14 in perfectly competitive markets profits are

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Business Analytics: Data Analysis & Decision Making
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Chapter 14 / Exercise 82
Business Analytics: Data Analysis & Decision Making
Albright/Winston
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14. In perfectly competitive markets, profits are maximized when: a. MC = AC b. P > AC c. MR = MC d. MR = P ANS: C
15. Economic profit:
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Business Analytics: Data Analysis & Decision Making
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Chapter 14 / Exercise 82
Business Analytics: Data Analysis & Decision Making
Albright/Winston
Expert Verified
d. does not reflect the cost of owner-supplied inputs. ANS: B 16. Market structure is not typically characterized on the basis of:
17. Effects of market structure are not typically measured in terms of:
18. Price and product quality competition tends to be vigorous when: a. entry barriers are low. b. potential entrants are few. c. product quality information is scarce. d. the number of active sellers is few. ANS: A
19. Industry cartels never:
20. The rate of return necessary to attract and retain capital investment is called:
d. economic profit. ANS: C 21. In competitive market equilibrium, the firm's:
22. At the point of minimum AVC: a. MC is falling. b. MC is constant. c. MC is rising. d. MC = AVC. ANS: D
23. So long as P > AVC, the competitive firm's short-run supply curve is equal to:
24. When profits are maximized in a competitive market, average cost is always:
25. The following market cannot be described as perfectly competitive:
d. the agricultural grain markets. ANS: B PROBLEM 1. Competitive Markets . Indicate whether each of the following statements is true or false and why. A. In long-run equilibrium, every firm in a perfectly competitive industry earns an economic profit. B. Pure competition exists in a market when firms are price makers as opposed to price takers. C. A natural monopoly results when the profit-maximizing output level occurs at a point where long-run average costs are decreasing. D. Downward-sloping industry demand curves characterize monopoly markets; horizontal de- mand curves characterize perfectly competitive markets. E. A decrease in the price elasticity of demand would follow an increase in monopoly power. ANS: A. False. In long-run equilibrium, every firm in a perfectly competitive industry earns zero ex- cess profit. Following a decrease in industry prices, high cost producers will be forced to exit. However, the firms that remain will continue to operate and earn a normal rate of re- turn on investment. B. False. Pure competition exists in a market when individual firms have no influence over price. Such firms take industry prices as a given. C.

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