Assignment:
Question 1 For a perfectly competitive firm operating at the profit-maximizing output level in the short run,
- m marginal revenue equals total revenue
- m marginal cost equals price
- m marginal cost equals average total cost
- m marginal cost equals average variable cost
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Question 2 If new firms enter a perfectly competitive industry seeking economic profit and begin supplying goods in the market, which of the following will occur?
- m The market supply curve will shift leftward.
- m The market supply curve will shift rightward.
- m The market supply and demand curves will both shift to the left.
- m The market supply and demand curves will both shift to the right.
- m There will be a downward movement along a fixed supply curve.
Question 3 If a perfectly competitive firm is in long-run equilibrium and market demand suddenly decreases, the Finn will experience:
- m a greater economic profit.
- m a normal profit.
- m a lower average total cost.
- m an economic loss.
Question 4 Which of the following is true for a perfectly competitive firm in long-run equilibrium?
- m Marginal revenue (MR) = Marginal cost (MC) = Average total cost (ATC)
- m Marginal revenue (MR) = Marginal cost (MC) = Average fixed cost (AFC)
- m Marginal cost (MC) = Average total cost (ATC) = Average fixed cost (AFC)
- m Marginal revenue (MR) = Marginal cost (MC) > Average total cost (ATC)
- m Marginal revenue (MR) = Marginal cost (MC) > Average variable cost (AVC)
Question 5 Mary Ann and Donna provide lawn mowing services in a perfectly competitive market. When they began their operations, the market rate for mowing lawns was $50 per lawn. After the price increased to $60, they were willing to work on Saturdays as well. Their response to the price change will be shown by:
- a rightward shift of the market supply curve.
- a leftward shift of the market supply curve.
- m an upward movement along their firm's marginal cost curve.
- m a downward movement along their firm's marginal cost curve.
- a rightward shift in the market demand curve for mowing lawns.
Question 6 For perfectly competitive firms, which of the following correctly shows the relationship among market price (P), average revenue (AR), and marginal revenue (MR)?
- m Price = Average revenue (AR) = Marginal revenue (MR)
- m Price > Average revenue (AR) = Marginal revenue (MR)
- m Price = Average revenue AR > Marginal revenue (MR)
- m Price = Average revenue (AR) < Marginal revenue (MR)
- m Price < Average revenue (AR) = Marginal revenue (MR)
Question 7 Suppose the equilibrium price in a perfectly competitive industry is $100 and a firm in the industry charges $112. Which of the following is likely to happen?
- m The firm will not be able to sell any of its output.
- m The firm will sell more output than its competitors.
- m The firm's profits will increase.
- m The firm's revenue will increase.
- m The firm will gradually take over the entire industry.
Question 8 If price is less than minimum average variable cost, a perfectly competitive firm that continues to produce in the short run .
- m earns a positive economic profit
- m incurs a loss greater than its fixed cost
- m can cover all of its variable cost and some of its fixed cost
- 0 can cover both its fixed cost and its variable cost
Question 9 In the long run, the entry of new firms in a competitive industry:
- m drives up the equilibrium price.
- m eliminates economic profits.
- m reduces the equilibrium quantity.
- m makes the demand curve facing each firm more inelastic.
- m makes the market demand curve steeper.
Question 10 If a perfectly competitive firm raises its price, its sales decrease to zero.
0 True
0 False