5) Which of the following indicates that a perfectly competitive firm is in long

Question

5) Which of the following indicates that a perfectly competitive firm is in long-run equilibrium?

a) Price equals marginal cost.

b) Price equals average revenue.

c) Price equals marginal cost, which equals average total cost.

d) Price equals average revenue, which equals marginal revenue.

e) Price equals average fixed cost.

6) At its current output level, a perfectly competitive firm's marginal revenue exceeds marginal cost and average variable cost. To maximize profit, the firm should

a) Maintain its current output level

b) Increase its price

c) Increase its output level

d) Decrease its price

e) Decrease its output level

8) Which of the following will occur in the industry in the long run?

a) New firms will enter the industry

b) The market price will increase

c) Existing firms

Explanation / Answer

d) Price equals average revenue, which equals marginal revenue.
c) Increase its output level
b) The market price will increase
d) Its marginal cost is $6.00, and its average fixed cost is $5.50.
a) Greater than its average total cost
e) The firm's output is 1,000 units, and its profit is positive
c) Downward sloping Horizontal
c) Continue to operate as long as price is greater than its average variable cost
a) More elastic in the short run than in the long run

d) Marginal cost equals price.
b) It is allocatively efficient.

b) Increase increase no change

b) Shut down when its loss is less than its fixed cost
c) Marginal revenue is equal to average total cost
c) Be equal to $5 Be equal to $5
d) 15,000 $12,000
b) Increase its price

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