Question

Part III: Multiple Choice 20. Which of the following statements is not a characteristic of a perfectly competitive firm? a. Perfectly competitive firms view cach other as fierce rivals. b. Firms are price-takers. c. All firms produce a homogeneous product. d. Perfectly competitive markets allow freedom of entry and exit. 21. Since the firm's demand curve is perfectly elastic for a price-taking firm, a P-MR. b. P = MRP. C.P TR. d. both a and b. e. both a and c. 22. In the short run, a firm shuts down when a. profit is negative. b. TR<TVC. c. MRP > ARP at the level of labor usage where MRP - w d. both b and c. e. all of the above. 23. In the short run, a firm continues to produce at a loss when a. TRTFC. b. P AFC c. (TR/O (ATC - AFC). d. both b and c. e. both a and e. 24. In a competitive industry the market price of output is $24. A firm is producing that level of output at which average total cost is $30, marginal cost is $25, and average fixed cost is $5. In order to maximize profit (or minimize losses), the firm should a. increase output. b. decrease output but keep producing. c. leave output unchanged. d. shut down. 25. In long-run competitive equilibrium, a. economic profit is zero. b. PLMC c. P-LAC. d. P-SMC e. all of the above

Answer 1

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