Exam 10: The Firm and the Industry under Perfect Competition

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

Why doesn't a competitive firm reduce its price below the industry price to increase sales?

In a market with perfectly competitive firms, the market demand curve is usually ____ and the demand curve facing each individual firm ____.

If government forced a firm to charge a price equal to marginal cost in a situation where there are scale economies,

Figure 10-7 -In Figure 10-7, output at which point represents short-run but not long-run equilibrium?

A firm sells in a competitive market in which price is $10.Its marginal cost is 2 + .5Q.Determine the profit-maximizing level of output.

A perfectly competitive firm's short-run supply is infinite at the market price.

Which of the following is a characteristic of a perfectly competitive market?

Firms entering a perfectly competitive industry will cause the price of the product to

The opportunity cost of a given investment is the potential earnings forfeited by tying up money in the investment.

If a firm sells its output at a price greater than AC, it will earn economic profit.

In a perfectly competitive industry, influence over price is exerted by

At a firm's profit-maximizing level of output, its price is $200 and its short-run average total cost is $225.The firm

In long-run equilibrium in perfect competition, every firm is producing at minimum average cost.

The process of adjustment to a new long-run equilibrium in a perfectly competitive industry is complete when

Zero economic profit means that the firm's owners receive no compensation for their investment.

Perfectly competitive markets are not the most efficient type.

Table 10-2 $\begin{array}{lcccc}& \underline {\text { Firm A }}& \underline {\text { Firm B }}& \underline {\text { Firm C }}& \underline {\text { Firm D }} \\\text { Total revenue (TR) \$} & 100 & 150 & 100 & 100 \\\text { Total variable cost (TVC)} & 180 & 160 & 60 & 140\\\text { Short-run nonvariable cost } &60&20&60&100\end{array}$ -Refer to Table 10-2.Which firm is better off staying in business in the short run?

If a firm has short-run losses, will it stay open? Under what conditions will a firm close in the short run? Explain.

Profits or losses must be temporary for perfectly competitive firms.Why?