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Econ Quiz #5
Terms in this set (16)
At Paula's Pizza, the marginal revenue of the last pizza produced is $12. The marginal cost of the last pizza produced is $10. In order to increase profits, Paula should:
Which of the following is not characteristic of perfect competition?
a. many buyers and sellers
b. ability to control price
c. standardized (identical) products
d. free entry and exit of firms
b. ability to control the price
Which of the following firms is most likely to be a perfectly competitive firm?
a. one of the three largest Us automakers
b. one of the cellphone service carriers
c. a public school operated by the government
d. a soybean farmer
d. a soybean farmer
The demand curve in a purely competitive industry is ____________ while the demand curve to a single firm in that industry is _____________.
downsloping, perfectly elastic
When firms are said to be price takers, it implies that if a firm raises its price,
buyers will go elsewhere
For perfectly competitive firms, what is relationship among market price, average revenue, and marginal revenue?
P= AR = MR
The short-run supply curve for a purely competitive firm is:
the segment of the MC curve lying above the AVC curve
If a firm in a competitive market increases its output by 20 percent, the price of its output is likely to...
Which of the following statements is correct regarding a firm's decision-making?
The decision to shut down is a short-run decision, whereas the decision to exit is a long-run decision
Joe's Garage operates in a perfectly competitive market. At the point where the marginal cost equals marginal revenue, ATC= $20, AVC= $15, and the price per unit is $10. In this situation,
Joe's Garage should shut down immediately
Firms that shut down in the short run are unable to avoid their
When market conditions in a competitive industry are such that firms cannot cover their total production costs, then...
some firms will exit the market, causing prices to rise until the remaining firms can cover their total production costs
In the long run, each firm in a competitive industry earns
zero economic profits
The entry of new firms into a competitive market will
increase market supply and decrease market price
The textile industry is composed of a large number of small firms. In recent years, these firms have suffered economic losses and many sellers have left the industry. Economic theory suggests that these conditions will
cause the market supply to decline and the price of textiles to rise
Which of the following represents the firm's long-run condition for exiting a market?
exit if P < ATC
If you have a major factor change to reflect a reduction in quantity demand, which way will the demand curve shifts?
This model does not fit Germano's description because he assumes what?
the quantity demanded at any price rises with income. This is known as a?
In a long-run equilibrium, economic profits in a perfectly competitive industry are:
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