Question

21. (This question refers to the MRU video 'Entry, Exit, and Supply Curves: Increasing Costs'.) Why wasn't the industry supply curve that Professor Tabarrok created in the video smooth like most of the ones we normally draw?

a. Because different firms entered the industry at different prices

b. Because different firms faced different demand curves

c. Because different firms had different marginal cost curves

d. Because the units of production were not divisible

22. (This question refers to the MRU video 'Entry, Exit, and Supply Curves: Constant Costs'.) When graphing an entire market alongside a representative firm, what feature is common to both?

a. The quantity produced

b. The marginal cost curve

c. The market price

d. The demand curve

23. (This question refers to the MRU video 'Introduction to the Competitive Firm'.) How is the price that a competitive firm faces determined?

a. By the market

b. By the firm's competitors

c. By the firm

d. By the buyers

24. (This question refers to the MRU video 'Introduction to the Competitive Firm'.) At the market price, a particular perfectly competitive firm can sell _______; at any price higher than the market price, a particular perfectly competitive firm can sell _______.

a. as much as it wants to; nothing

b. the market quantity; as much as it wants to

c. the market quantity; nothing

d. as much as it wants to; the market quantity

25. (This question refers to the MRU video 'Entry, Exit, and Supply Curves: Constant Costs'.) The _______ supply curve for goods in a constant-cost industry is going to be _______.

a. long-run; upward-sloping

b. long-run; flat

c. short-run; flat

d. short-run; downward-sloping

Answer 1

Q21)

Answer a. Because different firms entered the industry at different prices

Because different firms have different average costs which restricts them from entering the industry at a lower price than such cost because they will face loss at every quantity they supply at this price. So different firms have different reservation price above which they can supply to the industry

Q22) Answer c. The market price

Only market price is common to both as the firm is price taker and whatever price prevails in the market is taken by it.

The quantity produced can be different since the representative firm can also not produce.

The marginal cost curve of the market is not given.

The firm does not face any individual demand curve and faces the demand curve of the market.

Q23) Answer a. By the market

The price in a perfectly competitive market is decided by the market forces of demand and supply.

Q24) Answer c. the market quantity; nothing

At market price , the competitive firm will only be able to sell as much is demanded hence it will only sell the market quantity.

above the market price , no consumer will demand anything and hence it would not be able to sell anything , other firms will entertaking advantage of the untapped profits.

Q25) Answer b. long-run; flat

As profits in the short run is going to attract new firms , supply will increase which will bring down profits to 0 . Losses aregoing to make firms exit the industry till profits ebcome 0 again. So with cosntant cost firm will be able to supply whatever it wants without driving the price up .