Exam 8: Firms in Perfectly Compitive Markets

Which of the following statements is true?

Letters are used to represent the terms used to answer this question: price (P), quantity of output (Q), total cost (TC) and average total cost (ATC). Which of the following equations is equal to a firm's profit?

For a perfectly competitive firm, which of the following is not true at profit maximisation?

-Refer to Figure 8-5. What is the minimum price the firm requires to produce output?

If a perfectly competitive firm achieves productive efficiency, then

Competition has driven the economic profits in the video rental business to zero. Surya Bacha, who owns a video rental business, would be better off leaving the industry for another alternative.

In the short run, a firm that incurs losses might choose to produce rather than shut down if the amount of its revenue is less than its fixed cost.

A perfectly competitive firm will maximise its profit at the rate of output where the vertical distance between its total revenue and total cost is the largest. This is the same rate of output where

Some markets have many buyers and sellers but fall into the category of monopolistic competition rather than perfect competition. The most common reason for this is

-Refer to Figure 8-7. At price P₁, the firm would

A firm could continue to operate for years without ever earning a profit as long as it is producing an output where

If productive efficiency characterises a market,

-Refer to Figure 8-5. The firm's manager suggests that the firm's goal should be to maximise average profit. In that case, what is the output level and what is the average profit that will achieve the manager's goal?

What assumptions are necessary for a market to be perfectly competitive? Explain why each of these assumptions is important.

In perfect competition

The minimum point on the average variable cost curve is called

A perfectly competitive firm in a constant-cost industry produces 1000 units of a good at a total cost of $50 000. The prevailing market price is $48. Assuming that this firm continues to produce in the long run, what happens to output level in the long run?

If price is equal to average variable cost, a perfectly competitive firm breaks even.

If a firm's fixed cost exceeds its total revenue, the firm should stop production by shutting down temporarily.

When firms exit a perfectly competitive industry, the market supply curve shifts to the left.