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Exam 10: The Firm and the Industry Under Perfect Competition

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Question 31

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Give a complete but concise definition of the following terms. a.perfect competition b.perfectly competitive firm's demand curve c.shutdown point d.long-run equilibrium in perfect competition

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a.Perfect competition is a market struct...

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Question 32

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As long as TVC < TR,a firm will have a positive level of output in the short run.

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Question 33

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What is the difference between the short run and the long run as economists define the two?

Regardless of quantity in long-run equilibrium,the industry price cannot exceed the

The strength of the competition faced by a company can profoundly affect its

Helga owns Viking,Inc.,started with her $100,000 inheritance.Helga's accountant informs her that her firm earned a profit of $100,000 last year,and that if she chooses to invest the money she can expect a 10% return.If Helga did not run Viking,she would not work.What were Helga's economic profits last year?

A perfectly competitive firm will not operate where MC = MR but at MC = AC.

What are the assumptions of the model of perfect competition? Explain why each is important for short-run and long-run equilibrium.

It is relatively easy for a firm to enter a perfectly competitive market.

Figure 10-2 -Figure 10-2 shows demand and short-run cost curves for a perfectly competitive firm.At its profit-maximizing level of output,the firm's short-run TC is represented by area

In perfect competition there are differences in the products sold by various firms.

It pays the firm to produce only if total variable costs exceed total revenue.

In the short-run,the lowest price that a perfectly competitive firm will accept without closing its doors is found by examining the average variable cost curve.

Draw a graph illustrating the relationship between the demand curve of the perfectly competitive firm and the perfectly competitive industry.Label all curves and axes correctly.

A firm will shut down in the short run if

Of the following industries,which are perfectly competitive? Of those which are not,why do they not fit the model? a.local banking b.gasoline stations c.college-level educational institutions d.local radio and television e.local farmers' market

The market demand schedule in perfect competition is horizontal.

Explain the reasoning behind the shutdown rules.When is it appropriate to operate with a loss?

The long-run industry supply curve in perfect competition is derived from the

Once a firm's marginal revenue curve is known,the output level can be determined.