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Microeconomics: Short-Run Supply Curves

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Questions and Answers

What is the condition for an industry to have free entry and exit?

Existing producers are restricted from leaving the industry
The government regulates the entry and exit of producers
New producers are prohibited from entering the industry
New producers can easily enter into the industry and existing producers can easily leave (correct)

What is the formula for profit in a perfectly competitive industry?

Profit = TR - TC (correct)
Profit = TR / TC
Profit = TR + TC
Profit = TC / TR

What is the marginal revenue of a price-taking firm?

The total revenue minus total cost
The market price (correct)
The change in total revenue generated by an additional unit of output
The market price multiplied by the quantity of output

What is the optimal output rule in a perfectly competitive industry?

Produce the quantity of output at which the marginal revenue is equal to the marginal cost (B) Signup and view all the answers

What is the shape of the individual demand curve for a price-taking firm's output?

Horizontal (C) Signup and view all the answers

What is the purpose of the marginal revenue curve in a perfectly competitive industry?

To show how marginal revenue varies as output varies (C) Signup and view all the answers

What is a characteristic of a perfectly competitive market?

All market participants are price-takers (D) Signup and view all the answers

What is required for an industry to be perfectly competitive?

Many producers, none of whom have a large market share (D) Signup and view all the answers

What is a standardized product?

A product regarded as the same good by consumers (C) Signup and view all the answers

What is a characteristic of a price-taking producer?

Their actions have no effect on the market price (B) Signup and view all the answers

What is a perfectly competitive industry?

An industry in which producers are price-takers (C) Signup and view all the answers

What is a price-taking consumer?

A consumer whose actions have no effect on the market price (C) Signup and view all the answers

What is the condition for a short-run market equilibrium?

The quantity supplied equals the quantity demanded, with a fixed number of producers (D) Signup and view all the answers

What does the short-run industry supply curve show?

The relationship between the price of a good and the total output of the industry (A) Signup and view all the answers

What is the condition for a long-run market equilibrium?

The quantity supplied equals the quantity demanded, with entry and exit (D) Signup and view all the answers

What does the long-run industry supply curve show?

How the quantity supplied responds to the price, with entry and exit (B) Signup and view all the answers

What is the difference between the short-run and long-run industry supply curves?

The short-run curve assumes a fixed number of producers, while the long-run curve assumes entry and exit (B) Signup and view all the answers

What is the purpose of comparing the short-run and long-run industry supply curves?

To understand how the industry responds to changes in the market price over time (A) Signup and view all the answers

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