Because it is small relative to the market, perfectly competitive firms face perfectly inelastic demand curves....

Because it is small relative to the market, perfectly competitive firms face perfectly inelastic demand curves.

		True
		False

If a perfectly competitive firm is incurring a short-run economic loss, it

		A. will continue to operate as long as its fixed costs are covered
		B. will go out of business
		C. will continue to operate if its variable costs are covered
		D. will shut down

In the short-run, a perfectly competitive firm determines its quantity supplied at various prices by using (hint: what is the PC firm's short-run supply curve?)

		A. the portion of its marginal cost curve that lies above its average total cost curve
		B. the portion of its marginal cost curve that lies above its average variable cost curve
		C. a flip of a coin
		D. its marginal revenue curve

In the long-run in perfect competition, no firm can earn a normal profit.

		True
		False

Solutions

Expert Solution

1. False

Explanation: Perfectly competitive firms face perfectly elastic demand curves.

2. Option C. will continue to operate if its variable costs are covered

Explanation: The firm will operate as long as the price is higher than the average variable costs

3. Option B the portion of its marginal cost curve that lies above its average variable cost curve

Explanation: In perfect competition, the firm's supply curve is the segment of its marginal cost curve that lies above the minimum of the average variable cost curve.

4. False

Explanation: In perfect competition, all firms earn normal profit in the long-run.

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

The corn market is perfectly competitive, and the market supply and demand curves are given by...

The corn market is perfectly competitive, and the market supply and demand curves are given by the following equation: Qd =50,000,000 – 2,000,000 p Qs = 10,000,000 +5,500,000 p Where Qd and Qs are quantity demanded and quantity supplied measured in bushels, and P= price per bushel. 1) Determine consumer surplus at the equilibrium price and quantity.

Suppose the demand and supply curves of a perfectly competitive market are: Supply: Q = P...

Suppose the demand and supply curves of a perfectly competitive market are: Supply: Q = P - 10 Demand: Q = 90 - P (1) Solve for the market equilibrium (price and quantity at equilibrium) (2) Solve for Welfare (Total Surplus). (3) Suppose a per-unit tax of $10 is imposed in the market. Calculate tax revenue and deadweight loss.

1: Demand facing an individual, perfectly competitive firm is: a. perfectly inelastic at the quantity the...

1: Demand facing an individual, perfectly competitive firm is: a. perfectly inelastic at the quantity the firm chooses to produce. b. perfectly inelastic at the quantity determined by market forces. c. perfectly elastic at the price the firm chooses to charge. d. perfectly elastic at the price determined by market forces. 2: At the point at which P= MC, suppose that a perfectly competitive firm's MC = $100, its AVC = $80 and its ATC = $110. This firm should...

1. Consider a perfectly competitive market where the demand and supply curves are given by QD...

1. Consider a perfectly competitive market where the demand and supply curves are given by QD = 500 − P and QS = −100 + 2P , respectively. Suppose that the government decides to tax the producers by $60 per unit sold. (a) Determine the pre-tax and after-tax equilibrium price and quantity. (b) Determine the loss in net benefits due to the tax. (c)Determine the percentage of the tax burden that falls on the consumers.

Consider a perfectly competitive market in the short-run with the following demand and supply curves, where...

Consider a perfectly competitive market in the short-run with the following demand and supply curves, where P is in dollars per unit and Q is units per year: Demand: P = 500 – 0.8Q Supply: P = 1.2Q a. Calculate the short-run competitive market equilibrium price and quantity. Graph demand, supply, and indicate the equilibrium price and quantity on the graph. b. Now suppose that the government imposes a price ceiling and sets the price at P = 180. Address...

Relative to perfectly competitive markets, contrast a monopoly market structure. Explain the multiple ways that firms...

Relative to perfectly competitive markets, contrast a monopoly market structure. Explain the multiple ways that firms may enjoy barriers to entry from other firms, including natural monopolies (economies of scale), legal (patent, trademarks, copyrights, trade secrets, intellectual property), and predatory pricing.

Part A)The number of firms in a perfectly competitive market:

Part A)The number of firms in a perfectly competitive market: Multiple Choice is fixed in the short run. is fixed in the long run. varies in the short run. is the same at all possible long-run equilibria. Part B) One of the defining characteristics of an oligopoly is that: Multiple Choice one firm's behavior can affect the others' profits. all firms act independently to create a perfectly competitive outcome. all firms act independently to create a monopoly outcome. None...

Consider a market with a perfectly elastic demand curve at p∗= 1,763 and a perfectly inelastic...

Consider a market with a perfectly elastic demand curve at p∗= 1,763 and a perfectly inelastic supply curve at q∗= 452. What is the Consumer Surplus? What is the Producer Surplus?

The market for fertilizer is perfectly competitive. Firms in the market are producing output but are...

The market for fertilizer is perfectly competitive. Firms in the market are producing output but are currently incurring economic losses. a) How does the price of fertilizer compare to the average total cost, the average variable cost, and the marginal cost of producing fertilizer? b) Draw two graphs, side by side, illustrating the present situation for the typical firm and for the market c) Assuming there is no change in either demand or the firms’ cost curves, explain what will...

The market for fertilizer is perfectly competitive. Firms in the market are producing output, but are...

The market for fertilizer is perfectly competitive. Firms in the market are producing output, but are currently making economic losses. 4 ) Fill in the following blanks with U = go up, S = stay the same, D = go down. In the long run, the price of fertilizer will ......... and the total quantity produced will.......... . In addition, the amount of fertilizer produced by the average firm in the market will ............ 5 ) A large share of...

Subjects