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Chapter 9 or 22 Perfect Competition: Pre - Class & In - Class Activities Packet Name/I.D. Number: Section: Date: Part 3 . Discussion Questions and Problems 1. True or false: The firm's entire marginal cost curve is its short-run supply curve. Explain your answer. 2. True or false: In a perfectly competitive market, firms always operate at the lowest per-unit cost. Explain your answer. 3. For a perfectly competitive firm, profit maximization does not conflict with resource allocation efficiency. Do you agree? Explain your answer. 4. You read in a business magazine that computer firms are reaping high profits. With the theory of perfect competition in mind, what do you expect to happen over time to the following: Assuming that the computer industry is perfectly competitive (or at least acts as if it is), we would expect the of economic profits to attract new entrants into the market. This would, in turn, shift the market supply curve rightward, increasing sales, decreasing prices, and slashing profits. (a) Computer prices (b) The profits of computer firms (c) The number of computers on the market (d) The number of computer firms in the market 5. In your own words, explain resource allocation efficiency. 6. Explain why a perfectly competitive firm will shut down in the short run if price is lower than average variable cost, but it will continue to produce if price is below average total cost but above average variable cost