Exam 7: Perfect Competition

Which of the following offers the fullest explanation of why "price equals marginal cost" is the rule from marginal analysis that indicates the profit-maximizing output level?

The neighborhood ice cream shop finds that when it charges $3 per ice cream cone, its total revenues are $90,000. It has total variable costs of $30,000 and total fixed costs of $40,000. From this we can infer the:

If a firm shuts down in the short run, it will:

In a perfectly competitive industry, assume there is a permanent increase in demand for a product. The process of transition to a new long-run equilibrium will include:

Exhibit 7-17  Marginal revenue and cost per unit curves As shown in Exhibit 7-17, the price at which the firm earns zero economic profit in the short-run is:

A firm that is a price taker can:

Exhibit 7-5  A firm's MR and MC curves In Exhibit 7-5, a firm is currently producing 40 units of output. What would you advise this firm to do?

If a firm increases output when MR > MC, then:

A perfectly competitive market is characterized by the free entry and exit of firms.

The supply curve for a perfectly competitive firm is its marginal cost curve for all levels of output.

Exhibit 7-6  A firm's cost and MC curves In Exhibit 7-6, if this firm is currently producing 20 units of output, this firm:

Suppose that price is below the minimum average total cost (ATC) but above the minimum average variable cost (AVC), and the market price is expected to rise at least to ATC in the near future. In the short run, a firm that is a price taker would:

Jerome, the florist, sold 500 bridesmaid's bouquets in June. He estimates his costs that month were ATC = $10, AVC = $6, and MC = $9. If he sold each bouquet at the constant market price of $9, Jerome:

Profit is maximized when which of the following conditions occurs?

The most profitable output level can be found by looking at which two curves?

If the market price is $5 and you are currently producing at a level where average total cost is $3 and falling, you should:

In long-run equilibrium, the typical perfectly competitive firm will:

If a firm in a competitive industry is making zero economic profit but still producing, it must be the case that:

Exhibit 7-5  A firm's MR and MC curves In Exhibit 7-5, suppose a firm is currently producing 50 units of output. What would you advise this firm to do?

Exhibit 7-2  Total revenue and total cost graph In Exhibit 7-2, if output is 200 units per week, economic profit for the firm is: