Exam 22: Perfect Competition

Exhibit 22-9 ​ -Refer to Exhibit 22-9. Suppose that the market starts out at long-run competitive equilibrium with price equal to P₁ and producing Q₁ output, and then demand increases from D₁ to D₂. As a consequence, the typical profit-maximizing firm will

Which of the assumptions below assures us that economic profit will be zero in long-run equilibrium for perfectly competitive firms?

The theory of perfect competition generally assumes that

For a perfectly competitive firm,

Consider the following data: equilibrium price = $12.50, quantity of output produced = 1,000 units, average total cost = $15, and average variable cost = $13. What will the firm do and why?

In long-run competitive equilibrium, no firm has an incentive to change its plant size.

Exhibit 22-2 ​ -Refer to Exhibit 22-2. What quantity of output does the profit-maximizing (or loss-minimizing) firm produce?

Which of the following is the best example of a homogeneous good?

A perfectly competitive market is initially in long-run competitive equilibrium. Then, market demand falls. This causes the marginal revenue curves for existing firms to shift __________ and for these firms to produce __________ output. Some of the existing firms will end up __________.

A firm that is a price taker will not sell any of its product for less than the equilibrium price because

When an industry is described as a decreasing-cost, increasing-cost, or constant-cost industry, the "cost" that is being referred to is

A perfectly competitive firm that wants to maximize profits or minimize losses will produce in the short run as long as

Exhibit 22-8 ​ -Refer to Exhibit 22-8. What is the total revenue of firm B at profit-maximizing (or loss-minimizing) level of output?

Perfectly competitive firms are price takers for all of the following reasons except that

In long-run competitive equilibrium, firms

A perfectly competitive market is initially in long-run competitive equilibrium. Then, market demand increases. By the time all adjustments have been made, price will be __________ its original level if the industry is a(n) __________ cost industry.

Assume the following for a certain industry: (l) there is no incentive for firms to enter or exit the industry; (2) for some firms in the industry, short-run average total cost is greater than long-run average total cost at the level of output where marginal revenue equals marginal cost; (3) all firms in the industry are currently producing the quantity of output at which marginal revenue equals marginal cost. Is the industry in long-run competitive equilibrium?

In order for a firm to continue producing, price must exceed __________ and total revenue must exceed __________.

A firm that is a price taker can sell

A firm produces the quantity of output at which P = MC and P = ATC. It follows that the firm is