1. In a perfectly competitive market, a company is certainly making an economic
ID: 1213130 • Letter: 1
Question
1. In a perfectly competitive market, a company is certainly making an economic profit when:
MR > MC.
P > ATC.
P > MC.
P < ATC.
2.
Look at the above picture. Mary is one of 11 vendors who sell game-day shifts at basketball games in a perfectly competitive market. Her costs are the same as the costs of the other 9 sellers. If this economic sector is in long run equilibriu, then how many shirts will each seller sell?
14
20
22
24
3.
Look at the above figure. In this perfectly competitive market, the lowest price that will generate zero economic profit is represented by the letter:
G.
F.
E.
N.
14
20
22
24
3.
Look at the above figure. In this perfectly competitive market, the lowest price that will generate zero economic profit is represented by the letter:
G.
F.
E.
N.
Explanation / Answer
Answers:
1). P > ATC ( In a perfectly competitive market, if price is greater then average total cost at the profit-maximizing quantity of output a perfect competitive firm will certainly makes an economic profit).
2). Answer = 22 ( In the long run equilibrium will occur at output where MC = ATC, which is productive efficiency).
3). In this perfectly competitive market, the lowest price that will generate zero economic profit is represented by the letter E . Due to entry and exit, the long run equilibrium market price is at the level equal to the minimum point of firms ATC curve. All the firms in a perfectly competitive market earn economic profit equal to zero.This is why firms earning zero economic profit still exist in the market.
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