Question

In: Economics

13. Which of the following is not correct in the graph of a perfectly competitive firm...

13. Which of the following is not correct in the graph of a perfectly competitive firm with a profit?

Group of answer choices

Price is equal to marginal cost at the profit maximizing output.

The average total cost curve dips below the horizontal price line.

The firm’s marginal revenue and price are equal to each other.

The average total cost curve lies entirely above the horizontal price line.

14. Decreases in supply are always graphed as rightward shifts of the supply curve.

Group of answer choices

True

False

15. Assume that when a perfectly competitive firm is producing at the output where MR = MC, ATC > P. What should the firm do in the short run?

Group of answer choices

It should stay open if P > AVC.

It should definitely shut down.

It should definitely stay open.

It should shut down if P > AVC.

Solutions

Expert Solution

13.

The average total cost curve lies entirely above the horizontal price line.

Explanation :

Perfectly competitive firm maximises it's profit where MR equals MC and in perfect competition price is equals to MR. Profit =TR-TC. So ATC is below price when there is profit.

14.

False.

Explanation :

When supply increases, it shifts to the right. When supply decreases, it shifts to the left.

15.

It should stay open if P > AVC.

Explanation :

When ATC is greater than price, firm makes negative profit. Firm shutdowns when Price below AVC. So when price is above AVC, firm will stay open to minimise losses.

Rahul Sunny answered 2 years ago
Next > < Previous

Related Solutions

Which of the following statements regarding monopoly and perfectly competitive markets are correct? a. In a...
Which of the following statements regarding monopoly and perfectly competitive markets are correct? a. In a monopoly market, the firm is a price-maker. b. In a perfectly competitive market, firms invest in research and innovation. c. In a perfectly competitive market, there is little advertising. d. In a monopoly market, owners receive no economic rent.
Draw the following: (a) a perfectly competitive firm that earns profits (b) a perfectly competitive firm...
Draw the following: (a) a perfectly competitive firm that earns profits (b) a perfectly competitive firm that incurs losses, but will continue to operate (c) a perfectly competitive firm that incurs losses and will shut down in the short-run.
Which of the following are true with regard to profit for a perfectly competitive​ firm? A....
Which of the following are true with regard to profit for a perfectly competitive​ firm? A. Zero economic profit encourages firms to continue producing B. Positive economic profit encourages existing firms to exit the industry C. Negative economic profit encourages firms to raise the price D. Zero economic profit encourages firms to​ shut-down temporarily
​Refer to the graphs above of perfectly competitive firms. Which of the following statements is correct?
Refer to the graphs above of perfectly competitive firms. Which of the following statements is correct? In graph (IV) the firm is earning an economic loss. However, the firm will continue to operate in the short-run because price is greater than average variable costs. Therefore, the firm is covering average variable costs and reducing the overall burden of total fixed costs In graph (III) the firm is enjoying positive economic profits. Therefore, firms will enter the market and compete away the positive...
1. Which of the following is true for a firm in a perfectly competitive market? Its...
1. Which of the following is true for a firm in a perfectly competitive market? Its short-run supply curve is the average variable cost curve. Its short-run supply curve is vertical. Its short-run supply curve is negatively sloped. Its short-run supply curve is the marginal cost curve above the average variable cost curve. 2. A ________ cost is one that is incurred once and cannot be recovered, such as painting a sign on a building. sunk marginal fixed variable 3....
Which of the following statement is TRUE? a) A perfectly competitive firm is a price SETTER,...
Which of the following statement is TRUE? a) A perfectly competitive firm is a price SETTER, while a monopoly is a price TAKER b) A perfectly competitive firm faces market demand, while a monopoly faces a perfectly elastic demand c) Both monopoly and perfectly competitive firm faces market demand d) Both monopoly and perfectly competitive firm should produce at output level where marginal revenue = marginal cost
Which of the following is true of a perfectly competitive firm in long-run equilibrium? A) it...
Which of the following is true of a perfectly competitive firm in long-run equilibrium? A) it will minimize its average total cost B) the market demand curve is horizontal C) the market supply curve is horizontal D) marginal cost is minimized E) it will charge a price above its marginal cost
which of the following is false. a) an individual firm in a perfectly competitive market cannot...
which of the following is false. a) an individual firm in a perfectly competitive market cannot affect the price it receives for its output by changing the level of its output. b) in a perfectly competitive market, the price is determined by the combined output decisions of all firms in a market. c) a perfectly competitive firm has a downwards sloping marginal revenue curve d) for a perfectly competitive firm, the optimal quantity is determined by the following relationship MR=MC=P
4) For a perfectly competitive firm, which of the following is not true at profit maximiza-...
4) For a perfectly competitive firm, which of the following is not true at profit maximiza- tion? a. Total revenue minus total cost is maximized. b. Marginal revenue equals marginal cost. c. Price equals marginal cost. d. Market price is greater than marginal cost.
Draw a graph showing a market and a perfectly competitive firm in long run equilibrium.
Draw a graph showing a market and a perfectly competitive firm in long run equilibrium.
ADVERTISEMENT
Subjects
ADVERTISEMENT
Latest Questions
ADVERTISEMENT