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Questions and Answers
What is the defining characteristic of a competitive market?
What is the defining characteristic of a competitive market?
- Few buyers and sellers
- Barriers to entry
- Identical products (correct)
- Price setters
In the short run, when should a competitive firm shut down?
In the short run, when should a competitive firm shut down?
- When marginal cost is greater than average total cost
- When price (P) is greater than average variable cost (AVC)
- When total revenue (TR) is less than average total cost (ATC)
- When total revenue divided by quantity (TR/Q) is less than variable cost per unit (VC/Q) (correct)
What is the long-run decision for a competitive firm when total revenue is less than total cost?
What is the long-run decision for a competitive firm when total revenue is less than total cost?
- Lower prices
- Increase production
- Maintain current operations
- Exit the market (correct)
Why do competitive firms stay in business even if they make zero profit?
Why do competitive firms stay in business even if they make zero profit?
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What does a firm's supply curve represent in a competitive market?
What does a firm's supply curve represent in a competitive market?
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At what quantity is the average-total-cost curve at its minimum?
At what quantity is the average-total-cost curve at its minimum?
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What is the key condition for a firm to enter a competitive market?
What is the key condition for a firm to enter a competitive market?
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What should a competitive firm do in the short run if price is less than average variable cost?
What should a competitive firm do in the short run if price is less than average variable cost?
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