Microeconomics perfect competition

Which of the following is NOT a characteristic of a perfectly competitive market?

• Many buyers and sellers

• Products are identical

• Firms can freely enter and exit

• Firms are price makers

• No government intervention

In a perfectly competitive market, marginal revenue (MR) is equal to:

• Total cost

• Average variable cost

• Price

• Average total cost

• Fixed cost

A firm maximizes profit by producing the quantity where:

• ATC = AVC

• P = AVC

• MR = MC

• P = ATC

• TR = TC

When a company closes in the short term, it still has to pay the following:

• Variable costs

• Marginal costs

• Fixed costs

• No costs at all

• Only sunk costs

A firm should shut down in the short run if:

• P < ATC

• P < AVC

• MR < MC

• TR = TC

• P > AVC

A firm should exit the market in the long run if:

• P > AVC

• P < MC

• P < ATC

• MR > MC

• TR > TC

What part of a competitive firm's short-run supply curve is:

• ATC curve is above AVC

• AVC curve is above ATC

• MC curve is above AVC

• MC curve is below AVC

• MR curve is below ATC

The long-term supply curve of a competitive firm:

• Downward sloping

• Vertical

• U-shaped

• Horizontal at minimum ATC

• Same as the demand curve

The long-term equilibrium of a perfectly competitive market:

• Economic profit is maximized

• Firms earn zero economic profit

• Firms produce where P > MC

• There are barriers to entry

• Price is greater than ATC

If a firm is earning zero economic profit, this means:

• It is not earning any income

• It cannot pay its fixed costs

• It is not covering its opportunity costs

• It is covering all its explicit and implicit costs

• It should close immediately