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    Long-run perfectly competitive firms

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    In long-run equilibrium a perfectly competitive firm will operate where the price is:

    Select one:
    a. greater than MR but equal to MC and minimum ATC
    b. equal to MR, MC and minimum to ATC
    c. greater than MC and minimum ATC, but equal to MR
    d. greater than MR and MC, but equal to minimum ATC

    For firms in perfectly competitive industries:

    Select one:
    a. Profit maximization occurs at Q where MR = ATC
    b. Profit maximization occurs where TR attain a maximum
    c. Profit maximization occurs at Q where P = MC
    d. None of the above are true

    Which of the following is NOT a characteristic of the perfectly competitive market structure:

    Select one:
    a. The product the firm produces is homogeneous or standardized
    b. The firm can sell all it wants at the market clearing price
    c. Consumers are assumed to have complete (perfect) information regarding the producers in the market
    d. The firm may raise the price of the product it sells incurring small declines in sales

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    Solution Preview

    1. Answer is b. In the long run Price has to be equal to MR, and MC and the minimum of ATC.


    For a perfectly competitive firm, Prices are given (firms cannot set prices), thus price is ...

    Solution Summary

    This solution shows the relationship between different cost functions and profit maximization in a perfectly competitive market