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Exam 6: Perfect Competition

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Question 81

True/False

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For a perfectly competitive firm, price always equals marginal cost.

A) True
B) False

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Question 82

Multiple Choice

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The firmʹs short-run supply curve shows the relationship between the price of a good and the:

A) quantity demanded of that good.
B) quantity supplied of that good.
C) willingness of consumers to purchase the good.
D) firmʹs capacity output.

E) A) and B)
F) A) and C)

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Question 83

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Recall the Application about the break-even price for growing switchgrass, a perennial grass that is native to the U.S. plains states and is used to create biofuel, to answer the following question(s) . -Recall the Application. If the minimum of average total cost for switchgrass farmers is $55 per ton and the minimum of average variable costs is $40 per ton, then at a price of $50 per ton in the short-run the switchgrass farmer will:

Figure 6.6 -In Figure 6.6 if price is P2 then the industry will:

If marginal revenue is $10 and marginal costs is $8, the firm should increase its output.

In the short run, the firm should shut down when:

A firmʹs short-run supply curve is its marginal cost curve above the shut down point.

A firm will not shut down in the long-run as long as the firms revenue:

Figure 6.5 -Figure 6.5 shows the short-run and long-run effects of an increase in demand of an industry. The market is in equilibrium at point A, where 100 identical firms produce 6 units of a product per hour. If the market demand curve shifts to the right, what will happen to the number of firms in the industry as the industry moves from point A to point B?

What are the characteristics of monopolies?

A perfectly competitive firm has no control over the price that it charges.

Firms in a perfectly competitive market:

A firm will not shut down in the short run as long as at the point where MR = MC:

If in the short-run the firm incurs zero marginal cost, then the firm will:

If a firm suffers an economic loss, its:

In the short run a manufacturing firmʹs production equipment is a sunk cost.

Recall the Application about the break-even price for growing switchgrass, a perennial grass that is native to the U.S. plains states and is used to create biofuel, to answer the following question(s) . -Recall the Application. If the minimum of average variable cost for switchgrass farmers is $40 per ton and the current price is $35 per ton, in the long-run the switchgrass farmer will:

An increase in price causes exit from a constant cost industry.

Suppose Timʹs Cowboy boot factory produces in a perfectly competitive market. Suppose the average total cost of cowboy boots is $65, the average variable cost of cowboy boots is $60, and the price of cowboy boots is $62. If the firm is producing the level of output where marginal cost equals price, then in the short run the firm:

Toby sells wheat in a perfectly competitive market. This month Toby receives a lower price for a bushel of wheat than he did last month. Which of the following might explain this?