Reading 18: Perfect Competition - LOS b ～ Q1-5

答案和详解如下：

1.Which of the following most accurately describes the relationship between price (P), marginal cost (MC), and marginal revenue (MR) at the profit maximizing output level for a firm in a perfectly competitive industry?

A)   P > MC = MR.

B)   P = MC = MR.

C)   P > MC < MR.

D)   P > MR = MC.

The correct answer was B)

For a perfectly competitive firm, maximum profit occurs at the output level where marginal revenue equals marginal cost. And, since the demand curve faced by each firm in perfect competition is horizontal, marginal revenue is equal to price.

2.A firm in a perfectly competitive industry that seeks to maximize profit is most likely to continue production in the short run as long which of the following conditions exists? Price is equal to or greater than:

A)   average fixed cost.

B)   average total cost.

C)   marginal cost.

D)   average variable costs.

The correct answer was D)

If a firm is covering its average variable costs, it will continue to operate in the short run since it is covering some portion of its fixed costs.

3.A perfectly competitive firm will continue to increase output so long as which of the following conditions exists?

A)   Marginal revenue is greater than price.

B)   Marginal revenue is positive.

C)   Market price is greater than marginal cost.

D)   Marginal cost is greater than marginal revenue.

The correct answer was C)

A perfectly competitive firm will tend to expand its output so long as the market price is greater than marginal cost since price and marginal revenue are equal. In the short term and long term, profit is maximized when marginal cost and marginal revenue are equal (i.e., MC = MR).

4.Assume that a perfectly competitive firm produces 10 units of a good and sells them each for a price (P) equal to $15. If the marginal cost (MC) of the 10th unit is $15 and the average total cost (ATC) is $13, economic profit for the firm is closest to:

A)   $0

B)   $130

C)   $20

D)   $120

The correct answer was C)

When MR = MC = P, economic profit equals TR – TC. In this case, TR = $150 = 10 x $15 and TC = $130 = 10 x ATC = 10 x $13. So, economic profit is $20 = $150 - $130.

5.A firm operating under perfect competition will experience economic losses when which of the following conditions exists?

A)   Marginal revenue is greater than average total cost.

B)   Market price is less than average total cost.

C)   Marginal cost = average total cost = marginal revenue = Price.

D)   Marginal cost is less than average total cost.

The correct answer was B)

Under perfect competition, a firm will experience economic losses when its selling price is less than average total cost.