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practice problems_questions for chapter 8

practice problems_questions for chapter 8 - Practice...

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Practice Problem Set for Chapter 8 "Perfect Competition" Name: __________________________ Date: _____________ 1. The shutdown price is: A) the price at which economic profit is zero. B) the minimum level of AVC. C) the intersection of the MC and ATC curves. D) the minimum level of AFC. 2. When a perfectly competitive firm is in long-run equilibrium, the firm is: A) producing at maximum average total cost. B) producing at maximum average variable cost. C) producing at minimum marginal cost. D) producing at minimum long-run average total cost. 3. Which of the following is true? A) If price falls below average total cost, the firm will shut down in the short run. B) Price and marginal revenue are the same in perfect competition. C) Economic profit per unit is found by subtracting AVC from price. D) Economic profit is always positive in the short run. 4. A perfectly competitive firm will incur an economic loss but will continue producing the profit-maximizing quantity of output in the short run if price is: A) less than marginal cost. B) less than average variable cost. C) greater than average total cost. D) greater than average variable cost and less than average total cost. Page 1
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5. Suppose that the market for candy canes operates under conditions of perfect competition, that it is initially in long-run equilibrium, and that the price of each candy cane is $0.10. Now suppose that the price of sugar rises, increasing the marginal and average total costs of producing candy canes by $0.05. Based on the information given, we can conclude that in the short run a typical producer of candy canes will be making: A) an economic profit. B)
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