Exam 8: Firms in Perfectly Competitive Markets

Allocative efficiency is achieved in an industry when firms supply those goods and services that provide consumers with a marginal benefit equal to the marginal cost of producing those goods and services.

Assume that a perfectly competitive market is in long-run equilibrium.Suppose as a result of a health hazard associated with the industry's product,demand decreases drastically.What is the immediate result of this event?

Figure 8-8 -Refer to Figure 8-8.The firm's short-run supply curve is its

When plasma television sets were first introduced,prices were high and few firms were in the market.Later,economic profits attracted new firms,and the price of plasma televisions fell.This example illustrates

In the short run,a firm might choose to produce rather than shut down even if its market price is less than its average total cost of production.

A perfectly competitive market is in long-run equilibrium.At present there are 100 identical firms each producing 5000 units of output.The prevailing market price is $20.Assume that each firm faces increasing marginal cost.Now suppose there is a sudden increase in demand for the industry's product,which causes the price of the good to rise to $24.Which of the following describes the effect of this increase in demand on a typical firm in the industry?

Figure 8-1 -Refer to Figure 8-1.If the firm is producing 700 units,what is the amount of its profit or loss?

Figure 8-7 Figure 8-7 shows cost and demand curves facing a profit-maximising,perfectly competitive firm. -Refer to Figure 8-7.At price P₄,the firm would produce

A firm would decide to shut down if its production resulted in

If,as a perfectly competitive industry expands,it can supply larger quantities at the same long-run market price,it is

Figure 8-5 Figure 8-5 shows cost and demand curves facing a typical firm in a constant-cost,perfectly competitive industry. -Refer to Figure 8-5.The figure shows the cost structure of a firm in a perfectly competitive market.If the firm's fixed cost increases by $1000 due to a new environmental regulation,what happens to its profit-maximising output level?

For a perfectly competitive firm,which of the following is not true at profit maximisation?

Figure 8-2 -Refer to Figure 8-2.What is the amount of profit if the firm produces Q₂ units?

A constant cost,perfectly competitive market is in long-run equilibrium.At present,there are 1000 firms each producing 400 units of output.The price of the good is $60.Now suppose there is a sudden increase in demand for the industry's product which causes the price of the good to rise to $64.In the new long-run equilibrium,how will the average total cost of producing the good compare to what it was before the price of the good rose?

Which of the following characteristics of a farmers' market make it a good example of a perfectly competitive market?

How are market price,average revenue,and marginal revenue related for a perfectly competitive firm and why?

To maximise profit,a perfectly competitive firm

A constant-cost industry is an industry in which

If a perfectly competitive firm's price is less than its average total cost but greater than its average variable cost,the firm

Assume that firms in a perfectly competitive market are earning economic profits.Which of the following statements describes the change in market price and output as a result of the entry of new firms into this market?