Exam 8: Firms in Perfectly Compitive Markets

In the short run, a profit-maximising firm will shut down if its total revenue is greater than its variable costs.

Both buyers and sellers are price takers in a perfectly competitive market because

If a perfectly competitive apple farm's marginal revenue exceeds the marginal cost of the last bushel of apples sold, what should the farm do to maximise its profit?

A perfectly competitive wheat farmer in a constant-cost industry produces 1000 bushels of wheat at a total cost of $50 000. The prevailing market price is $48. What will happen to the market price of wheat in the long run?

To maximise profit, a firm will produce the level of output where MR = MC. If a firm actually makes a profit depends on the relationship of price to average total cost. What are the three possible relationships between price and average total cost that determine if a firm will make a profit, experience a loss, or break even?

Use a graph to show the demand, AVC, ATC, MC, and MR curves of a firm that should temporarily shut down in the short run. Identify the shutdown point on the graph.

If, in a perfectly competitive industry, the market price facing a firm is above its average total cost at the output where marginal revenue equals marginal cost, then

Assume that a perfectly competitive market is in long-run equilibrium. Suppose as a result of a health hazard associated with the industry's product, demand decreases drastically. What is the immediate result of this event?

Suppose the equilibrium price in a perfectly competitive industry is $10 and a firm in the industry charges $12. Which of the following will happen?

Firms in perfect competition produce the allocatively efficient output in the short run and in the long run.