In a perfectly competitive market, if a firm finds it is producing an amount of output such that its marginal cost is less than its price, it will

1 point

A) immediately shut down for the short run.

B) be maximizing profits.

C) increase its output to increase its profit.

D) decrease its output to increase its profit.

2. In perfect competition, ________.*

1 point

A) there are restrictions on entry into the market

B) firms in the market have advantages over firms that plan to enter the market

C) only firms know their competitors' prices

D) there are many firms that sell identical products

If a perfectly competitive market is in long-run equilibrium and there is a permanent decrease in demand, then

1 point

A) some firms will incur economic losses.

B) firms are no longer maximizing profits.

C) some firms must immediately exit.

D) each firm must produce less output in the new long run equilibrium and earn less economic profit.

Which of the following is FALSE regarding a perfectly competitive firm?*

1 point

A) The firm can charge a lower price than its competitors and thereby sell more output and increase its profits.

B) The firm always earns a normal profit.

C) The firm's marginal revenue is horizontal.

D) The firm's minimum efficient scale is small relative to the market demand.

The short-run supply curve for a perfectly competitive firm is its

1 point

A) marginal cost curve above the horizontal axis.

B) marginal cost curve above its shutdown point.

C) average cost curve above the horizontal axis.

D) average cost curve above its shutdown point.

5. If the firm is producing 4 packets of biscuits, to maximize its profit it will

1 point

A) increase its output.

B) decrease its output.

C) continue producing packets of biscuits.

D) shut down.

6. A firm's shutdown point is the quantity and price at which the firm's total revenue just equals its

1 point

A) total cost.

B) total variable cost.

C) total fixed cost.

D) marginal cost.

. Explain why, in the long run, the price of a product produced by a perfectly competitive industry will be driven down to the minimum long-run average cost.

Why is a perfectly competitive firm's demand curve identical to its marginal revenue curve?

What sort of competition (if any) exists among perfectly competitive firms?

Provide a local example of the perfectly competitive market and describe the commodities it provides, the locations in which this market exists. (3 marks)

A. Use the graph for a perfectly competitive firm producing T-shirts to answer the following questions. Find:The profit maximizing price and quantity. (2 marks)

Case Study: Perfect Competition in Credit Card Industry! In 1997, over $700 billion purchases were charged on credit cards and this total is increasing at a rate of over 10 per cent a year. At first glance, the credit card market would seem to be a rather concentrated industry. Visa, MasterCard and American Express are the most familiar names, and over 60 per cent of all charges are made using one of these three cards. But on closer examination, the industry seems to exhibit most characteristics of perfect competition. Consider first the size and distribution of buyers and sellers. Although Visa, MasterCard and American Express are the choices of the majority of consumers, these cards do not originate from just three firms. In fact, there are over six thousand enterprises (primarily banks and credit unions) in the US that offers charge cards to over 90 million credit card holders. One person's Visa card may have been issued by his company's credit union in Los Angeles, while a next door neighbour may have acquired hers from a Miami Bank when she was living in Florida. Credit cards are a relatively homogenous product. Most Visa cards are similar in appearance, and they can all be used for the same purposes. When the charge is made, the merchant is unlikely to notice who it was that actually issued the card. Entry into and exit from the credit card market is easy as evidenced by the 6000 institutions that currently offer cards. Although a new firm might find it difficult to enter the market, a financially sound bank, even one of modest size, could obtain the right to offer a MasterCard or a Visa card from the present companies with little difficulty. If the bank wanted to leave the field, there would be a ready market to sell its accounts to other credit card suppliers. Thus, it would seem that the credit card industry meets most of | the characteristics for a perfectly competitive market. Reference Prasad, A., 2015. Case Study: Perfect Competition in Credit Card Industry! [Blog] Infinite Soluzioni Blog, Available at: .MC ATC Price and cost (dollars per day) 30 AVC 25 23.5 20 MR 18 15 0 7 8 9 9.5 10 Quantity (T-shirts per day)\fMarginal benefit Number of (dollars from the last police officers officer 8.00 7.20 6.40 5.60 4.80 4.00 3.20