Pure competition – Flashcards
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In a purely competitive industry:
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there may be economic profits in the short run, but not in the long run.
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In the short run the individual competitive firm's supply curve is that segment of the
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Marginal cost curve lying above the average variable cost curve
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Which of the following will not hold true for a competitive firm in long-run equilibrium?
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P = AFC
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If production is occurring where marginal cost exceeds price, the purely competitive firm will:
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fail to maximize profit and resources will be overallocated to the product
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If a firm is confronted with economic losses in the short run, it will decide whether or not to produce by comparing:
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price and the minimum of AVC
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A purely competitive seller is:
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is a "price taker"
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The primary force encouraging the entry of new firms into a purely competitive industry is:
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economic profits earned by firms already in the industry.
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Allocative efficiency is achieved when the production of a good occurs where:
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P=MC
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If a purely competitive constant-cost industry is realizing economic profits, we can expect industry supply to:
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increase, output to increase, price to decrease, and profits to decrease.
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The demand curve in a purely competitive industry is _____, while the demand curve to a single firm in that industry is _____.
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downsloping, perfectly elastic
