Econ 202
ECON 202 Exam 3 with Correct Answers Graded 2026
A perfectly competitive firm ?
Must charge the market price and also has a perfectly elastic demand curve.
Where does a firm produce maximize its profit?
When Marginal Revenue = Marginal Cost
What part of the Marginal Cost curve indicates a perfectly competitive firm's short run
supply?
Describe the three shapes for a perfectly competitive firm's long run supply curve
increasing, constant, decreasing
What are the characteristics of perfect competition ?
(1) a large number of small firms,
(2) identical products sold by all firms,
(3) perfect resource mobility or the freedom of entry into and exit out of the industry,
(4) perfect knowledge of prices and technology.
How do you determine where a competitive firm will produce and what price it will
charge?
Profit=(Price)(Quantity produced)
-
(Average cost)(Quantity produced)
the firm does not choose what price to charge, the supply and demand of the market
will determine the price.
What would be shown on a graph if a competitive firm will shut down in the short run?
Total cost > Total revenue
Econ 202
, Econ 202
Where is profit located on a graph?
In long-run equilibrium in a competitive industry is there a entry or exit cost?
No
When are both the short-run and the long-run average costs at a minimum?
When the firm produces at the long-run competitive equilibrium.
What happens to the long-run equilibrium when there is an increase in demand in a
competitive industry?
Increases in demand cause a rapid increase in price followed by a fall in price as more
firms enter the industry in the long run. Decreases in demand case a rapid decrease in
price followed by a rise in price as firms exit the industry in the long run.
When will entry to a perfectly competitive firm occur?
When firms are earning positive economic profits
What kind of profits occur in a long run perfectly competitive industry?
Normal profits
For a short-run competitive firm, what kind of profits can be expected?
it is possible for a firm's economic profits to be positive, negative, or zero.
Economic profits will be zero in the long-run.
When there is a under allocation of resources in a purely competitive industry, what can
we determine?
That Price (P) is greater than Marginal Cost (MC)
P>MC
Econ 202
ECON 202 Exam 3 with Correct Answers Graded 2026
A perfectly competitive firm ?
Must charge the market price and also has a perfectly elastic demand curve.
Where does a firm produce maximize its profit?
When Marginal Revenue = Marginal Cost
What part of the Marginal Cost curve indicates a perfectly competitive firm's short run
supply?
Describe the three shapes for a perfectly competitive firm's long run supply curve
increasing, constant, decreasing
What are the characteristics of perfect competition ?
(1) a large number of small firms,
(2) identical products sold by all firms,
(3) perfect resource mobility or the freedom of entry into and exit out of the industry,
(4) perfect knowledge of prices and technology.
How do you determine where a competitive firm will produce and what price it will
charge?
Profit=(Price)(Quantity produced)
-
(Average cost)(Quantity produced)
the firm does not choose what price to charge, the supply and demand of the market
will determine the price.
What would be shown on a graph if a competitive firm will shut down in the short run?
Total cost > Total revenue
Econ 202
, Econ 202
Where is profit located on a graph?
In long-run equilibrium in a competitive industry is there a entry or exit cost?
No
When are both the short-run and the long-run average costs at a minimum?
When the firm produces at the long-run competitive equilibrium.
What happens to the long-run equilibrium when there is an increase in demand in a
competitive industry?
Increases in demand cause a rapid increase in price followed by a fall in price as more
firms enter the industry in the long run. Decreases in demand case a rapid decrease in
price followed by a rise in price as firms exit the industry in the long run.
When will entry to a perfectly competitive firm occur?
When firms are earning positive economic profits
What kind of profits occur in a long run perfectly competitive industry?
Normal profits
For a short-run competitive firm, what kind of profits can be expected?
it is possible for a firm's economic profits to be positive, negative, or zero.
Economic profits will be zero in the long-run.
When there is a under allocation of resources in a purely competitive industry, what can
we determine?
That Price (P) is greater than Marginal Cost (MC)
P>MC
Econ 202
