ECON Final Review

Which of the following is NOT a characteristic of a perfectly competitive market?

• Large number of buyers and sellers

• Homogeneous products

• high Barriers to entry and exit

• ) Perfect information

In a perfectly competitive market, individual firms:

• Can influence the market price by adjusting their output

• Accept the market price as given and cannot influence it

• Set their own prices independently of the market

• Determine the market price through negotiation

A perfectly competitive firm will shut down in the short run if:

• Total revenue exceeds total cost

• Marginal revenue equals marginal cost

• Price falls below average variable cost

• Price is greater than average fixed cost

In the long run, perfectly competitive firms earn:

• Negative economic profits

• Zero economic profits

• Positive economic profits

• Any of the above, depending on market conditions

In a perfectly competitive market, the supply curve of an individual firm corresponds to:

• The marginal cost curve above the average variable cost curve

• The upward-sloping portion of the average cost curve

• The entire average total cost curve

• The downward-sloping portion of the marginal cost curve

A perfectly competitive firm maximizes its profit when:

• Total cost equals total revenue

• Average total cost equals average variable cost

• Price equals average total cost

• Marginal revenue equals marginal cost

In long-run equilibrium in perfect competition, which of the following is true?

• Firms operate at the minimum point of their average total cost curve

• Firms earn positive economic profits

• Price is greater than marginal cost

• Barriers to entry prevent new firms from entering

If a perfectly competitive firm is making a loss in the short run but continues to operate, it is because:

• Total revenue exceeds total cost

• Price is below marginal cost

• Total revenue covers variable costs and contributes to fixed costs

• Price is below average variable cost

In a perfectly competitive market, allocative efficiency occurs because price equals marginal cost in equilibrium.

• True

• False

A perfectly competitive firm has the following cost structure:

• Total Fixed Cost (TFC): $100

• Average Variable Cost (AVC): $10 at the profit-maximizing output of 20 units

If the market price is $15, what is the firm’s profit?

• $0

• $50

• $100

• $200