ECO2023 Chapter 10

the economy experiences recession

(Last Word) Temporary shutdowns of firms are most widespread wheN

upward-sloping

In a graph for a firm in pure competition with the quantity of output measured on the horizontal axis, the total revenue curve is

profit maximizing/ loss minimizing rule

MR = MC rule is known as the

decrease in marginal cost for firms in the industry and an increase in the industry supply curve

The resource cost falls in a purely competitive industry. This change will result in a(n)

all market structures

Unit price and average revenue are the same or equal in

pure

_____ competition is considered to be rare in the real world

marginal; production

_____ revenue is the additional revenue that an additional unit of _____ would add to total revenue

pure

a _____ competitive firm's average-revenue schedule is also known as its demand schedule

large number of sellers

a basic feature of the purely competitive market is the presence of _____

variable; greater than

a firm should stop producing if its average _____ cost is _____ price

purely

a firm will not increase its product price in a _____ competitive market

marginal cost is equal to marginal revenue

a firm within a purely competitive market can maximize its profit in the short run by producing up to the point where

1. it will experience the highest possible profits at this point and 2. it will experience the lowest possible losses at this point

a firm within pure competition will produce up to the point where marginal revenue equals marginal cost because

false; MP must exceed the minimum average variable cost

a purely competitive firm in the short run will maximize profit by producing up to the point where marginal revenue is equal to marginal cost if the market price is less than minimum average variable cost

a, c

a purely competitive firm's demand schedule equals its a. marginal-revenue schedule b. total-revenue schedule c. average-revenue schedule

a

all of the following describe purely competitive firms, except a. they engage in non-price competition b. they produce standardized products c. they make no attempt to differentiate their products d. they produce homogeneous products e. they produce identical products

$69.50 in a perfectly competitive market, price is equal to marginal revenue Profit/Loss = (price - ATC)Quantity; price = MR

at a profit-maximizing level of output of 25 units, a perfectly competitive firm's marginal revenue is $4, average variable cost is $0.30, average total cost is $1.22 and marginal cost is $3.75. This firm's economic profit equals

by comparing marginal revenue to marginal costs; by comparing total revenue to total costs

by which two ways can a purely competitive firm determine the level of output at which it will realize maximum profit or minimum losses

four

economists group industries into _____ distinct market structures

do not differentiate their products

firms that operate in a purely competitive industry

takers

firms within pure competition are considered to be price _____

a normal; a zero

from an economic standpoint, the break-even point is the level of output at which a firm makes _____ profit

less; variable

if price is _____ than a firm's minimum average _____ cost, the firm will not operate

equal to; equal to

in a perfectly competitive market, price is _____ marginal revenue, therefore, price is _____ marginal cost at the profit-maximizing output

substitute other firm's products such as B, C, or D

in a purely competitive industry, an increase in the price of product A supplied by one firm will cause consumers of product A to:

revenue; marginal cost OR cost; price OR revenue; price

in a purely competitive industry, at profit-maximization or loss-maximization, marginal _____ is equal to _____

revenue; marginal

in a purely competitive market, price per unit to the purchaser is synonymous with _____ per unit or _____ revenue to a seller

price

in pure competition, _____ and marginal revenue are equal

marginal revenue minus average total cost multiplied by quantity; price minus average total cost multiplied by quantity

in pure competition, economic profit is calculated as _____ or _____

price; marginal

in pure competition, to calculate economic profit, we first calculate the difference between product _____ or _____ (average) revenue and average total cost and then multiply it by output

enter and exit

in purely competitive industries, firms can freely

product price; the total supply of a product; the firm's demand

in purely competitive markets, an individual firm does not exert control over _____

low; revenue; cost

in the initial stages of production, where output is relatively _____, marginal _____ will usually, but not always, exceed marginal _____

output

in the short run, a purely competitive firm can maximize its economic profit (or minimize its loss) by adjusting its _____

change; one

marginal revenue is the _____ in total revenue that results from selling _____ more unit (extra unit) of output

price; marginal revenue; marginal cost

profit in a purely competitive market is maximized when _____ equals _____ equals _____

pure monopoly; oligopoly; monopolistic competition

the market structures designed as "imperfect competition" are

in the short-run, the firm will maximize profit or minimize loss by producing the output at which marginal revenue equals marginal cost

the profit maximizing rule of MR=MC states that

profit; losses

there are two ways to determine the level of output at which a firm will realize maximum economic _____ or minimum economic _____

not produce that additional unit of output

when the marginal cost of an additional unit of output exceeds the marginal revenue, the firm should

equal; variable; total; fixed

when the price is _____ to a firm's lowest average _____ cost, the firm will be able to cover its _____ variable cost and its loss will equal its total _____ cost

all

which of the following are true about the profit-maximizing rule of MR=MC a. the rule can be re-stated as P=MC when applied to a purely competitive firm because product price and MR are equal b. the rule is an accurate guide to profit maximization for all firms regardless of their market structure c. the rule applies only if producing is preferable to shutting down d. when MR is equal to MC at a fractional level of output, the last complete unit of output should be produced where MR>MC

a relatively large number of sellers producing differentiated products and in which entry or exit from the industry is quite easy

which of the following best describes a monopolistic competition

one firm selling a single unique product, where entry of additional firms is blocked and product differentiation is not an issue

which of the following best describes a pure monopoly

an industry involving a very large number of firms producing identical products and in which new firms can enter or exit the industry very easily

which of the following best describes pure competition

one of a large number of firms producing an identical product as every firm in its industry and only providing a fraction of total market supply

which of the following best describes the situation of a price-taking firm

because the firm would gain more in revenue from selling that unit than it would add to its costs by producing it

which of the following best explains why the firm should produce any unit of output whose marginal revenue exceeds its marginal costs

b, c, e

which of the following conditions are necessary to have pure competition? a. barriers to entry b. free entry and exit c. very large numbers of firms or sellers d. price searchers e. standardized product

they produce a large fraction of total supply

which of the following does not describe a purely competitive firm

c

which of the following does not describe a purely competitive firm a. they do not exert control over product price b. they produce a small fraction of total supply c. they produce a large fraction of total supply d. they are price takers

producing it would add more to costs than to revenue and profit would decline or loss would increase

which of the following explains why a firm would not produce a unit of output where MC exceeds MR

a purely competitive market

which of the following market structures produces only a standardized product

there are no significant legal, technological, financial, or other obstacles prohibiting firms from entry and exit

which of the following summarizes why it is possible for a firm to freely enter and exit a purely competitive market