question
In which market structure do firms exist in very large numbers, each firm produces an identical product, and there is freedom of entry and exit?
answer
only perfect competition
question
A perfectly competitive market arises when
answer
there are many buyers and sellers.
question
To maximize its profit, in the short run a perfectly competitive firm decides
answer
what quantity of output to produce.
question
A perfectly competitive firm can
answer
sell all of its output at the prevailing market price.
question
A large number of sellers all selling an identical product implies which of the following?
answer
the inability of any seller to change the price of the product
question
We know that a perfectly competitive firm is a price taker because
answer
its MR stays the same as its output changes.
question
If a firm in a perfectly competitive market faces an equilibrium price of $5, its marginal revenue
answer
will also be $5.
question
If the market price of a product is $14 and all sellers are price takers, then which of the following is correct?
answer
Each seller's total revenue line is graphed as an upward-sloping straight line.
question
Marginal revenue is
answer
the change in total revenue from a one-unit increase in the quantity sold.
question
The total revenue curve for a perfectly competitive firm is
answer
a straight line coming out of the origin with a positive slope.
question
A firm maximizes its profit by producing the amount of output such that
answer
marginal revenue equals marginal cost.
question
In a perfectly competitive market, the market price is $23. At the current level of output, a firm has a marginal cost of $18. What should the firm do?
answer
produce a larger output to make more profit
question
Suppose that a perfectly competitive firm's marginal revenue equals $12 when it sells 10 units of output. If the marginal cost of producing the 10th unit is $9, to maximize its profit the firm should
answer
increase its production.
question
The above figure illustrates a perfectly competitive firm. If the market price is $50 a unit, to maximize its profit (or minimize its loss) the firm should
answer
produce 42 units.
question
The above figure illustrates a perfectly competitive firm. If the market price is $20 a unit, to maximize its profit (or minimize its loss) the firm should
answer
produce 30 units or shut down
question
If a firm shuts down, it
answer
incurs an economic loss equal to its total fixed cost.
question
A perfectly competitive firm will be able to make positive economic profit when the price is above the minimum point on the
answer
average total cost curve.
question
In the short run, a perfectly competitive firm
answer
can possibly make an economic profit or possibly incur an economic loss.
question
If a perfectly competitive firm's average total cost is less than the price, then the firm
answer
makes an economic profit.
question
Peter's Pencils is a perfectly competitive company producing pencils. Suppose Peter is producing 1,000 pencils an hour. If the total cost of 1,000 pencils is $500, the market price per pencil is $2, and the marginal cost is $2, then Peter
answer
is maximizing his profit and is making an economic profit.
question
Suppose that marginal revenue for a perfectly competitive firm is $20 . When the firm produces 10 units, its marginal cost is $20, its average total cost is $22, and its average variable cost is $21. Then to maximize its profit in the short run, the firm
answer
should shut down.
question
A perfectly competitive firm should shut down in the short-run if price falls below the minimum of
answer
average variable costs.
question
The above figure shows a perfectly competitive firm. If the market price is $5, the firm
answer
might shut down but more information is needed about the AVC.
question
The above figure shows a perfectly competitive firm. If the market price is more than $30 per unit, the firm
answer
will stay open to produce and will make an economic profit.
question
The above figure shows a perfectly competitive firm. If the market price is $20 per unit, the firm
answer
will stay open to produce and will make zero economic profit.
question
The above figure shows a perfectly competitive firm. If the market price is $15 per unit, the firm
answer
will stay open to produce and will incur an economic loss.
question
The above figure shows a perfectly competitive firm. If the market price is $5 per unit, the firm
answer
will definitely shut down to minimize its losses.
question
A perfectly competitive firm definitely makes an economic profit in the short run if price is
answer
greater than average total cost.
question
According to the above diagram, when market price is $10 the company will maximize its profit/minimize its losses if it sets its output at:
answer
64
question
According to the above diagram, when market price is $6 the company will maximize its profit/minimize its losses if it sets its output at:
answer
50
question
According to the above diagram, when market price is $4 the company will maximize its profit/minimize its losses if it sets its output at:
answer
0
question
On the diagram above, at which quantity MR>MC?
answer
Q1
question
On the diagram above, at which quantity MC>MR?
answer
Q3
question
On the diagram above, at which quantity MR=MC?
answer
Q2
question
According to the diagram above, the following is true regarding P1:
answer
P1 > min ATC
question
According to the diagram above, the following is true about P3:
answer
P3<min ATC
question
According to the diagram above, when the market price is P2, the firm:
answer
will stay open to produce and will incur an economic loss
question
According to the diagram above, when the market price is P3, the firm:
answer
will shut down to minimize its losses
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