Question

18. In a perfectly competitive market, individual firms set: A) prices and quantities B) neither prices nor quantities. C) quantiies but not prices D) prices but not quantities 19. The perfectly competitive firm faces a perfectly elastic demand curve because A) t has the ability to set the price and force everyone to buy at that price. it has no ability to control price. B) C) t doesn't; it faces a perfectly inelastic demand curve D) it doesn't; everyone knows that the demand curve slopes down and to the right 20. Figure: Interpreting Short-Run Cost Curves) The short-run supply curve begins where the ATC 1.2 AVC 1.0 MC 0.8 0.6 0.4 0.2 0.8 1.0 1.2 0.2 0.4 0.6 Output A) MC equals the minimum ATC. B) MC equals the minimum AVC. C) price is approximately $0.75 D) price is approximately $0.80 21. In a competitive market, price is always equal to A) marginal cost B) marginal product C) marginal revenue D) It is more complicated than that; many factors go into determining price 22. For all firms, regardless of the market structure, the profit-maximizing rule is produce where marginal revenue A) equals the price B) exceeds the price C) equals marginal cost D) exceeds marginal cost. Costs

Answer 1

18. Ans: C ) quantities but not prices.

19. Ans: B ) it has no ability to control price.

Explanation:

Under perfect competition market structure , firm is the price takers whereas industry is the price maker.

20. Ans: B ) MC equals the minimum AVC.

Explanation:

Under perfect competition , the short run supply curve is the rising portion of marginal cost curve which begins from the minimum point of average variable cost ( AVC ) curve.

21. Ans: C ) marginal revenue

Explanation :

Under perfect competition , P = AR = MR . It is because of the unique price fixed by the industry.

22. Ans: C ) equals marginal cost

Explanation:

Profit maximization condition is where marginal cost equals marginal revenue( MC = MR ).