A perfectly competitive tyre firm operates where its price line crosses both the marginal cost curve and the minimum point of average total cost. Which of the following can be concluded about the firm?
long-run equilibrium and efficiency in perfect competition
Review long-run equilibrium and efficiency in perfect competition for AP Microeconomics and try 2 free AP-style practice questions. 16 questions on this topic in AP Micro · Unit 3 · Production, Cost, and the Perfect Competition Model.
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In the graph, point B marks this firm's profit-maximizing output in long-run equilibrium. If the firm expanded output beyond that level, its economic profit would
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Answer, then see why
The price of gasoline rises 10% and the quantity demanded falls 5%. What happens to total revenue?
Not quite. The answer is B.
Why the other options are wrong
AI grading for free-response
Write your FRQ answer and get it scored point by point against the AP rubric, with the line from your answer that earned or missed each point.
Question 13 / 4 pts
Part a1 / 1 pts
Point 1: Earned
Grader confidence 94% sureReason: Correctly identifies demand for gasoline as inelastic.
Evidence: "The price of gasoline rises and the quantity falls only a little."
Part b2 / 3 pts
Point 1: Earned
Grader confidence 91% sureReason: Graph shows relatively inelastic demand.
Evidence: Draws a steep demand curve.
Point 2: Earned
Grader confidence 88% sureReason: Correct new equilibrium price.
Evidence: Shifts supply left, P1 → P2.
Point 3: Not earned
Grader confidence 82% sureReason: With inelastic demand, a price increase raises total revenue.
Evidence: "Revenue goes down."