When a perfectly competitive firm is in long-run equilibrium, the firm is: A) pr
ID: 1099304 • Letter: W
Question
When a perfectly competitive firm is in long-run equilibrium, the firm is:
A) producing at maximum average total cost.
B) producing at maximum average variable cost.
C) producing at minimum marginal cost.
D) producing at minimum long-run average total cost.
2.
A perfectly competitive firm's short-run supply curve is its:
A) average variable cost curve above the marginal cost curve.
B) marginal cost curve above the average fixed cost curve.
C) marginal cost curve above the average total cost curve.
D) marginal cost curve above the average variable cost curve.
3.
When a firm's total cost exceeds its total revenue:
A) average total cost is less than average revenue.
B) net revenue is positive.
C) marginal cost is negative.
D) total cost rises with increases in output.
4.
If a perfectly competitive firm is producing a quantity that generates P < MC, then profit:
A) is maximized.
B) can be increased by increasing the price.
C) can be increased by increasing production.
D) can be increased by decreasing production.
5.
Suppose that some firms in a perfectly competitive industry are earning positive economic profits. In the long run, the:
A) industry is in long-run equilibrium.
B) industry supply curve will shift to the left.
C) number of firms in the industry will not change.
D) number of firms in the industry will increase.
6.
Economic profit is maximized when:
A) the slope of the total revenue curve is equal to the slope of the total cost curve.
B) marginal revenue is more than marginal cost.
C) an additional unit of output yields a benefit to the firm greater than the additional cost.
D) no more output can be sold at the market price.
7.
Economic profits in a perfectly competitive industry induce _______ , and losses induce _______ .
A) exit; entry
B) entry; entry
C) entry; exit
D) exit; exit
8.
In perfect competition, _______ profits in long-run equilibrium will be _______.
A) implicit and explicit; equal to zero
B) accounting; negative
C) economic; zero
D) economic; positive
9.
If all firms in a perfectly competitive industry earn zero economic profits, in the long run, the:
A) industry supply curve will shift to the right.
B) number of firms in the industry will decrease.
C) number of firms in the industry will increase.
D) industry is in long-run equilibrium.
10.
When economic profits in an industry are zero:
A) firms are really doing badly.
B) it means that firms are doing as well as they could do in other markets.
C) firms should exit, so they can make an economic profit in some other market.
D) the industry is not in long-run equilibrium.
11.
If price is greater than average variable cost and less than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:
A) produce at an economic loss.
B) produce at an economic profit.
C) shut down production.
D) produce more than the profit-maximizing quantity.
12.
A perfectly competitive firm will continue producing in the short run as long as it can cover its:
A) total cost.
B) average total cost.
C) average variable cost.
D) average fixed cost.
13.
If a perfectly competitive firm is producing a quantity that generates MC < MR, then profit:
A) is maximized.
B) can be increased by increasing production.
C) can be increased by decreasing production.
D) can be increased by increasing the price.
14.
If all firms in a perfectly competitive industry earn zero economic profits, in the long run, the:
A) industry supply curve will shift to the left.
B) industry supply curve will shift to the right.
C) number of firms in the industry will not change.
D) number of firms in the industry will increase.
15.
For a firm producing at any level of output greater than the most profitable one, a reduction in output decreases total:
A) cost more than total revenue.
B) revenue more than total cost.
C) revenue by the same amount as total cost.
D) revenue but not total cost.
Explanation / Answer
(1) (D)
In long run equilibrium for a perfectly competitive firm, Price = MC = Minimum ATC
(2) (D)
Firm supply curve is the portion of its MC curve above its minimum point of AVC curve.
(3) (D)
When total cost is higher than total revenue, total cost curve is rising, so total cost increases with increase in output.
(4) (D)
Profit is maximized when P = MC. When P < MC, there is a marginal loss which can be minimized by decreasing output, and eliminated when P = MC.
NOTE: As per Chegg Answering Policy, first 4 questions are answered.
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