Under perfect competition: Select one: a. firms set prices based on their costs
ID: 1166545 • Letter: U
Question
Under perfect competition:
Select one:
a. firms set prices based on their costs
b. prices are set in the market by supply and demand
c. firms set prices to maximize their profits
d. firms set prices in order to compete with each other
Which of the following is NOT true about the long run average cost curve (LRAC)?
Select one:
a. the shape of the LRAC is due to economies and diseconomies of scale
b. the LRAC is influenced by the short run average cost curves
c. the LRAC represents the least expensive average cost curve for any level of output
d. the shape of the LRAC is due to the law of diminishing marginal returns
Which of the following is NOT an example of a fixed cost?
Select one:
a. mortgage on a retail store
b. business property taxes
c. equipment rental
d. wages paid to workers
In a perfectly competitive industry we expect that a rightward shift in the industry supply curve will cause:
Select one:
a. market price to rise, and individual firms remaining in the market to produce a higher output
b. market price to fall and individual firms remaining in the market to produces a lower output
c. market price to fall, and individual firms remaining in the market to produce a higher output
d. market price to rise and individual firms remaining in the market to produces a lower output
Explanation / Answer
Under perfect competition:
Answer
b. prices are set in the market by supply and demand
In perfect competition market price is fixed by the industry by the forces of demand and supply.
Which of the following is NOT true about the long run average cost curve (LRAC)?
Answer
d. the shape of the LRAC is due to the law of diminishing marginal returns
The shape of LRAC is due to the law of returns to scale. The law of diminishing returns is applicable in short run.
Which of the following is NOT an example of a fixed cost?
Answer
d. wages paid to workers
Wages paid to workers is a variable cost. It varies according to the change in output.
In a perfectly competitive industry we expect that a rightward shift in the industry supply curve will cause:
Answer
c. market price to fall, and individual firms remaining in the market to produce a higher output
When the supply curve shifts to right hand side, there will be an increase in supply being the demand remains constant. The price will come down and supply or output increases.
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