Which of the following is not a characteristic of the structure

Question # 00659413 Posted By: dr.tony Updated on: 03/08/2018 10:31 AM Due on: 03/08/2018
Subject Economics Topic Microeconomics Tutorials:
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Which of the following is not a characteristic of the structure of perfectly competitive markets?

a. Easy, low cost entry and exit.

b. Each individual firm is small in size relative to the overall market.

c. Few sellers.

d. Homogeneous product.


Which of the following is a key characteristic of the long-run competitive equilibrium that distinguishes it from the short-run competitive equilibrium?

a. Free entry to reduce short-run profits, or free exit to reduce short-run losses.

b. Marginal revenue is greater than marginal cost.

c. Average revenue is less than average cost.

d. Economic profits are positive, but cannot be negative.


Which of the following is a characteristic of a competitive price-taker market?

a. Profit maximizing firms in the market will expand output until price equals average variable cost.

b. There are many firms in the market, each producing a small share of total market output.

c. The product produced by each of the firms is differentiated.

d. The market demand curve for the product is a horizontal line.


A perfectly competitive market is characterized by the free entry and exit of firms.

True or False


If a perfectly competitive firm cannot cover all of its costs, then it should shut down in the short run.

True or False


A perfectly competitive firm shuts down in the short-run when the market price is less than the average variable cost.

True or False


A perfectly competitive firm's short-run supply curve is its marginal cost curve below its average variable cost curve.

True or False


Which of the following best explains why a firm in a perfectly competitive market must take the price determined in the market?

a. If a price taker increased its price, consumers would buy from other suppliers.

b. There are no good substitutes for the product supplied by a firm that is a price taker.

c. The short-run average total costs of firms that are price takers will be constant.

d. Firms in a price-taker market will have to advertise in order to increase sales.


If a firm is producing an output level at which marginal revenue exceeds marginal cost, the firm will increase profits by reducing its output level.

True or False


Which of the following is true of a perfectly competitive market?

a. All of these.

b. In long-run equilibrium P = MR = SRMC = SRATC = LRAC.

c. If economic profits are earned then the price will fall over time.

d. A constant-cost industry exists when the entry of new firms has no effect on their cost curves.


In long-run equilibrium, a perfectly competitive firm will produce an output level at which its long-run average cost curve is upward sloping.

True or False


When faced with an economic loss, a competitive firm will exit the industry in the long run.

True or False


In long-run equilibrium, a perfectly competitive firm's short-run marginal cost curve crosses the long-run average cost curve at the lowest point on the long-run average cost curve.

True or False


When the marginal cost of a price-taker firm is more than the market price of its product, the firm should:

True or False


Which of the following statements are false?

a. Marginal and average total costs are equal at the most efficient production level.

b. Marginal cost is always rising.

c. The AFC and AVC curves do not cross.

d. The AFC and ATC curves do not cross.

e. b and d.


In the short run, a firm should shut down if its economic loss from operating exceeds its total fixed cost.

True or False


In the short run, the profit maximizing (or minimizing) quantity of output for any firm to produce exists at that output level at which marginal revenue equals marginal cost.

True or False


In the long run, a competitive firm will earn zero economic profit.

True or False


If marginal revenue exceeds marginal cost in the short run, the perfectly competitive firm earns an economic profit in the short-run.

True or False


In long-run equilibrium, a perfectly competitive firm's short-run marginal cost curve crosses the long-run average cost curve at the lowest point on the long-run average cost curve.

True or False


A perfectly competitive industry must have a perfectly elastic long-run supply curve.

True or False?

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