chapter 8

If a firm is operating where MC = ATC, then

• it is earning positive economic profits

• it is earning an economic loss

• it is earning zero economic profit

• more firms will join the industry

which describes the long-run adjustment when firms are earning short-run economic losses?

• some firms exit, industry supply decreases, market price falls.

• some firms exit, industry supply decreases, market price rises

• some firms join, industry supply increases, market price rises

• some firms join, industry increases, market price falls

if a perfectly competitive firm can sell soybeans for $25 per bushel and MC = $22 per bushel, then it should

• expand output

• reduce output

• increase price

• cut output to zero

a perfectly competitive firm is producing 100 units.

if the price is $12 and ATC = $11, then

• profit = $1

• profit = $10

• profit = $100

• profit = $1000

Corn is a perfectly competitive commodity.

In the market place, the demand curve for corn is:

• perfectly elastic

• perfect inelastic

• downward sloping

• upward sloping

if a competitive firm in the short run finds that its average total exceed price, the firm:

• has economic loss

• should definitely shut down

• has economic profit

• has zero economic profit

the perfectly competitive firm will always try to produce at a point where:

• average costs are at a minimum

• average variable costs are ai a minimum

• marginal costs are less than the market price

• marginal costs are equal to the market price

in a perfectly competitive market, individual firms set:

• prices and quantities

• neither prices nor quantities

• quantities but not prices

• prices but not quantities

the cotton industry is experiencing negative profits.

you can expect some firms to:

• increase price

• decrease output

• leave the industry in the long run

• enter the industry in antiparticipant of higherprices

a perfectly competitive firm should shut down in the short run if:

• price is below average total cost

• it is not making a profit

• price is below marginal cost

• price is below average variable cost