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In a perf ergot competitive market there are
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Many buyers and many sellers
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A market is perfectly competitive if
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there are many firms in it, each selling an identical product
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Which of the following is a defining characteristic of a perfectly competitive market?
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no restrictions on entry into the industry
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An example of a perfectly competitive firm is
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An oat farmer in the US
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In perfect competition, the market demand for the good ________________ perfectly elastic and the demand for the output of one firm____________ perfectly elastic
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Is not; is
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Because each perfectly competitive firm sells a product identical to that of the other firms
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each firm's output is a perfect substitute for the output of any other firm
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A perfectly competitive firms demand curve is
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horizontal line
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In a perfectly competitive market, which of the following determines the market price?
answer
market demand and market supply
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The goal of a perfectly competitive firm is to maximize its
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economic profit
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In perfect competition, a firm that maximizes its economic profit will sell its good at a price that is
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At the market price
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Marginal revenue is equal to
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the change in total revenue divided by the change in quantity sold
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In perfect competition, the marginal revenue of an individual firm
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equals the price of the product
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I'm perfect competition, the firms marginal revenue curve
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Is the same as its demand curve
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When Sidney's Sweaters, Inc. makes exactly zero economic profit, Sidney, the owner,
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makes an income equal to his best alternative forgone income.
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When the firm produces the quantity that sets marginal revenue equal to marginal cost, a perfectly competitive firm is
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Maximizing its profit
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A perfectly competitive firm is producing more than the profit-maximizing amount of its product. You can conclude that it's
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Marginal cost exceeds the price of the product
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A perfectly competitive firm shuts down if the price of its product is
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Less than it's min average variable cost
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In the short run, a perfectly competitive firm will
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shut down if P < AVC
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In the short run, a perfect competitive firm will shut down if
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Total revenue is less than the total variable cost
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A firm shuts down and produces no output incurs a loss equal to its
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Total fixed costs
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In the short run, a perfectly competitive firm will make an economic profit as long as
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P>ATC
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If firms are making zero economic profit then,
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There is no incentive to enter or exit the market
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Suppose firms in a perfectly competitive industry are making economic profits, as a result
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I. New firms enter the industry
II. The market price falls
III. The economic profits of the existing firms decrease
II. The market price falls
III. The economic profits of the existing firms decrease
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Economic profit sends a signal to entrepreneurs by telling them where
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an above normal return on investment can be earned
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In the long run equilibrium, firms produce the level of output such that
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Marginal cost equals the price
Average total cost is minimized
Average total cost is minimized
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