Economics and Perfectly Competitive Firm

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  • Topic: Economics, Perfect competition, Costs
  • Pages : 5 (1058 words )
  • Download(s) : 311
  • Published : October 25, 2011
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1. Luxury goods are
a. price inelastic
b. income inelastic
c. income elastic
d. goods with negative income elasticity

2. Substitutes are pairs of products with
a. positive cross-price elasticity of demand
b. negative cross-price elasticity of demand
c. positive income elasticity of demand
d. negative income elasticity of demand

3. The long run is a period of time
a. during which at least one resource is fixed
b. during which all resources are variable
c. during which all resources are fixed
d. less than one year

4. Marginal product is defined as
a. the increase in revenue that occurs when an additional unit of a resource is added b. the increase in output that occurs when all resources are increased by the same proportion c. the increase in output that occurs when an additional unit of a resource is added, holding all other resources constant d. the amount of additional resources needed to increase output by one unit when all resources are increased by the same amount

5. Fixed costs are defined as
a. the total costs of a firm's production
b. the additional cost of the last unit produced
c. costs that increase proportionately as the quantity produced increases d. costs that do not vary as quantity produced increases

6. When a firm is experiencing diminishing marginal returns, marginal cost is a. rising
b. falling
c. constant
d. rising at first, then falling

7. Minimum efficient scale is the level of output at which
a. short-run average total cost stops decreasing
b. short-run average total cost stops increasing
c. long-run average cost stops decreasing
d. long-run average cost stops increasing

8. The demand curve facing a perfectly competitive firm is
a. almost vertical at the market quantity
b. perfectly inelastic
c. perfectly elastic
d. horizontal at the price the firm wishes to charge

9. Marginal revenue is
a. total revenue minus total cost
b. total revenue divided by quantity of output
c. the change in total revenue divided by the change in output d. the change in total revenue divided by the change in the quantity of an input used

10. A perfectly competitive firm's profit per unit of output equals a. price times quantity
b. total revenue minus total cost
c. price minus average variable cost
d. price minus average total cost

11. Long-run equilibrium for a perfectly competitive firm occurs when a. P = MC = MR = ATC
b. MC = MR = AFC = ATC
c. MC = MR = P > ATC
d. P > MC > MR > ATC

12. A constant-cost industry is one
a. that faces constant average costs in the short run b. that experiences economies of scale
c. that experiences stable demand
d. whose cost curves do not change as new firms enter

13. To achieve allocative efficiency, firms
a. strive to minimize fixed costs
b. strive to maximize profits
c. produce at their minimum long-run average cost
d. produce the output consumers want most

14. The demand curve a monopolist faces
a. is more elastic than a perfectly competitive firm's demand curve b. is the market demand curve
c. is as elastic as a perfectly competitive firm's demand curve d. is not affected by the prices of complements

15. The demand curve facing a single-price monopolist
a. is the same as its average revenue curve
b. is the same as its marginal revenue curve
c. is the same as the perfect competitor's demand curve d. lies above its average revenue curve

16. Which of the following is true at the profit-maximizing quantity for both a perfectly...
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