ReviewEcon - Perfect Competition

What is the profit-maximizing quantity for all firms?

• Where MR=MC

• Where MC=ATC

• Where MR=ATC

• Where MC=AVC

Which of the following is true about perfectly competitive markets?

• Firms produce where MR=MC

• Firms can affect the market price

• Products are differentiated

• Barriers to entry are high

What happens in the long run when firms in a perfectly competitive market earn economic profits?

• Firms enter the market, increasing supply and reducing prices

• Firms exit the market, reducing supply and increasing prices

• Firms maintain economic profits indefinitely

• Firms reduce production to increase prices

What is the firm’s supply curve in a perfectly competitive market?

• The MC curve above the AVC

• The ATC curve above the AVC

• The MR curve above the AVC

• The demand curve above the AVC

Which industry is an example of an increasing cost industry?

• Precious metals

• Microchips

• Agriculture

• Textiles

What is allocative efficiency in perfectly competitive markets?

• Price equals marginal cost

• Price equals average total cost

• Price equals average variable cost

• Price equals marginal revenue

What happens to the market supply curve in the long run when firms exit due to economic losses?

• It shifts to the left, increasing prices

• It shifts to the right, decreasing prices

• It remains unchanged

• It becomes perfectly elastic