on the MC curve.
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The accompanying table gives cost data for a firm that is selling in a purely competitive market. At 3 units of output, total variable cost is ________ and total cost is ________.
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$20; $70
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The Ajax Manufacturing Company is selling in a purely competitive market. Its output is 100 units, which sell at $4 each. At this level of output, total cost is $600, total fixed cost is $100, and marginal cost is $4. The firm should
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produce zero units of output.
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The accompanying table applies to a purely competitive industry composed of 100 identical firms. If each of the 100 firms in the industry is maximizing its profit and earning only a normal profit (i.e. zero economic profit), each must have a total cost of
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20,000
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The accompanying table applies to a purely competitive industry composed of 100 identical firms. At the equilibrium price, each of the 100 firms in this industry will produce
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600,000 units of output.
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Refer to the diagram for a purely competitive producer. The lowest price at which the firm should produce (as opposed to shutting down) is
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P2
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The accompanying table applies to a purely competitive industry composed of 100 identical firms. For each of the 100 firms in this industry, marginal revenue and total revenue will be
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$3 and $18,000, respectively.
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The accompanying table applies to a purely competitive industry composed of 100 identical firms. The equilibrium price in this purely competitive market is
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3
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Which of the following is a feature of a purely competitive market?
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Products are standardized or homogeneous.
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Refer to the diagram for a purely competitive producer. If product price is P 3,
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economic profits will be zero.
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In a purely competitive industry, each firm
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Can easily enter or exit the industry
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A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $900. This firm should
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produce because the resulting loss is less than its TFC.
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Economists use the term imperfect competition to describe
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those markets that are not purely competitive.
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If the market demand for the product increases, in the short run a purely competitive firm
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will earn higher profits or experience smaller losses as a result of the change in the market.
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An industry comprising a very large number of sellers producing a standardized product is known as
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pure competition.
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The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $35, it will produce
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6 units at a loss of $90.
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In the provided diagram, at the profit-maximizing output, total profit is
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fgab.
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In the provided diagram, the profit-maximizing output
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is n.
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When a firm is maximizing profit, it will necessarily be
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maximizing the difference between total revenue and total cost.
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Which of the following is not a necessary characteristic of a purely competitive industry?
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The industry or market demand is highly elastic.
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Which of the following is a reason why individual firms under pure competition would not find it gainful to advertise their product?
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All firms produce a standardized and homogeneous product.
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A firm reaches a break-even point (normal profit position) where
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total revenue and total cost are equal.
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The accompanying table applies to a purely competitive industry composed of 100 identical firms. If each of the 100 firms in the industry is maximizing its profit, each must have a marginal cost of
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$3.
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Which of the following is true under conditions of pure competition?
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No single firm can influence the market price by changing its production level.
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Refer to the diagram for a purely competitive producer. The firm will produce at a loss at all prices
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between P2 and P3.
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A perfectly elastic demand curve for a perfectly competitive producer implies that the firm
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is selling a differentiated (heterogeneous) product.
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Suppose you find that the price of your product is less than minimum AVC. You should
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close down because, by producing, your losses will exceed your total fixed costs.
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A purely competitive seller is
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a "price taker."
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The accompanying table gives cost data for a firm that is selling in a purely competitive market. We can infer that, at zero output, this firm's total fixed, total variable, and total costs are
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$150, zero, and $150, respectively.
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Refer to the diagram for a purely competitive producer. If product price is P4,
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the firm will make a loss by producing output.
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The principle that a firm should produce up to the point where the marginal revenue from the sale of an extra unit of output is equal to the marginal cost of producing it is known as the
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profit-maximizing rule.
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The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $87, it will produce
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9 units at an economic profit of $281.97.
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Firms seek to maximize
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total economic profit.
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Suppose that Joe sells pork in a purely competitive market. The market price of pork is $3 per pound. Joe's marginal revenue from selling the 12th pound of pork would be
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$3.
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The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $68.10, it will produce
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8 units at an economic profit of $130.72.
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The demand schedule or curve confronted by a single purely competitive firm is
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perfectly elastic.
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The accompanying table gives cost data for a firm that is selling in a purely competitive market. If the market price for this firm's product is $15, it will produce
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0 units at a loss of $150.
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Assume the XYZ Corporation is producing 20 units of output. It is selling this output in a purely competitive market at $10 per unit. Its total fixed costs are $100 and its average variable cost is $3 at 20 units of output. This corporation
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is making an economic profit of $40.
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For a purely competitive seller, price equals
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all of these.
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