Section 1

1)The theory of perfect competition generally assumes that

	sellers act independently of other sellers, but buyers do not act independently of other buyers.
	buyers act independently of other buyers, but sellers do not act independently of other sellers.
	buyers and sellers act independently of other buyers and sellers.
	neither buyers nor sellers act independently of other buyers and sellers.

2)In long-run competitive equilibrium, firms

	earn positive economic profits.
	have no incentive to make any changes.
	earn losses on some units of the good they produce and sell.
	do not produce the quantity of output at which MR = MC.

3)Resource allocative efficiency exists for a perfectly competitive firm because

	price equals marginal revenue and the firm equates marginal revenue and marginal cost to maximize profits.
	price equals average total cost and the firm equates marginal revenue and average total cost to maximize profits.
	price is greater than marginal revenue and the firm equates marginal revenue with average total cost to maximize profits.
	price is less than marginal revenue and the firm equates marginal cost and marginal revenue to maximize profits.
	none of the above

4)The U.S. Postal Service earns a __________________ profit per unit on its commemorative stamps than it does on its standard stamps because the ________________ cost is lower on the commemorative stamps.

	higher; average variable
	lower; average variable
	higher; average fixed
	lower; average fixed

5)Ultimately, market supply curves are upward sloping because of

	the law of diminishing marginal returns.
	economies of scale.
	average fixed cost falling continually as more output is produced.
	the law of the short run marginal cost curve.
	specialization.

6) MC ATC d Price and Cost (dollars) 4 3 2 0 10 20 30 40 50 60 70 80