### Understanding Perfect Competition and Cost Curves#### Question 1In a perfectly competitive market, a firm has no control over the price because:- **a.** the government imposes price ceilings on the products produced in perfectly competitive industries.- **b.** the market demand for products produced in perfectly competitive industries is perfectly elastic.- **c.** every firm's product is a perfect substitute for every other firm's product.- **d.** there is free entry and exit from the industry.#### Question 2A firm is experiencing ______ on the upward-sloping portion of a firm’s long-run average cost curve.- **a.** increasing returns to scale- **b.** decreasing returns to scale- **c.** constant returns to scale- **d.** diminishing marginal returnsThese questions explore the fundamentals of market structures, specifically focusing on the principles of perfect competition and cost behaviors in the long run. Understanding these concepts is essential for analyzing how firms operate and compete within different market environments.

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A firm in a perfectly competitive market has no control over price because O a. the government imposes price ceilings on the products produced in perfectly competitive industries. O b. the market demand for products produced in perfectly competitive industries is perfectly elastic. O c. every firm's product is a perfect substitute for every other firm's product. O d. there is free entry and exit from the industry. A firm is experiencing the upward-sloping portion of a firm's long run average cost curve. O a. increasing returns to scale O b. decreasing returns to scale Ос. constant returns to scale O d. diminishing marginal returns

A firm in a perfectly competitive market has no control over price because O a. the government imposes price ceilings on the products produced in perfectly competitive industries. O b. the market demand for products produced in perfectly competitive industries is perfectly elastic. O c. every firm's product is a perfect substitute for every other firm's product. O d. there is free entry and exit from the industry. A firm is experiencing the upward-sloping portion of a firm's long run average cost curve. O a. increasing returns to scale O b. decreasing returns to scale Ос. constant returns to scale O d. diminishing marginal returns

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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The figure shows a perfectly competitive firm. The firm is operating; that is, it has not shut down. The firm produces O A. 20 units of output and earns a normal profit. MC ATC 50 B. 10 units of output and incurs an economic loss. 40 O C. 10 units of output and earns a normal profit. O D. 20 units of output and incurs an economic loss. 30 MR 20 10 10 30 40 Quantity (per day) Price and costs (dollars) 20
In a competitive market with free entry and exit from the market a permanent rise in demand will lead to Select one or more: O a. excess profits being made in the short run (before new firms can enter) O b. entry by new firms O c. a permanent rise in prices O d. normal profits being made in the long-run
The optimal output rule for a perfectly competitive firm is to produce that quantity where A. P = MC in the long run, but in the short run to produce that quantity where MC = %3D ATC. O B. MC = ATC in the short run. C. P = MC no matter what the time period, provided that price is greater than average variable cost. D. P = MC no matter what the time period, provided that price is greater than %3D average total cost.
A market supply curve is O a. downward sloping initially, and then upward sloping. O b. downward sloping. Oc the vertical sum of the individual supply curves. Od. the horizontal sum of the individual supply curves.
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If a firm is a price-taker, then Select one: O a. marginal revenue is equal to price O b. the firm can sell as much output as it likes at the market-determined price O c. marginal revenue is equal to total revenue O d. both a and b
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With free entry and exit, the long-run market supply in a perfectly competitive market is O a. upward sloping. O b. horizontal and equal to the minimum long-run marginal cost of each firm producing in this market. Oc. horizontal and equal to the minimum long-run average cost of each firm producing in this market. O d. downward sloping.
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Imagine a firm in a competitive market comes up with a new production method, which halves its marginal cost at all levels of Q. Fixed costs are unaffected. Which of the following statements are true? O a. The firm's AC at all levels of Q would be lower. O b. The firm would extract an innovation rent from selling at the market price with lower costs. Oc. The firm's point of minimum AC would be a higher level of Q. O d. The innovation would immediately cause the market price to drop.
Because perfectly competitive firms are price takers, a permanent increase in the market demand does not change the price of the product in either the short run or long run. O A. True O B. False
Resources Submit All Question 6 of 30 Indicate whether each of the statements below about a perfectly competitive market is true or false. a. In general, the market demand curve in a perfectly competitive market is perfectly elastic. True False b. In general, an individual firm in a perfectly competitive market faces a perfectly elastic demand curve. True O False 46°F a