AP Microeconomics Unit III

Front

If a profit-maximizing firm in a perfectly competitive market chooses to produce in the short run, then marginal cost is always:

Back

Greater than or equal to average variable cost

Front

For a perfectly competitive firm producing the profit-maximizing quantity, the average total cost is $10 and the average variable cost is $8. If the market price for its product is $10, which of the following is true for the firm?

Back

It is earning zero economic profit and will remain in business

Front

In a perfectly competitive market, the price facing the firm is equal to: Marginal revenue, Average revenue, The Market price, Demand, All of the above

Back

All of the above

Front

In the long run, perfectly competitive firms make zero economic profit. This is primarily a result of: Easy entry and exit into and out of the market

Back

Easy entry and exit into and out of the market

Front

This firm will continue to produce as long as the price is equal to or above:

Back

D

Front

As successive units of an input are added to production, output increases by ever smaller amounts. This best describes:

Back

Diminishing marginal returns

Front

What is the relationship between marginal cost and average total cost?

Back

When marginal cost is above average total cost, average total cost must be rising.

Front

The demand curve in a purely competitive industry is ______, while the demand curve to a single firm in that industry is ______.

Back

downward sloping, perfectly elastic

Front

Smokey’s Smoke Detectors, Inc. operates in a perfectly competitive market for smoke alarms. Smokey is currently earning short-run positive economic profits. What will Smokey experience as the industry adjusts to the long-run equilibrium?

Back

Firms will enter the industry, market price will decrease, economic profits will decrease.

Front

Refer to Graph 1. To maximize profit or minimize losses this firm will produce:

Back

C units at price H