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perfectly competitive firm

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1) a perfectly competitive firm

a) sells a product that has perfect substitutes

b) has a perfect inelastic demand

c) has a perfectly elastic supply

d) all of the above

2) In the short run, a perfectly competitive firm____ earn an economic profit and ____ incur an economic loss

a) might' will never
b) will never'might
c) might; might
d) will never; will never.

3) If a perfectly competitive firm finds that the price exceeds its ATC, then the firm.
a) will raise its price to increase its economic profit
b) will lower its price to increase its economic profit
c) is earning an economic profit
d) is incurring an economic loss

4) For a perfectly competitive syrup producer whose average total cost curve does not change, an economic profit could turn into an economic loss if the :

a) market demand for syrup decreases
b) marginal cost curve shifts downwards
c) market demand for syrup does not change.
d) market demand for syrup increases.

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Solution Preview

1) a perfectly competitive firm

a) sells a product that has perfect substitutes

Each firm in a perfectly competitive market sells an identical product, which is also commonly termed "homogeneous goods." The essential feature of this characteristic is not so much that the goods themselves are exactly, perfectly the same, but that buyers are unable to discern any difference. In particular, buyers cannot tell which firm ...

Solution Summary

Multiple Choice - If a perfectly competitive firm finds that the price exceeds its ATC

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(e) How would you explain the differences among these market structures? Identify which market structure your organization competes in and why you think so.

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