Practice Questions
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In a perfectly competitive market, a firm maximizes its profit by producing the quantity of output where marginal cost (MC) equals which of the following?
A firm maximizes profit when it produces the amount where the cost to make one more item (marginal cost) is the same as the money it earns from sellin...
In a perfectly competitive market, which condition must be met for a firm to achieve allocative efficiency?
Allocative efficiency happens when the price of a product matches the cost to make one more unit. Other options are incorrect because Some might think...
In a perfectly competitive market, a firm maximizes its profit when it produces the quantity of output where its marginal cost equals which of the following?
A firm maximizes profit when the cost to make one more item (marginal cost) matches the selling price. Other options are incorrect because Some might ...
In a perfectly competitive market, what is the primary difference between short-run and long-run equilibrium regarding price determination and profit maximization?
In the short run, companies can make extra money, called economic profits. Other options are incorrect because This answer suggests that companies can...
In a perfectly competitive market, if the market supply increases significantly while demand remains constant, what is likely to happen to the price of homogeneous products?
When supply goes up and demand stays the same, there are more products available. Other options are incorrect because Some might think that more suppl...
In a perfectly competitive market, a firm maximizes its profit by producing the quantity of output where marginal cost equals which of the following?
A firm maximizes profit when it produces where the cost of making one more item (marginal cost) is equal to the money earned from selling that item (m...
In a perfectly competitive market, a firm maximizes profit by producing where which of the following conditions is met?
A firm maximizes profit when its marginal cost, the cost of making one more item, equals its marginal revenue, the money made from selling one more it...
In a perfectly competitive market, a firm maximizes its profit by producing the quantity of output where marginal cost (MC) equals which of the following?
A firm maximizes profit when it produces where the cost of making one more item (marginal cost) equals the money it earns from selling that item (marg...
Arrange the following steps in the correct order for achieving profit maximization in a perfectly competitive market: A) Identify the level where Marginal Revenue equals Marginal Cost, B) Set production at the output level corresponding to that intersection, C) Monitor changes in market conditions, D) Ensure that price equals average total cost in the long run.
First, find where Marginal Revenue equals Marginal Cost. Other options are incorrect because This option suggests starting with production before find...
If Profit Maximization in Perfect Competition is to Marginal Revenue as Long-Run Equilibrium is to what?
In the long run, firms in perfect competition make zero economic profit. Other options are incorrect because Some might think marginal cost is the mai...
Which of the following statements accurately describe the conditions for profit maximization in a perfectly competitive market? Select all that apply.
In a perfectly competitive market, firms maximize profit when marginal revenue equals marginal cost. Other options are incorrect because This statemen...
In a perfectly competitive market, which condition indicates that a firm is maximizing its profit?
When the price a firm receives for its product equals the cost of making one more unit, it means the firm is maximizing profit. Other options are inco...
If a perfectly competitive firm is producing at a level where marginal revenue is less than marginal cost, what is the likely effect on the firm's profitability in the short run?
When a firm’s marginal revenue is less than its marginal cost, it means the cost of making one more unit is higher than the money it earns from sellin...
In a perfectly competitive market, profit maximization occurs at the output level where marginal revenue (MR) equals ______.
In a perfectly competitive market, firms maximize profit when they produce where the money made from selling one more unit (marginal revenue) equals t...
A dairy farmer notices that the market price for milk has increased. To maximize profits, she decides to produce more milk. Which of the following actions should she take to ensure that she is maximizing her profit in the short run?
To make the most money, the farmer should keep increasing milk production until the extra money made from selling one more unit (marginal revenue) equ...
Which of the following scenarios best illustrates the condition for profit maximization in a perfectly competitive market?
A firm maximizes profit by increasing production until the cost of making one more unit (marginal cost) equals the money it earns from selling that un...
In a perfectly competitive market, what condition must be met for a firm to maximize its profit in the long run?
A firm maximizes profit when the price it receives for its product equals the cost of producing one more unit. Other options are incorrect because Som...
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