SEMINAR11

In a perfectly competitive industry many firms produce very similar but slightly different products.

• TRUE

• FALSE

The wage rate a firm must pay rises, so its marginal costs rise. But its demand curve does not change. As a result, the firm ____ the amount it produces and ____ its price.

• a. decreases; raises

• b. increases; lowers

• c. decreases; does not change

• d. increases; raises

TABLE 11.1

Quantity Price (dollars)

100 5.00

101 5.00

Using Table 11.1, what is the marginal revenue from selling 101 units of output rather than 100?

• a. $5

• b. $500

• c. $505

• d. $0

The minimum efficient scale of a firm is the smallest level of output at which the long-run average total cost is at its minimum.

• TRUE

• FALSE

When will new firms want to enter an industry?

• a. When MR = MC for the existing firms in the industry.

• b. Any time the price of the good has risen

• c. When the new firms can earn economic profits.

• d. When there are external economies.

Efficient use of resource occurs when making someone better off must make someone else worse off.

• TRUE

• FALSE

Paul runs a shop that sells printers. Paul’s business is a perfect competitor and can sell each printer for a price of $500. The marginal cost of selling one printer a day is $300, the marginal cost of selling a second printer is $400, and the marginal cost of selling a third printer is $550. To maximize his profit, Paul should sell

• a. one printer a day.

• b. two printers a day.

• c. three printers a day.

• d. more than three printers a day.

A perfectly competitive firm’s supply curve is its ATC curve.

• TRUE

• FALSE

In the long-run equilibrium in a perfectly competitive market, the firms produce at the ____ possible average total cost and the price equals the ____ possible average total cost.

• a. highest; highest

• b. highest; lowest

• c. lowest; highest

• d. lowest; lowest

If P > ATC, a perfectly firm is incurring an economic loss.

• TRUE

• FALSE