19-A perfectly competitive firm faces a demand curve which is: a.Downward-slopin
ID: 1202622 • Letter: 1
Question
19-A perfectly competitive firm faces a demand curve which is: a.Downward-sloping. b.Horizontal c.Greater than the market price. d.Equal to the total costs of production for each level of output. e.Nonexistent 20.Profit maximizing firms should increase output to the point where: a.Total revenue is largest b.Total revenue just exceeds total costs c.An increase in revenue is just offset by an increase in cost. d.Fixed costs are covered e.Total cost is minimized 21.The Golden Rule of Output Determination for a perfectly competitive firm is to: a.Choose the output rate at which price is greatest. b.Choose the output rate at which marginal revenue equals marginal cost. c.Produce to the point of diminishing marginal returns d.Produce until total revenue exceeds total cost. e.Choose the output rate at which total cost is the lowest. 22.Which of the following conditions would indicate that a perfectly competitive firm should expand output to increase its profit? a.Marginal cost equals average cost b.Total cost exceeds marginal cost c.Price exceeds marginal cost d.Total revenue exceeds total costs e.Total revenue equal price 23. It would not pay a firm to produce anything in the short run if the price were: a.Above average total costs b.Equal to marginal cost and above the average variable cost. c.Equal to total revenue divided by output d.Below average variable cost e.Below marginal average cost 24.The perfectly competitive firm’s supply curve is exactly the same as: a.The supply curve of all other firms in the industry b.The average variable cost curve, since the firm will not produce if price is less than average variable cost. c.The firm’s marginal cost curve for all prices above the minimum value of average variable cost d.Fully allocated costs e.The price faced by the firm 25.The market supply curve for a perfectly competitive, constant cost industry is: a.Identical with the supply curve of a perfectly competitive firm. b.Horizontal in the short run c.The numerical average of all the individual firms’ supply curve. d.Likely to become perfectly inelastic as the length of time covered by the curve grows. e.The horizontal summation of the marginal cost curves for all firms above the minimum average variable cost 26.The basic distinction between the short run and the long run is a perfectly competitive industry is that in the long run, firms: a.Earn economic profits. b.Are free to enter or exit c.Face vertical demand curves d.Have zero marginal costs e.Produce the highest possible output rates.
Explanation / Answer
19.
It is b, horizontal.
A perfectly competitive firm is a price taker. There is a fixed price in the market and all the firms have to sell their products at that price. Therefore, the demand curve (AR) becomes equal to marginal revenue (MR) curve and price (P). It indicates horizontally a straight line parallel to X axis, quantity.
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