Question

1. Which of the following is one of the reasons that firms in perfectly competitive markets are price takers?

   		their demand curves are downward sloping
   		there are no good substitutes for their goods
   		many other firms produce identical products
   		Each firm is very large

2. When looking at a supply and demand graph, you would find producer surplus:

   		to the right of equilibrium quantity and above market price.
   		below the demand curve and above market price.
   		above the demand curve and above the supply curve.
   		above the demand curve and below the supply curve.
   		below market price and above the supply curve.

3. If marginal cost is equal to average total cost at a given level of output, then we know that at that level of output

   		marginal cost is zero
   		average total cost is zero
   		average variable cost is minimized
   		marginal cost is minimized
   		average total cost is minimized

Answer 1

c. many other firms produce identical products

There are large number of firms producing identical products and have horizontal demand curve which is why they are price takers since they cannot influence price.

e. below market price and above the supply curve.

This can be seen in following graph:

e. average total cost is minimized

The point where MC cuts ATC is the point where ATC is minimum. It can be seen from following graph: