A perfectly competitive firm maximizes profit by producing the quantity at which:
MR = MC.
Consider a perfectly competitive firm in the short run. Assume the firm produces the profit-maximizing output and that it earns economic profits. At the profit-maximizing output, all of the following are correct except:
price is equal to average total cost.
People in the eastern part of Beirut are prevented by border guards from traveling to the western part of Beirut to shop for (or sell) food. This situation violates the perfect competition assumption of:
ease of entry and exit.
Suppose that some firms in a perfectly competitive industry earn negative economic profits. In the long run:
the industry supply curve will shift to the left
The shut-down price is:
the minimum of the AVC curve
Suppose the market for widgets is perfectly competitive. Furthermore, suppose the total cost curve for a typical firm in this market is TC = 175 + 4q2 where q represents the quantity of widgets sold by a single supplier. Suppose that there are 79 sellers in this market, sharing a market demand given by P = 1127 – 3Q, where P represents price per widget and Q represents the market quantity of widgets sold.
What is the short-run equilibrium quantity in this market?
Maximizing profits also means that a firm is attempting to:
produce at the output level where the difference between total revenue and total cost is the greatest.
If the price is greater than average total cost at the profit-maximizing quantity of output in the short run, a perfectly competitive firm will:
produce at a profit
The market for breakfast cereal contains hundreds of similar products, such as Froot Loops, corn flakes, and Rice Krispies, that are considered to be different products by different buyers. This situation violates the perfect competition assumption of:
a standardized product.
The perfectly competitive model assumes all of the following