What assumptions are necessary for the perfect competition model? How realistic are they?

Why are firms operating in perfectly competitive markets considered price takers? Why do competitive firms produce at an output level at which marginal revenue equals marginal cost.

How does the competitive firm decide on the profit-maximizing level of output? Why is the average cost curve important in this model? Where do average fixed costs show up?

If a competitive firm is earning an economic loss and several other firms in its industry exit the market, then will this firm then earn a normal profit? Explain.

How are competitive firms earning a normal profit affected when costly "homeland security" regulations are imposed on them? If these firms start earning economic losses, then will they have to exit the market? Explain.

Do competitive, price taking firms have supply curves? Explain. Under what conditions do can such firms operate under a loss? What is the shutdown rule?

What happens to economic profits and economic losses in the long run? Why?

Price taking behavior occurs when
A) P = LRAVC.
B) the firm cannot sell all it wants at the market price.
C) the firm faces so much competition that it cannot control its
price.
D) both a and c
E) both b and c

If a firm is making zero economic profit,
A) it will be forced to shut down and leave the market.
B) it will also generally be making zero accounting profit.
C) it is doing as well as typical firms in other markets.
D) it will not survive in the long run.