1. (0.1 pt) A perfectly competitive firm is a price ____________________. 2. (0.
ID: 1113104 • Letter: 1
Question
1. (0.1 pt) A perfectly competitive firm is a price ____________________.
2. (0.2 pt) A competitive firm maximizes profit by choosing the quantity where
_________________________ equals _________________________.
3. (0.2 pt) A perfectly competitive firm’s short-run supply curve is its (MC, AVC, ATC)
curve above its (MC, AVC, ATC) curve. (Circle the correct answer for each.)
4. (0.2 pt) In the long-run equilibrium of a competitive market with identical firms, what is
the relationship between price P, marginal cost MC, and average total cost ATC?
P (<, =, >) MC and P (<, =, >) ATC. (Circle the correct answer for each.)
5. (0.2 pt) If a profit-maximizing, competitive firm is producing a quantity at which
marginal cost is between average variable cost and average total cost, it will
(keep producing, shutdown) in the short run and (keep producing, exit) in the
long run. (Circle the correct answer for each.)
(Make sure to show all your work.)
Explanation / Answer
1) Price taker as in perfet competition, all the firms will b selling identical product and have marginal market share, so the price will be inelastic.
2) Price is equal to Marginal cost so that the profi can be maximised
3) MC above ATC curve In short run supply curve, ATC will be above AVC and MC will be above all the curves.
4) P will be equal to MC in the long run equilibrium of competitive markts whereas P will be greater than the average total cost.
5) Shudown, exit. Because in competitive firm, th are selling at marginal cost and when MC goes below ATC, they tend to face loss
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.