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Assuming fixed factor prices, the short-run industry supply curve for a perfectly competitive industry is equal to the sum of the


A) AVC curves above minimum AVC.
B) ATC curves above minimum ATC.
C) MC curves above minimum AVC.
D) MC curves above minimum ATC.

E) None of the above
F) B) and C)

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Which of the following is a characteristic of perfect competition?


A) Easy entry and exit
B) Few firms
C) Differentiated products
D) None of the above

E) None of the above
F) A) and D)

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-Refer to the above table. If the price is $3 the maximum profit this firm could earn is A) $99. B) $306. C) -$100. D) -$99. -Refer to the above table. If the price is $3 the maximum profit this firm could earn is


A) $99.
B) $306.
C) -$100.
D) -$99.

E) A) and B)
F) A) and C)

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A company finds that at its present level of production, MC = AVC at $15, MC = ATC at $20, and MC = MR at $17. Your advice to the firm regarding its short-run operations is


A) to continue production, as it is earning an economic profit of $2 per unit.
B) to continue production, as it is earning an economic profit of $3 per unit.
C) to shut down.
D) to continue production at a loss.

E) A) and B)
F) A) and D)

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A perfectly competitive producer faces a demand curve for its own product that is


A) downward sloping.
B) upward sloping.
C) horizontal.
D) vertical.

E) C) and D)
F) None of the above

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-The long-run supply curve in a constant-cost, perfectly competitive industry is A) perfectly inelastic. B) upward sloping. C) downward sloping. D) perfectly elastic. -The long-run supply curve in a constant-cost, perfectly competitive industry is


A) perfectly inelastic.
B) upward sloping.
C) downward sloping.
D) perfectly elastic.

E) A) and B)
F) A) and C)

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-At the short-run break-even point, the perfectly competitive firm is A) earning positive economic profits. B) earning zero economic profits. C) earning negative economic profits. D) just covering its total variable costs. -At the short-run break-even point, the perfectly competitive firm is


A) earning positive economic profits.
B) earning zero economic profits.
C) earning negative economic profits.
D) just covering its total variable costs.

E) B) and C)
F) B) and D)

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-Which of the following equals the ratio of the change in total revenues over the change in output? A) Total cost B) Average revenue C) Demand D) Marginal revenue -Which of the following equals the ratio of the change in total revenues over the change in output?


A) Total cost
B) Average revenue
C) Demand
D) Marginal revenue

E) A) and D)
F) B) and C)

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The equation TR/Q is used to compute


A) total cost.
B) average revenue.
C) demand.
D) marginal revenue.

E) All of the above
F) A) and B)

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For a firm in a perfectly competitive industry, which of the following is TRUE?


A) MR = P
B) MR < P
C) AVC = ATC
D) MR > P

E) A) and D)
F) C) and D)

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A constant-cost industry will have


A) a perfectly elastic long-run supply curve.
B) a perfectly inelastic long-run supply curve.
C) an upward sloping demand curve in the long run.
D) an upward sloping supply curve in the long run.

E) A) and C)
F) B) and D)

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If AVC is $6 when P = MC, a firm


A) will have positive economic profits if price is greater than $6.
B) is producing too little output.
C) should shut down if price is less than $6.
D) is experiencing economies of scale.

E) C) and D)
F) A) and B)

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In a perfectly competitive market, if P < MC, then


A) too little output is being produced.
B) too much output is being produced.
C) production is efficient, as the firm is earning profits.
D) the firm is paying a price for resources that is too high.

E) B) and C)
F) A) and D)

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The total revenue of a perfectly competitive firm is calculated by


A) multiplying average revenue by price.
B) dividing price by quantity.
C) multiplying price by quantity.
D) multiplying quantity by average total cost.

E) C) and D)
F) All of the above

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Consider an industry that is in long-run equilibrium. An increase in demand leads to no change in the price of the good. We know that this is


A) a decreasing cost industry.
B) a constant cost industry.
C) an increasing cost industry.
D) not a competitive industry.

E) B) and D)
F) C) and D)

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Which of the following is NOT correct for a perfectly competitive firm in long-run equilibrium?


A) SAC = LAC
B) MR = P = AR
C) MC = MR > LAC
D) LAC = P

E) None of the above
F) C) and D)

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Marginal revenue


A) cannot be used to determine the profit-maximizing rate of production.
B) is the change in total revenues resulting from a change in output.
C) is a change in revenue that is immeasurable and non-quantifiable.
D) cannot be effectively utilized when analyzing the perfect competitor.

E) C) and D)
F) None of the above

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When price equals marginal cost


A) firms make zero profits.
B) firms make positive profits.
C) the industry is in long-run equilibrium.
D) the marginal benefits of consuming an extra unit of the good exactly equals the marginal cost to society of producing the good.

E) B) and C)
F) None of the above

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"A market is said to be perfectly competitive when consumers can tell that some products are of better quality than others." Do you agree or disagree? Why?

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Disagree. A market is perfectl...

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A perfectly competitive firm faces a market clearing price of $150 per unit. Average variable costs are at the minimum value of $200 per unit at an output rate of 100 units. Marginal cost equals $150 per unit at an output rate of 75 units. It can be concluded that the short-run profit-maximizing output rate is


A) 75 units, at which the firm earns zero economic profits per unit sold.
B) 75 units, at which the firm earns $50 in economic profits per unit sold.
C) 100 units, because marginal cost equals average variable costs.
D) 0 units, because price is less than average variable costs.

E) A) and B)
F) All of the above

Correct Answer

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