Economic Exam Questions Essay

2335 Words Apr 13th, 2015 10 Pages
ECON EXAM 3 QUESTIONS

Competitive Supply

A perfectly competitive firm maximizes profit by producing the quantity at which:

MR = MC.

Consider a perfectly competitive firm in the short run. Assume the firm produces the profit-maximizing output and that it earns economic profits. At the profit-maximizing output, all of the following are correct except:

price is equal to average total cost.

People in the eastern part of Beirut are prevented by border guards from traveling to the western part of Beirut to shop for (or sell) food. This situation violates the perfect competition assumption of:

ease of entry and exit.

Suppose that some firms in a perfectly competitive industry earn negative economic profits. In the long run:

the
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Which of the following is a necessary condition for perfect competition?
Firms produce a standardized product.

A perfectly competitive firm will continue producing in the short run as long as it can cover its: variable cost

If some firms in a perfectly competitive industry are earning positive economic profits, then in the long run, the: industry supply curve will shift to the right

In a long-run equilibrium, economic profits in a perfectly competitive industry are:
0

In perfectly competitive long-run equilibrium: all firms produce at the minimum point of their average total cost curves.

If a Florida strawberry wholesaler operates in a perfectly competitive market, that wholesaler will have a ________ share of the market, and consumers will consider her strawberries to be ________. Therefore, ________ advertising will take place in this market. small; standardized; little, if any

A competitive firm operating in the short run is producing at the output level at which ATC is at a minimum. If ATC = $8 and MR = $9, in order to maximize profits (or minimize losses), this firm should:
Increase output

Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Now suppose that the price of sugar rises, increasing the marginal and average total cost of producing candy canes by $0.05; there are no other changes in

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