Exam 13: Perfect Competition

A perfectly competitive firm facing a price of $10 decides to produce 100 units. If its marginal cost of producing the last unit is $12 and it is seeking to maximize profit, the firm should:

Suppose the minimum possible price of constructing homes is $50 per square foot. As a result of a sharp drop in the demand for home construction, the equilibrium price of home construction falls to $40 per square foot. Assuming the home construction industry is perfectly competitive and there are no specialized inputs, firms will:

Refer to the graph shown. If the firm increases output from 50 to 60, total revenue will increase:

A perfectly competitive firm's marginal revenue is:

In the wake of the 2008 recession, the electronics retailer Circuit City closed its stores. If we assume this was a short-run decision, the most likely explanation for it is that the price of a typical product sold at Circuit City stores was:

Suppose a perfectly competitive firm can increase its profits by reducing its output. Then it must be the case that the firm's:

Refer to the graph shown. If the market price is P₄, the maximum profit the firm can earn is:

Which of the following is a requirement for a perfectly competitive market?

For a perfectly competitive firm, the profit-maximizing output level occurs where marginal cost equals price.

Because only competitive firms are price takers, only competitive firms have supply curves.

As long as marginal cost is below marginal revenue, a perfectly competitive firm should:

Refer to the graph shown. If market price is currently $7.00 per unit, this perfectly competitive firm will maximize profit by producing:

Refer to the graph shown, which depicts a perfectly competitive firm. If the price of the product is $3:

In a perfectly competitive long-run constant-cost industry, an increase in market demand causes:

Suppose that the firms in the perfectly competitive oat industry are currently receiving a price of $2 per bushel for their product and there are constant returns to scale. The minimum possible average total cost of producing oats in the long run is $1 per bushel. Other things being equal, it follows that:

A perfectly competitive firm in the long run earns:

The long-run industry supply curve will be upward-sloping if:

Refer to the graph shown. What area represents total economic profits?

In a perfectly competitive market, firms set:

If the long-run market supply curve is perfectly elastic, an increase in demand will cause the final equilibrium to be at: