26. The demand curve facing a perfectly competitive firm is a. perfectly elastic
ID: 1122240 • Letter: 2
Question
26. The demand curve facing a perfectly competitive firm is a. perfectly elastic b. perfectly inelastic e. unit elastic d. downward-sloping e. identical to the industry demand curve 27. A firm in perfectly competitive industry is maximizing profit at Q-3,000. Then its fixed cost increases. The profit-maximizing output is now a greater than 3,000 and profit decreases b. less than 3,000 and profit decreases greater than 3,000 and profit is unchanged c. d equal to 3,000 and profit decreases e. equal to 3,000 and profit increases 28. In the short run, a perfectly competitive firm suffering a loss a. will close if PExplanation / Answer
Answer 26 - The perfectly competitive firm face a perfectly elastic demand curve. Price is given by the market. The firms are price taker.
Option A is the correct answer.
Answer 27 - In perfectly competitive industry a firm is making maximizing profit at Q=3000, then it fixed cost increases. The profit maximizing output is now equal to 3000 but profit decreases. Since fixed cost is increased therefore ATC curve will shift upward which reduces the amount of profit.
Answer 28 - In the short run a perfectly competitive firm suffering a loss, the firm will produce till P = AVC. The will shut down its operation when P goes below AVC. Thus it is called shut down point. Firm will not produce if P<AVC in the short run.
Option A is the correct answer.
Answer 29 - A monopolist is a single seller of a product with not close substitute. There must be an error in printing the option. Monopolist is the firm which works in monopoly market.
Option C is the correct answer.
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