***ANSWER ALL THE QUESTIONS*** 1. In perfectly competitive markets, if the price
ID: 1160358 • Letter: #
Question
***ANSWER ALL THE QUESTIONS***
1. In perfectly competitive markets, if the price is _____, the firm will _____.
Select one:
a. greater than ATC; make an economic profit
b. less than ATC; make an economic profit
c. less than ATC; break even
d. greater than the minimum ATC; break even
2. If a perfectly competitive firm is producing a quantity where MC > MR, then profit:
Select one:
a. can be increased by increasing production.
b. is maximized.
c. can be increased by decreasing production.
d. can be increased by decreasing the price.
3. A perfectly competitive firm maximizes profit in the short run by producing the quantity at which:
Select one:
a. P < AVC.
b. TR = TC.
c. Q × (P – ATC) = 0.
d. MR = MC.
4. Perfect competition is characterized by:
Select one:
a. widely recognized brands.
b. fierce quality competition.
c. the inability of any one firm to influence price.
d. rivalry in advertising.
5. The perfectly competitive model does NOT assume:
Select one:
a. easy entry to and exit from the market.
b. a standardized product.
c. a great number of buyers.
d. that firms attempt to maximize their total revenue.
Explanation / Answer
a) "A"
If the price is greater than ATC the firm will make a profit.
b) "C"
The firm will have to decrease the production i.e. the MC to increase the profit.
c) "C"
The firm will maximize the profit at the point where the total cost incurred by the firm will be equal to the total revenue earned by the firm. The difference between these two will be zero.
d) "C"
In a perfect competition, the firm is a price taker and can't influence the price alone.
e) "D"
That a firm attempts to maximize their total revenue.
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