Which of the following statements is correct?
  • maximizing the difference between total revenue and total cost.
  • It will not advertise its product.
  • each seller supplies a negligible fraction of total supply.
  • Economic profits induce firms to enter an industry; losses encourage firms to leave.
If price P is greater than minimum average variable cost, the firm will produce the amount of output where MR (= P) = MC in order to either maximize its profit (if price exceeds minimum ATC) or minimize its loss (if price lies between minimum AVC and minimum ATC).
  • True
  • new firms will enter this market.
  • Fact
  • each seller supplies a negligible fraction of total supply.
The long-run supply curves of constant-, increasing-, and decreasing-cost industries are horizontal, upsloping, and downsloping, respectively.
  • new firms will enter this market.
  • Fact
  • True
  • produce because the resulting loss is less than its TFC.
Market supply in a competitive industry is the horizontal sum of the individual supply curves of all of the firms in the industry. The market equilibrium price is determined by where the industry's market supply curve intersects the industry's market demand curve.
  • new firms will enter this market.
  • True
  • each seller supplies a negligible fraction of total supply.
  • Fact
The demand seen by a purely competitive firm is perfectly elastic—horizontal on a graph—at the market price. T o F
  • True
  • False
Marginal revenue and average revenue for a purely competitive firm coincide with the firm's demand curve; total revenue rises by the product price for each additional unit sold. T o F
  • True
  • False
Price is constant to the individual firm selling in a purely competitive market because:
  • each seller supplies a negligible fraction of total supply.
  • produce because the resulting loss is less than its TFC.
  • those markets that are not purely competitive.
  • It will not advertise its product.
An increasing-cost industry is associated with:
  • an upsloping long-run supply curve.
  • workers in the "destroyed" industries
  • It will not advertise its product.
  • esults in zero economic profits.
A firm will choose to produce if it can at least break even and generate a normal profit.T o F
  • True
  • False
A competitive firm's short-run supply curve is the portion of its marginal cost (MC) curve that lies above its average variable cost (AVC) curve.
  • True
  • Fact
  • produce because the resulting loss is less than its TFC.
  • marginal revenue and marginal cost.
Long-run competitive equilibrium:
  • an upsloping long-run supply curve.
  • esults in zero economic profits.
  • workers in the "destroyed" industries
  • new firms will enter this market.
If a purely competitive firm is producing at the MR = MC output level and earning an economic profit, then:
  • new firms will enter this market.
  • esults in zero economic profits.
  • marginal revenue and marginal cost.
  • It will not advertise its product.
A firm finds that at its MR = MC output, its TC = $1,000, TVC = $800, TFC = $200, and total revenue is $This firm should:
  • marginal revenue and marginal cost.
  • produce because the resulting loss is less than its TFC.
  • True
  • each seller supplies a negligible fraction of total supply.
Economists use the term imperfect competition to describe:
  • each seller supplies a negligible fraction of total supply.
  • maximizing the difference between total revenue and total cost.
  • workers in the "destroyed" industries
  • those markets that are not purely competitive.
The MR = MC rule applies:
  • in both the short run and the long run.
  • It will not advertise its product.
  • workers in the "destroyed" industries
  • esults in zero economic profits.
In pure competition, entrepreneurs remove resources from industries and firms that are generating economic losses in order to transfer them to industries and firms that are generating economic profits.
  • new firms will enter this market.
  • produce because the resulting loss is less than its TFC.
  • Fact
  • True
Creative destruction is least beneficial to:
  • workers in the "destroyed" industries
  • maximizing the difference between total revenue and total cost.
  • an upsloping long-run supply curve.
  • esults in zero economic profits.
If the market price is below the minimum average variable cost, the firm will minimize its losses by shutting down.
  • new firms will enter this market.
  • marginal revenue and marginal cost.
  • True
  • Fact
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