Exam 10: The Firm and the Industry Under Perfect Competition

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.

Sally Rand owns a ceiling fan company. She sells 1,000 ceiling fans at $50 each. Each fan costs her $20. She uses her own money to buy the fans; she withdraws the money from her savings account where it earns 5 percent interest. Before going into the ceiling fan business, she worked as a fan-dancer at $25,000 a year. Should Sally remain in business?

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

What is the relationship between the long-run industry supply curve and the short-run supply curve in a perfectly competitive market?

Show what happens to the industry equilibrium when new firms enter a perfectly competitive market in the long run.

Exhibit 10-1 A perfectly competitive producer has the following short-run average cost curve and marginal cost curve: SR AC = 2Q + 3 MC = 4Q + 3 Where costs are measured in dollars and Q represents the firm's output in units. If the market price of wangdoodles is $15 each, the profit-maximizing producer whose short-run cost curves are given in Exhibi should produce ____ wangdoodles.

A perfectly competitive firm may, under some circumstances, be able to affect the market price.

Under perfect competition, a firm's

A tax on polluting firms

If the opportunity cost of capital is below the rate of return to capital in the perfectly competitive beauty salon industry,

Perfect competition displays the market mechanism at its best in many respects, yet most markets in operation today are monopolistic or oligopolistic, composed of a few large firms. Should government regulation break up those large firms into several smaller firms to try to achieve perfect competition? Why or why not?

Which of the following most resembles a perfectly competitive market?

Figure 10-5 ​ Figure 10-5 shows supply and demand conditions in a perfectly competitive industry and for a firm in that industry. At point C, the firm would

What is the nature of the elasticity of the demand curve faced by perfectly competitive firm?

Which of the following decisions cannot be taken by a firm in a perfectly competitive market?

When a firm leaves a perfectly competitive industry,

In the short run, a perfectly competitive firm can make a profit, a loss, or go out of business.

In the short run, a firm may have accounting losses and remain in operation.

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

A firm that is operating at a loss may continue to operate for a while because of costs that it will still have to pay even if production ceases.