MMU - GEE6113

A perfectly competitive firm __________.

• chooses its price to maximize profits

• sets its price to undercut other firms selling similar products

• takes its price as given by market conditions

• can influence market prices.

In a perfectly competitive market, firms are considered price takers because __________.

• they have significant market power

• they can set their own prices

• the products they sell are identical

• they can influence demand for their products

Which of the following is a characteristic of a perfectly competitive market?

• Barriers to entry are high

• Firms sell differentiated products

• There are many buyers and sellers

• Firms can earn long-term economic profits

In the short run, a perfectly competitive firm will produce at a level where __________.

• marginal cost equals average total cost

• total revenue exceeds total cost

• marginal revenue equals marginal cost

• average variable cost is minimized

A competitive firm's short-run supply curve is its ______ curve.

• average cost
• fixed cost
• total cost
• marginal cost

Shut down in competitive market means ______.

• the firm can continue operating the business

• a short run decision not to produce anything during a specific period of time because the firm cannot cover its variable cost. However, the firm still need to pay its total fixed cost.

• the firm’s long run decision to leave the market

• the firm’s short run decision to leave the market

In a perfectly competitive market, the long-run equilibrium occurs when __________.

• firms are making economic profits

• the market price equals the minimum average total cost

• there are no firms entering or exiting the market

• all firms are producing at their maximum capacity

Which of the following best describes the demand curve faced by a perfectly competitive firm?

• Downward sloping

• Perfectly elastic

• Perfectly inelastic

• Upward sloping

Which of the following is true about the long-run adjustments in a perfectly competitive market?

• Firms will exit the market if they are making losses

• Firms will enter the market if they are making losses

• All firms will earn economic profits in the long run

• Firms will produce at a level where price is greater than average total cost

If P > min AVC, the firm should ______.

• shut down the operation

• continue the operation

• exit the market

• not to produce anything