1. The production decisions of perfectly competitive firms follow one of the Ten Principles of Economics, which states
that rational people
a.
consider sunk costs.
b.
equate prices to the average costs of production.
c.
prefer to purchase products from smaller rather than larger firms.
d.
think at the margin.
2. If firms are competitive and profit maximizing, the price of a good equals the
a.
marginal cost of production.
b.
fixed cost of production.
c.
total cost of production.
d.
average total cost of production.
3. Profit maximizing firms in competitive industries with free entry and exit face a price equal to the lowest possible
a.
marginal cost of production.
b.
fixed cost of production.
c.
total cost of production.
d.
average total cost of production.