1
ECP 6705 - Module 3 Questions with Detailed Verified
Answers (100% Correct Answers) /Already Graded A+
What does the free entry and exit assumption imply for a perfectly competitive
market?
Ans: Firms will leave if they sustain losses.
In the long run, economic profits are zero.
Firms will enter when profits exist.
If the market for corn contains many buyers and sellers (none of whom can
influence price), a homogeneous product, and free entry in the market, we
consider the market to be _________.
Ans: perfectly competitive
Since each producer in a perfectly competitive market has no influence on
market price, the demand curve for the individual firm is
Ans: a horizontal line equal to the market price.
Suppose a spinach farmer operates in perfect competition. At the market
price of $3.00 per bunch, the farmer sells 125 bunches per day. If the farmer
increases her price to $3.01, she will sell ___ bunches.
Ans: zero
In order to maximize profits in the short run, a manager must determine how
much output should be produced, given
Ans: only variable inputs within his or her control.
A market with many "small" buyers and sellers, identical products, no
transaction costs, and free entry and exit where buyers and sellers have
perfect information is called __________.
Ans: perfect competition
For a perfectly competitive firm, marginal revenue is equal to the market
Approved By:
vPretest - Stuvia US
,2
Ans: price
In general, agriculture is considered a ___________ market.
Ans: perfectly competitive
Define the competitive firm's demand.
Ans: Df = P = MR
In a perfectly competitive market, the individual producer's demand curve is
the market
Ans: price
π = P(Q) - C(Q) defines
Ans: profits
An individual firm in perfect competition has a price elasticity that is
________.
Ans: perfectly elastic
In perfect competition, profits are maximized at a level of output such that
Ans: the vertical distance between the revenue line and the cost curve is
greatest.
A period of time during which at least one input is fixed is called the ___ run.
Ans: short
A perfectly competitive firm maximizes profits at a point where P ___ MC
over the range where MC is _________.
Ans: equals; increasing
Given a revenue function, R = R(Q), what is the marginal revenue (MR)?
Approved By:
vPretest - Stuvia US
, 3
Ans: MR = dR/dQ
The demand curve for a perfectly competitive firm is a ___ line at the ___
market .
Ans: horizontal, price
In the short run, when a firm shuts down, losses equal ___ costs.
Ans: fixed
In perfect competition, profit equals
Ans: Revenues - Costs
At the point where the cost curve C(Q) and the revenue line R(Q) are the
farthest vertical distance apart, the marginal cost (MC) is ________ marginal
revenue (MR).
Ans: equal to
A perfectly competitive firm maximizes profits at the level of output such that
market price ___ marginal cost (MC)
Ans: equals
In a perfectly competitive firm, in the short run, a firm will shut down to
minimize losses when price is ______ average variable cost.
Ans: less than
Marginal revenue is
Ans: the change in total revenue from a one-unit change in output.
True or false: A perfectly competitive firm's short-run supply curve is its
marginal cost above the minimum point of the average cost (AC) curve.
Ans: false
If P is less than AVC, the firm _____.
Approved By:
vPretest - Stuvia US
ECP 6705 - Module 3 Questions with Detailed Verified
Answers (100% Correct Answers) /Already Graded A+
What does the free entry and exit assumption imply for a perfectly competitive
market?
Ans: Firms will leave if they sustain losses.
In the long run, economic profits are zero.
Firms will enter when profits exist.
If the market for corn contains many buyers and sellers (none of whom can
influence price), a homogeneous product, and free entry in the market, we
consider the market to be _________.
Ans: perfectly competitive
Since each producer in a perfectly competitive market has no influence on
market price, the demand curve for the individual firm is
Ans: a horizontal line equal to the market price.
Suppose a spinach farmer operates in perfect competition. At the market
price of $3.00 per bunch, the farmer sells 125 bunches per day. If the farmer
increases her price to $3.01, she will sell ___ bunches.
Ans: zero
In order to maximize profits in the short run, a manager must determine how
much output should be produced, given
Ans: only variable inputs within his or her control.
A market with many "small" buyers and sellers, identical products, no
transaction costs, and free entry and exit where buyers and sellers have
perfect information is called __________.
Ans: perfect competition
For a perfectly competitive firm, marginal revenue is equal to the market
Approved By:
vPretest - Stuvia US
,2
Ans: price
In general, agriculture is considered a ___________ market.
Ans: perfectly competitive
Define the competitive firm's demand.
Ans: Df = P = MR
In a perfectly competitive market, the individual producer's demand curve is
the market
Ans: price
π = P(Q) - C(Q) defines
Ans: profits
An individual firm in perfect competition has a price elasticity that is
________.
Ans: perfectly elastic
In perfect competition, profits are maximized at a level of output such that
Ans: the vertical distance between the revenue line and the cost curve is
greatest.
A period of time during which at least one input is fixed is called the ___ run.
Ans: short
A perfectly competitive firm maximizes profits at a point where P ___ MC
over the range where MC is _________.
Ans: equals; increasing
Given a revenue function, R = R(Q), what is the marginal revenue (MR)?
Approved By:
vPretest - Stuvia US
, 3
Ans: MR = dR/dQ
The demand curve for a perfectly competitive firm is a ___ line at the ___
market .
Ans: horizontal, price
In the short run, when a firm shuts down, losses equal ___ costs.
Ans: fixed
In perfect competition, profit equals
Ans: Revenues - Costs
At the point where the cost curve C(Q) and the revenue line R(Q) are the
farthest vertical distance apart, the marginal cost (MC) is ________ marginal
revenue (MR).
Ans: equal to
A perfectly competitive firm maximizes profits at the level of output such that
market price ___ marginal cost (MC)
Ans: equals
In a perfectly competitive firm, in the short run, a firm will shut down to
minimize losses when price is ______ average variable cost.
Ans: less than
Marginal revenue is
Ans: the change in total revenue from a one-unit change in output.
True or false: A perfectly competitive firm's short-run supply curve is its
marginal cost above the minimum point of the average cost (AC) curve.
Ans: false
If P is less than AVC, the firm _____.
Approved By:
vPretest - Stuvia US
