Question

The actions of a firm in a purely competitive industry have no effect on market price; therefore, the demand curve faced by the firm is *

1 point

a. unknown.

b. a downward-sloping curve.

c. a horizontal line at the level of the market price.

d. a firm’s total revenue curve.

A competitor maximizes profit by producing the output that *

1 point

a. equates price and average variable cost.

b. equates TR and TC.

c. equates MR and MC.

d. maximizes the difference between MR and MC.

A firm will shut down in the short-run whenever *

1 point

a. price is less than ATC.

b. price is less than AFC.

c. price is less than AVC.

d. MR is equal to MC.

The slope of total curves/functions (e.g., TP, TC, TR) is *

1 point

a. their marginal values.

b. the shape of the curve/function.

c. their average values.

d. none of the above

Which of the following statements is correct? *

1 point

a. In order to maximize profits in the short run, a purely competitive firm should produce at the level where marginal cost is equal to price.

b. A purely competitive firm will produce in the short run, so long as total receipts are sufficient to cover its total fixed costs. 2

c. A purely competitive firm will always close down in the short run, whenever price is less than average total cost.

d. In the long-run, firms incur costs that are fixed and variable.

When the firm generates sales that is enough to cover its costs the firm is experiencing *

1 point

a. zero profit.

b. losses.

c. break-even.

d. both A and C above

Answer 1