Perfect Competition & Monopoly

In the short run, a perfectly competitive firm earns profit if:

• P > ATC

• P < MC

• TR = TC

• P < ATC

• P < AVC

If total revenue = $2,000 and total cost = $1,500, what is the firm's profit?

• $500

• –$500

• $3,500

• $1,000

• $2,500

A firm is operating at a loss but still produces. This is rational in the short run if:

• P < ATC

• P > AVC

• TR = 0

• MC = 0

Why can't a firm in perfect competition set its own price?

• Demand is perfectly inelastic

• It has monopoly power

• The firm is a price taker

• It faces zero marginal cost

• Prices are controlled by government

In the long run, economic profits in perfect competition are:

• Positive

• Zero

• Negative

• Maximized

• Unlimited

What causes long-run economic profits to be eliminated in perfect competition?

• Government regulation

• Inelastic demand

• Free entry and exit

• Branding

• High fixed cost

When new firms enter a perfectly competitive market:

• Price rises

• Supply increases

• Demand decreases

• Costs fall

• Price becomes unstable

A firm in long-run equilibrium in perfect competition produces where:

• P = MC = minimum ATC

• P > MC

• MC > ATC

• P < MC

When the price of a good increases, and quantity demanded decreases, this illustrates:

• Law of supply

• Law of demand

• Price ceiling

• Equilibrium surplus

• Perfect elasticity

A rightward shift in the demand curve can be caused by:

• Lower income for a normal good

• Higher price

• Increase in consumer income

• Fall in input cost

• Decrease in population