Question

1.

A perfectly competitive firm is a price taker because

Its products are differentiated.

The price of the product is determined by many buyers and sellers.

It has market power.

Market supply is upward-sloping.

2.

When the short-run marginal cost curve is upward-sloping,

The average total cost curve is above the marginal cost curve.

The average total cost curve is upward-sloping

Diminishing returns occurs with greater output.

3.

If a perfectly competitive firm is producing a rate of output at which MC exceeds price, then the firm

Can increase its profit by decreasing output.

Is maximizing profit.

Must have an economic loss.

Can increase its profit by increasing output.

4.

The short run is the time period

Necessary so that profits can be earned from production.

In which some costs are fixed.

In which only the amount of capital may be altered.

Over which an investment decision can be made.

6.

The perfectly competitive market structure includes all of the following except

Low entry barriers.

Identical products.

Large advertising budgets.

Many firms.

Answer 1

1.A competitive firm is a price taker because its share of production in the market is marginal relative to total production of the industry.

Answer-The price of the product is determined by many buyers and sellers.

2.ATC is rising but below MC when MC is rising

Answer-The average total cost curve is upward-sloping

3.If MC>MR,then the firm should reduce output to earn more profits,as reducing output would reduce MC.

Answer-Can increase its profit by decreasing output

4.In the short run some inputs are fixed and some are variable.

Answer-In which some costs are fixed

6.There are no advertising cost in a competitive market structure.

Answer-Large advertising budgets