ECON 1050 Chapter 12: Economics-1 (1) (dragged) 1

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salmoneagle674

17 Sep 2016

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The demand for a firm"s product is perfectly elastic because one firm"s sweater is a perfect substitute for the sweater of another firm. The market demand is not perfectly elastic because a sweater is a substitute for some other good. A perfectly competitive firm"s goal is to make maximum economic profit, given the constraints it faces. So the firm must decide: how to produce at minimum cost, what quantity to produce, whether to enter or exit a market. We start by looking at the firm"s output decision. A perfectly competitive firm chooses the output that maximizes it"s economic profit. One way to find the profit-maximizing output is to look at the firm"s total revenue and total cost curves. The firm can use marginal analysis to determine the profit-maximizing output.

Related Questions

1. When a profit-maximizing firm produces, they will be producing at that output at which marginal cost = marginal revenue:

all of the time
some of the time
on rare occasions
none of the time

2. Economics Profit is:

the same as accounting profit
sales minus explicit costs and implicit costs
sales minus variable costs and fixed costs
opportunity cost only

3. A market structure with so many firms that no one firm has any influence over price, and firms produce an identical product is called:

monopoly
oligopoly
perfect competition
monopolistic competition

4. Which of the following is NOT a characteristic of a perfectly competitive market?

identical products
perfect mobility
perfect knowledge
price maker

5. The demand curve in a perfectly competitive market is perfectly elastic.

true
false

emeraldwombat313

32. Which of the following is not a difference between monopolies and perfectly competitive markets?

A. Monopolies face downward sloping demand curves while perfectly competitive firms face horizontal demand curves.

B. Monopolies charge a price higher than marginal cost while perfectly competitive firms charge a price equal to marginal cost.

C. Monopolies can earn profits in the long run while perfectly competitive firms break even.

D. Monopolies choose to produce the quantity at which marginal revenue equals marginal cost while perfectly competitive firms do not.

40. Which of the following statements is not correct?

A. Both monopolies and monopolistically competitive firms can earn economic profits in the long run.

B. Both monopolistically competitive and perfectly competitive firms can earn economic profits in the short run.

C. Only competitive firms produce the welfare-maximizing level of output.

D. Firms in perfect competition, monopolistic competition, and monopoly maximize profits by producing where marginal revenue equals marginal cost.

43. A monopolistically competitive firm is currently producing 20 units of output. At this level of output the firm is charging a price equal to $20, has marginal revenue equal to $12, has marginal cost equal to $12, and has average total cost equal to $18. From this information we can infer that

A. the profits of the firm are negative.

B. firms are likely to leave this market in the long run.

C. the firm is currently maximizing its profit.

D. All of the above are correct.

A good rule-of-thumb to determine whether a market is close to being perfectly competitive is for an industry to have at least 10 to 20 firms to be considered "perfectly competitive." Is this rule-of-thumb accurate? Explain.
This rule-of-thumb is
A. not necessarily accurate because the 10 to 20 firms may collude.
B. not necessarily accurate because the 10 to 20 firms may each individually face elastic demand curves.
C. accurate because industries with fewer than roughly 10 firms rarely experience aggressive competition.
D. accurate because industries with fewer than roughly 10 firms have very elastic demand curves.
E. not necessarily accurate because industries with fewer than roughly 10 firms have very elastic supply curves.

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ECON 1050 Chapter 12: Economics-1 (1) (dragged) 1

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