In a perfectly competitive market: marginal costs will be less than average costs. all firms will produce an equal amount of output. market price will equal the total cost of production. total industry costs of production are minimized.

In a perfectly competitive market: marginal costs will be less than average costs. all firms will produce an equal amount of output. market price will equal the total cost of production. total industry costs of production are minimized.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter22: Perfect Competition

Section: Chapter Questions

Problem 3QP

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Question

In a perfectly competitive market:

marginal costs will be less than average costs.

all firms will produce an equal amount of output.

market price will equal the total cost of production.

total industry costs of production are minimized.

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Which of the following is true about competitive firms? A firm with fixed/sunk costs receiving a price above its average variable cost will choose to stay in the industry in the short-run despite earning losses. Produce identical goods. An individual firm is too small relative to the market to impact the price. Is willing to supply a greater quantity if there is a reduction in the firm's marginal cost. Earn zero profits in the long-run because firms are free to enter or exit the industry over the long-run. They produce up until the point where the price equals the marginal cost of production.
Firms in a perfectly competitive industry maximize profits by: eliminating the competition. producing a higher quality good and setting a price higher than the competition. setting a price equal to the market price. setting a price less than the market price and undercutting the competition.
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In a competitive market characterized by increasing costs, the long-run industry supply curve gives the minimum long-run average cost of production at various levels of industry output. long-run industry supply curve gives the long-run marginal cost of production at various levels of industry output. long-run industry supply curve is upward sloping. both a and b all of the above
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