Perfect Competition Test 4

If a perfectly competitive firm is producing a quantity where MC=MR, then profit:

• Can be increased by decreasing production

• Can be increased by increasing production

• Can be increased by decreasing the price

• Is maximized

When economic profits in an industry are zero:

• The industry is not. in long-run equilibrium

• Firms are doing as well as they could do in other markets

• Firms are doing really badly

• Firms should exit so they can make an economic profit in some other market.

Many furniture stores run "going out of business" sales but never go out of business. For the shutdown decision to be the appropriate one, the price of the furniture must be _____ than the _____ average variable cost.

• Higher, Minimum

• Lower, Minimum

• Lower, Maximum

• Higher, Maximum

In the short run, a perfectly competitive firm produces output and breaks even if the firm produces the quantity at which:

• P > ATC

• P = (TR/Q + TC/Q) * Q

• P = ATC

• P < ATC

Perfectly competitive firms will:

• Maximize total revenue by using the marginal decision rule.

• Always attempt to minimize average variable cost.

• Increase output up to the point that the marginal benefit of an additional unit of output is equal to the marginal cost.

• Increase output up to the point that the marginal benefit of an additional unit of output is greater than the marginal cost.

If a perfectly competitive firm decreases production from 11 units to 10 units and the market price is $20 per unit, the total revenue for 10 units is: In dollars,

• 200

• 10

• 210

• 20

The equilibrium price of a guidebook is $35 in the perfectly competitive guidebook industry. Our form produces 10,000 guidebooks for an average total cost of $34, marginal cost of $30, and average variable cost of $30. Our firm should.

• Produce more guidebooks, because the next guidebook produced increases profit by $5.

• Raise the price of guidebook, because the firm is losing money.

• Shut down, because the firm is losing money.

• Keep output the same, because the firm is producing at minimum avarage variable cost.

The demand curve for a perfectly competitive firm is:

• Perfectly elastic

• Downward sloping

• Perfectly inelastic

• Relatively but not perfectly elastic.

If a perfectly competitive firm sells 10 units of output at. $30 per unit, its marginal revenue is:

• $30

• $10

• More than $30

• $300

Marginal Revenue is:

• The slope of the average revenue curve

• The price divided by the change in quantity.

• The change in quantity divided by the change in total revenue.

• Equals the market price in perfect competition.