Exam 8: Perfect Competition

If a perfectly competitive industry uses only a small share of the available inputs in a resource market, what shape is the long-run market supply curve for the industry most likely to be?

What is a perfectly competitive firm?

When the marginal cost of a price-taking firm is less than the market price of its product, what action should the firm take?

What can we conclude about a competitive firm facing a perfectly elastic demand curve?

What is marginal revenue?

Which of the following best describes a firm facing a horizontal demand curve?

TABLE 8-1 -Refer to Table 8-1. What is the value of the variable Y?

Whenever marginal revenue is greater than marginal cost, a profit-maximizing firm should reduce its output.

Economic profits in a perfectly competitive industry will encourage entry of new firms, which will shift the market supply curve to the right.

Darlene runs a fruit and vegetable stand in a medium-sized community where there are many such stands. Her weekly total revenue equals $3500. Her weekly total cost of running the stand equals $3500, consisting of $2500 of variable costs and $1000 of fixed costs. What would an economist likely advise Darlene to do?

How will a profit-maximizing firm in a perfectly competitive market react to an increase in the short-run market demand curve?

What is the shape of the long-run industry supply curve in a perfectly competitive industry largely determined by?

In long-run equilibrium, a perfectly competitive firm produces the output level that minimizes average total cost.

TABLE 8-1 -Refer to Table 8-1. What is the AVC of producing three units of output?

FIGURE 8-2 -Refer to Figure 8-2. Using Graph C (a movement from D₀ to D₁), which of the following statements does NOT describe the diagram?

What action might perfectly competitive firms making economic losses take in the short run?

FIGURE 8-7 -Refer to Figure 8-7. When the market price equals P₅, what output should the firm produce?

FIGURE 8-7 -Refer to Figure 8-7. When the market price equals P₃, what output should the firm produce?

Which of the following most closely resembles a perfectly competitive market?

FIGURE 8-3 -Refer to Figure 8-3. Suppose the market price equals $88 and the firm is currently producing 600 units of output. In this situation, what can we conclude about the firm?